While specialty credentials, auditor independence and XYZ were thrust to the forefront of member issues during past Council meetings of the American Institute of CPAs, attendees at the 2004 fall confab were urged to take a more proactive role in what is inarguably a new era in the timeline of the profession.
That message was underscored by Bob Bunting, the institute's 2004-2005 chairman, as he accepted the AICPA's top volunteer mantle from outgoing chair Scott Voynich at the two-day meeting, the theme of which was, "Volunteers: Harnessing the Power."
Bunting, who recently stepped down as chairman and chief executive of Seattle-based Moss Adams LLP, called on his fellow CPAs to not only embrace change, but to initiate it.
"Great professions don't just accept change," Bunting said in acceptance remarks to Council members. "They don't just embrace change. Great professions initiate change - for their own good, for the public good and for the sake of the future."
In addition to detailing his priorities as chairman during the upcoming year - a litany of issues highlighted by a call for increased transparency in the peer review process - Bunting noted that the CPA profession must continue in its responsibility to provide understandable and reliable information for decision-makers, and should offer expertise to help inform policy-makers and educate the public.
"As a great profession, we must also renew ourselves," said Bunting. "This means bringing in new blood - young, bright and committed professionals who can carry our legacy forward."
Credentials update
One year ago, during its Fall Meeting of Council in New Orleans, the institute gave the green light to developing and funding its trio of specialty credentials - the Personal Financial Specialist, the Accredited in Business Valuation and the Certified Information Technology Professional.
Since that time, the PFS, ABV and CITP have grown 4 percent, 16 percent and 28 percent, to 3,318, 1,766 and 671 members, respectively.
"We had to build them from the bottom up," explained Robert Harris, chairman of the AICPA's National Accreditation Commission. "And that involved working on the three 'Cs' - community, communications and competency."
To heighten the credentials' value proposition, Harris said that, as an example, the ABV designation now has a reciprocity agreement with the American Society of Appraisers. For the CITP, Harris revealed that the body of knowledge is moving into assurance and auditing, so that "CPAs with a CITP have a value and a place in an audit firm."
To hone communications with holders and potential holders, the NAC is working toward building a community with town halls, online forums and monthly letters from the chair of each designation to members.
With its decision to maintain the specialty designations, the institute also set established membership and timeline targets for each. The PFS must have a minimum of 3,600 credential holders by 2006; the ABV's target is 2,700 holders by 2008; and the CITP's mandate is 1,700 by 2008.
101-3 Ruling
To help assuage practitioners' concerns regarding the rules governing members who offer non-attest services to attest clients, the institute's Professional Ethics Executive Committee unveiled its interpretation of Rule 101-3 - a ruling that capped a three-year effort that began during the fourth quarter of 2001, when the committee added the project to its agenda to ensure independence.
At issue were the specifics of 101-3 on performance of non-attest services, and what constitutes independence when non-attest services - i.e., information technology systems design, appraisal and valuation, bookkeeping, internal audit outsourcing, etc. - are provided to attest clients.
PEEC chair Bruce Webb and Sue Coffey, the institute's vice president for audit quality and professional ethics, said that the interpretation, generally effective Jan. 1, 2005, mandates that members cannot make all management decisions and perform management functions, but may provide advice, research materials and recommendations to attest clients. Attest clients were defined as recipients of audit review, attestation and compilation services.
For the client's part, 101-3 stipulates that one of the key responsibilities is to designate a "competent" employee (usually senior management) to oversee any non-attest services. That ruling brought out a charged response from some attendees, who questioned whether, for example, a three-person business could designate someone in their employ as "competent" enough to oversee the non-audit work.
Coffey added that the institute is helping members with the interpretation via Webcasts, a peer review hotline and the establishment of a standing PEEC task force.
A widening gap
Meanwhile, institute president and chief executive Barry Melancon told the 400-plus attendees that the long-existing gap between what the public thinks the profession's responsibilities are when it comes to fraud, and what the profession's actual responsibilities are, is widening.
"The expectation of the public has changed," particularly in the area of audit function, said Melancon. "New gaps are developing, and in the area of fraud, the gap is widening."
Melancon added that a new expectation gap is developing in the area of internal controls assessment, an issue that falls under Section 404 of the Sarbanes-Oxley Act. At issue is what the public's - and the courts' - expectation is of what attestation will mean when something goes wrong. "The public's expectation that the profession has an obligation to detect fraud has moved to an expectation that maybe we ought to be preventing fraud."
The institute also unveiled a new Web site to complement its 360 Degrees of Financial Literacy program. (For more details, see "Institute debuts consumer financial literacy portal," page 20.)
Flat financials
In its annual financial update, the institute said that, aided by a reversal of nearly $2 million in pension liability, it reported a $290,000 excess in operating revenue for fiscal 2004, versus a deficit of $1.25 million for its prior fiscal year.
However, fiscal 2004 operating revenue fell 3 percent below budget, to $3.9 million. The shortfall in operating revenue stems from a decline in a number of streams, including a $1.9 million, or 14 percent, dip in CPA exam revenue as a result of this year's conversion to the computer-based test, and a $677,000, or 9.4 percent, fall in advertising sales.
The institute also said that due to fewer new members and higher numbers of retired members, membership dues were $781,000, or 1.2 percent, below budget.
For 2004, institute membership stood at 334,635, with roughly 80 percent of that figure split between members from the public accounting and business and industry sectors.
Meanwhile, magazine subscriptions and software revenue fell $559,000, or 2.5 percent, as a result of decreased renewal rates and the termination of the Financial Accounting Standards Board loose-leaf subscription service.
The institute's Web portal, CPA2Biz, citing a $4 million depreciation expense, posted a loss of $3.1 million for fiscal 2004. CPA2Biz also accrued an additional $10 million in net asset losses, boosting that figure to $101.2 million in red ink since its 2001 inception.
However, CPA2Biz chief executive Erik Asgeirsson told attendees that the vehicle intends to remain cash positive. "For fiscal year 2004, we have EBITDA of $1.5 million."
Asgeirsson added that the portal now has 200,000 users and offers some 1,000 products. He said that online sales for the second quarter hit $2.96 million, up from $2.33 million for the year-ago period.
Asgeirsson also said that, since the Spring Council meeting, an additional 5,000 firms have enrolled in the portal's Business Solutions Program, which features vendor partnerships with Paychex and Chase offering payroll and banking services, respectively, bringing the total number of firms enrolled in the program to 10,500.
Beresford feted
The institute also awarded the 2005 Gold Medal for Distinguished Service - its highest honor - to former Financial Accounting Standards Board chair Dennis R. Beresford.
Beresford, the Ernst & Young Executive Professor of Accounting at the University of Georgia's Terry College of Business, served as FASB chairman from 1987 to 1997. Prior to joining the standards-setting board, he was national director of accounting standards for Ernst & Young.
Beresford presently serves on the boards and chairs the audit committees of three public companies, and is a member of the Nasdaq Listing and Hearing Review Council.
Melissa Klein-Aguilar and Howard Wolosky contributed to this report.
