Barry Melancon and Robert Harris

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Barry Melancon has been president and CEO of the American Institute of CPAs since 1995. Under his leadership, the AICPA has spearheaded a number of initiatives to benefit the profession and the general public, including private company reporting standards and 360 Degrees of Financial Literacy. He is a member of the AICPA’s delegation to the International Federation of Accountants, chairman of XBRL-US, vice chairman of the Center for Audit Quality, and a founding board member of the Global Accounting Alliance. He serves on the board of the U. S. Chamber Center for Capital Markets Competitiveness.

Robert Harris is chairman of the AICPA for 2009-2010. He has been a member of the governing Council for 15 years. He is managing director of Harris, Cotherman, Jones, Price & Associates, CPAs, in Vero Beach, Fla. In his role as a consulting and testifying expert, he speaks to attorneys and CPAs throughout the country on professional standards and malpractice issues.

Melancon and Harris recently sat down to talk with the staff of Accounting Today and WebCPA.

Q: The Institute has been solidly behind the adoption of IFRS, but how do you feel about the slow pace of moving toward IFRS and whether it would yield the high set of global accounting standards that was initially the mission?

Melancon: One of the things that we said in our comments to the SEC was to adopt it in a revised roadmap. If you’re really going to hold firm on making the decision in 2011, then you can’t make 2014 the effective date, despite the fact that we’re supporters of getting to IFRS for public companies. That was a pretty strong feeling from our members in industry. There’s a cost associated with getting there, but more importantly, there’s a need for time. So we said, ‘Look, either make the decision earlier or make the effective date later than 2014.’ And they were pretty clear in taking that feedback in this revised roadmap, because they said, ‘We’re still going to make it in 2011, and it won’t be before 2015.’

Q: To what extent are you troubled by the possibility of a registered tax return preparer competing with a CPA on the local level? Do you think there will be confusion?

Harris: I’m worried more about people being hurt than helped. You’re not going to find a CPA out there who is going to say I don’t think everyone who does tax returns shouldn’t have more education. We’re certainly not against registration. If you ask CPAs about the PTIN numbers, they’ll tell you they already have identification numbers. What they’re not aware of is the fact that the IRS doesn’t sort them in a database that allows them to work with them as it should. We CPAs look at ways to fix things. If you gave me a set of facts and said, ‘We’re having a problem with Earned Income Tax Credits, and refundable anticipation loans are the big areas of interest,’ which is what the commissioner said, you fix it technologically. You use a database. You have everybody using a PTIN number, and the minute you spot someone who’s got an excess number of those, you use that technology to identify it and then stop it, versus creating mandatory education for people who have a high school degree and then testing them. There’s not enough CPAs right now to prepare all the returns in the country. There’s certainly a need for lower-cost tax preparation. I don’t think anybody’s going to argue with that. I do think you do need to have a methodology for enforcing it and not just creating tests that are not going to do anything and just create window dressing.

Q: Do you still see growth in demand for accountants? Is there still a staffing shortage?

Melancon: We’ve come off of a staffing shortage. We had 90-something thousand people take the CPA Exam last year, which is a record number, so we believe that we identified an issue in the late 1990s. We understand probably more than our peer groups some of the demographic and generational issues, and we went about that in a very structured way. We invested in it, and during the 2000s we were able to reverse that very emphatically with a record number of graduates. ‘Start Here, Go Places’ was all about filling the front end of that pipeline. You’re going to see some things get launched during 2010 that are about moving the people that are in that pipeline into the CPA profession. We see a bright future. Compliance isn’t going to go away. The notion of sovereign interest in protecting and regulating isn’t going to go away, whether it’s in the U.S. or around the world. Maybe the most important thing is that ‘CPA’ in the U.S. vernacular gives a young person a pretty significant versatility in terms of where they want to go because they understand business.

Harris: You can add to that the whole area of sustainability reporting, which is going to create demand within firms. And look at the fact that there was a tremendous number of CPAs who came into this profession during the 70s who will be retiring, and it’s hard to come out of college and replace one of those people the day you come out of school. And everything continues to shift there. I feel confident enough that my son is starting a Master’s in accounting in May, and I’m fully supportive of it.

Melancon: To add to that, yes, we’ve got record numbers. Yes, the classrooms are full in accounting. All of those things are wonderful. But we need that in order to replace the CPAs one for one. That’s still a big challenge because we know what the Baby Boomers look like. Now if you compare us to some of the other professions out there, and unfortunately the medical profession is one of those that sort of has this problem, we identified it early, and we’ve got probably the best shot of all the professions in the country for actually achieving replacement. But that’s still replacement. That’s not achieving tremendous growth so obviously it’s still a good opportunity.

Q: What do you see as the biggest challenge for accounting graduates and undergrads as they embark on their career and decide which direction to go?

Melancon: Clearly right now one is the economy. Where do you find the best opportunity? Your early career is all about finding the right place where you can grow your competencies and your confidence. That’s not going to be as easy in this environment as it was three or four years ago. Number two has got to be the same problem that 30-year professionals have today. It’s the complexity of it all. It’s the fast pace of it all. But that’s no different than any other profession. But because we have compliance components, because we have things like IFRS convergence, and new tax systems, and new compliance and business laws, there’s a greater degree of pressure. I would say, at a macro level, to make sure that competency is a continual process. If you’re a person coming out of school and your mindset is ‘I went to school and I got all these hours and I passed the exam, and I’ve achieved something,’ you have achieved something, but to have a successful career, you’re going to have to continually invest in that.

Q: What’s happening with the CPA Exam?

Melancon: The exam contract renewal with NASBA through 2024 is a really big deal because the exam is sort of a gateway, and it’s been a very cooperative situation. We also hope to have an international offering of the U.S. CPA Exam within a year in a few pilot locations. We’re still working that out. We have a high number of people today who come in to take the U.S. CPA Exam. Making that available, say in Asia as an example, will change some of the dynamics, but we hope to get that done in the next year or so.

Q: Currently one of the huge uncertainties is estate planning. Do you have any take on whether it will be solved this year and whether it will be retroactive?

Melancon: Well, every day that goes by, it’s going to be harder and harder to make it retroactive. I think a lot of people in Washington are saying it’s going to be retroactive, and there are an awful lot of people in Washington who say it may not be constitutional to make it retroactive. Certainly the more time that goes by, the harder it will be to make it retroactive. I think everybody believes it’s going to get enacted. The debate becomes what rate to apply, and there’s the Republican view and the Democratic view, and what level of transfer exemption should be there. There are two different camps on that. I think historically that would be ripe for sort of compromising down the middle, but unfortunately, that’s not the political environment that exists right now. But we fully expect something to be enacted.

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