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 AICPAs 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 youre really going to hold firm on making the decision in 2011, then you cant make 2014 the effective date, despite the fact that were supporters of getting to IFRS for public companies. That was a pretty strong feeling from our members in industry. Theres a cost associated with getting there, but more importantly, theres 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, Were still going to make it in 2011, and it wont 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: Im worried more about people being hurt than helped. Youre not going to find a CPA out there who is going to say I dont think everyone who does tax returns shouldnt have more education. Were certainly not against registration. If you ask CPAs about the PTIN numbers, theyll tell you they already have identification numbers. What theyre not aware of is the fact that the IRS doesnt 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, Were 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 whos 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. Theres not enough CPAs right now to prepare all the returns in the country. Theres certainly a need for lower-cost tax preparation. I dont think anybodys 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: Weve 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. Youre 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 isnt going to go away. The notion of sovereign interest in protecting and regulating isnt going to go away, whether its 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 its 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 Masters in accounting in May, and Im fully supportive of it.
Melancon: To add to that, yes, weve 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. Thats 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 weve got probably the best shot of all the professions in the country for actually achieving replacement. But thats still replacement. Thats not achieving tremendous growth so obviously its 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. Thats 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. Its the complexity of it all. Its the fast pace of it all. But thats 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, theres a greater degree of pressure. I would say, at a macro level, to make sure that competency is a continual process. If youre 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 Ive achieved something, you have achieved something, but to have a successful career, youre going to have to continually invest in that.
Q: Whats 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 its 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. Were 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, its going to be harder and harder to make it retroactive. I think a lot of people in Washington are saying its 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 its going to get enacted. The debate becomes what rate to apply, and theres 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, thats not the political environment that exists right now. But we fully expect something to be enacted.
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