A stay for designations, and a flanking move on standards at the AICPA confab
by Melissa Klein
An 11th hour resolution that resulted in a possible stay of execution for the American Institute of CPAs’ specialty credentials, and a rallying cry for the institute to take the lead in standards setting for privately held companies, dominated the agenda at the institute’s spring meeting of Council.
Following a spirited debate, Council members overwhelmingly approved an amended resolution giving the institute permission to explore all options in determining the future of its three specialty credentials: the Personal Financial Specialist, the Certified in Information Technology Professional, and the Accredited in Business Valuation credentials.
Options include spinning off any or all of the credentials, forming strategic partnerships with outside groups, and possibly sunsetting any or all of the designations.
The amended resolution deleted references to “exit strategies,” and instead included plans to investigate strategies to “enhance” all three, sustaining hope that the credentials won’t face the firing squad. The original proposal recommended by the National Accreditation Commission and approved by the board sought permission to investigate “possible exit strategies ... to transition” just the PFS and CITP credentials outside the AICPA.
Results of an informal straw poll taken at regional Council meetings last month showed “overwhelming support to pursue external strategies for PFS and CITP,” while a majority supported further development of the ABV, Bruce J. Harper, National Accreditation Commission chairman, told Council members prior to the vote.
Harper said that two strategic partners are being considered to take over stewardship of the CITP credential, while three have been identified for the PFS designation.
“We have great credentials and great credentials holders,” Harper said. “The problem is that we have not been able to achieve market recognition and we haven’t built critical mass to support the infrastructure required to support the credentials.”
About 3,000 CPAs hold the PFS credential, which launched in 1987, while the ABV, which entered the market in 1997, has attracted 1,500 CPAs. About 500 CPAs hold the CITP, which was created in 2000.
Council member and former institute chairman Marvin Strait, of Colorado, complained that the initial resolution to search for exit strategies sent mixed signals, since Council members showed strong support in an informal poll just a day earlier for continued focus on financial planning and technology, both of which were identified as core services for CPAs during the visioning process.
“We have a saying in Colorado: You can’t suck and blow at the same time,” Strait said. “We’d better decide what it is we’re doing.”
Strait was pleased with the amended resolution. “I think it’s a reasonable proposal if it opens us up to look at all the options,” he said after the vote.
Task force members plan to meet with possible strategic partners before the July board of directors meeting, and to circulate an “invitation to comment” detailing any recommendations to credential holders. The NAC will present a final plan for all three credentials by the September board meeting, with a final plan to be presented to Council members by the October Council meeting in New Orleans.
Council members also debated the AICPA’s future role in standards setting, which has been uncertain following a year of landmark legislation that ended the era of self-regulation for the profession.
“One set of standards no longer looks operable,” proclaimed AICPA chair William F. Ezzell at the conference’s opening session. “We have to step forward in our role in setting standards for non-issuers.”
While the Public Company Accounting Oversight Board has taken over setting audit standards for firms that audit companies registered with the Securities and Exchange Commission, AICPA vice chair Scott Voynich noted that of the 45,000 firms that are members of the institute, less than 800 - or about 1.5 percent - deal with SEC registrants. The question now is, who will set standards for the other 98 percent?
“With the dramatic changes taking place, it’s irresponsible not to ask the question regarding what role the AICPA should have in standards setting. Clearly, [the AICPA] has no legislated role, but our members have a huge stake in the outcome,” said Voynich.
When asked in a straw poll whether the institute should continue to set audit standards for the remaining 98 percent of member firms, Voynich said that Council members “were far and away in favor of the profession continuing as a standards setter for non-SEC registrants in the areas of audit, quality control and peer review.”
Council OKs changes to disciplinary processWashington - During their spring meeting, members of the American Institute of CPAs ruling Council okayed measures to beef up the institute's disciplinary processes, including a measure to automatically sanction members.
But, when it came to the same question on accounting standards, responses were mixed. While Voynich said that the AICPA isn’t interested in setting accounting standards, which have been set by the Financial Accounting Standards Boards since 1973, he said that AICPA leaders wanted Council members’ input on the issue, since funding for FASB has since changed.Voynich noted that, until the start of this year, FASB was funded partly by contributions to the Financial Accounting Foundation from the accounting profession, and partly from the sale of its publications. Now, under Sarbanes-Oxley, FASB is funded by registration fees from firms that are required to register with the PCAOB.
“The question is, now that all of FASB’s funding comes from public company registrants, will it be an effective voice for the non-registrant community?” Voynich said.
Council member and former chairman Bob Israeloff, of Garden City, N.Y.-based Israeloff & Trattner & Co., said that he supports differential standards. “I think there should be varying standards for auditing and accounting that are appropriate for the user. There are some things you need to do for public companies that you don’t need to do for private companies. They’re different animals.”
The Sarbanes-Oxley ‘cascade’
Kathy Eddy, chair of the institute’s Special Committee on State Regulation, reported good news and bad news on the impact of Sarbanes-Oxley at the state level.
“The cascade effect is real,” said Eddy, who noted that 13 states introduced accounting reform legislation in 2003, while eight states eyed corporate governance reform initiatives, and 10 states had executive branch activity.
The good news, Eddy said, is that state accounting reform has been overshadowed by the foundering economy and budget and security issues, and is not a top legislative issue. The bad news, though, is that it is a top issue among state attorneys general, which means greater probability for action in the regulatory area.
Eddy outlined a series of “first response” guidelines thatincluded “a reasoned approach at the state level by allowing the regulatory process to work and being an advocate for small business;” uniformity of state laws in lieu of a piecemeal approach to adopting Sarbanes-Oxley; and communicating the complexity of issues.
“In states where we’ve had activity, CPAs have had a seat at the table,” Eddy said, noting that reforms have been derailed in Colorado, Illinois, New Mexico, Maryland and Montana.
The CPA Exam
Leaders from the AICPA, the National State Boards of Accountancy, and test administrator Prometric (a Thomson business) - the three groups working on the computerization of the CPA Exam - told Council members that work is on schedule and on budget for the planned April 2004 launch of the computer-based test. A tutorial to help candidates get familiar with the new test was set to go online at www.cpa-exam.org a day after Council members headed home.
In the coming months, Prometric, which will administer the test in its 300 test centers around the country, will evaluate the demand for additional test centers in some areas, while NASBA will help the state boards of accountancy prepare. Meanwhile, the AICPA will work with educators and others charged with preparing exam candidates. The AICPA will also be looking for volunteers to take a pilot exam, expected to roll out in November.
The computer-based test, which cost $19.5 million to develop, would enable students to sit for the exam up to four times a year, compared to twice a year for the current test, and the new format will include simulations and relational case studies that will test candidates’ accounting knowledge and skills using real-life, work-related situations. At 14 hours, the revamped test will also be 90 minutes shorter than the paper-based test.
John Covaleski and Tracey Miller-Segarra contributed to this report.
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