The story "Council OKs 'Little GAAP' strategy" (Accounting Today, June 20-July 10, 2005, page 1) was subtitled "AICPA financials come under fire." It reported that six American Institute of CPAs members, under the banner CPAs Reforming Our Profession (Crop), tried rousing the AICPA Council to find answers to anomalies in recent AICPA audited combined financial statements.We volunteered hundreds of hours researching and preparing our analyses with the hope of improving the AICPA and our profession. While your reporting is appreciated, we politely suggest a misplaced emphasis. Generally accepted accounting principles, or any professional initiatives, won't matter if the AICPA sinks under ineffective governance.

Crop invited the AICPA Council to evaluate this information over a year ago at its Scottsdale meeting; reactions were a mixture of ambivalence, haughtiness and indignation. We were deemed disrespectful for suggesting closer scrutiny or offering critical assessments of the financial statements, which included lackluster operating results.

Because they're not transparent, portions of the financial statements raise questions; however, other portions are clear and reveal that AICPA management squandered over $100 million of equity. Why would any fiduciary reject our efforts, rather than study them and weigh their implications?

Crop's Web site (www.cpas4- and listserv ( criticized the AICPA for encouraging the actions of some prominent members (e.g., promoting CPAs delivering auditing and consulting services to the same clients) and ineffectively addressing remedies to prevent similar occurrences.

Washington began snubbing the AICPA when Congress replaced it as the public company audit standard-setter with the Public Company Accounting Oversight Board, and the AICPA was initially omitted when organizations were appointed PCAOB observers. The President's Advisory Panel on Federal Tax Reform excluded the profession's input too.

While Rome burned, the AICPA fiddled with questionable forays into a for-profit subsidiary, CPA2Biz, which was assembled with mostly external funding, and a thinly disguised related effort to embrace a nebulous brand, XYZ/Cognitor. Members awakened and, by a landslide vote, rejected this attempt to stock the membership with non-CPAs; however, members slumbered through years of financial statements showing CPA2Biz losing the outsiders' substantial investment and depleting the members' equity as well.

AICPA management consistently asserts that the AICPA does not "fund" CPA2Biz. Yet footnotes in the financial statements indicate that a "new agreement" in July 2002 reduced CPA2Biz's lease obligations to the AICPA by almost $3 million annually; the AICPA apparently also financed CPA2Biz with a $4.3 million note, which one year later had repayment extended by the AICPA's board of directors.

These unchallenged inconsistencies indicate that CPAs (including those on the board and Council) have not monitored their national organization's financial statements. Unbelievable! Furthermore, Barry Melancon's embarrassing CPA2Biz insider's stake warrants attention too, as Lynn Turner's Senate testimony supporting the Sarbanes-Oxley Act cited the AICPA/CPA2Biz relationship in justifying creating the PCAOB.

You noted Crop's specific concerns, like the manner of recording CPA2Biz's CapPro acquisition, its subsequent non-cash transfer to Nationwide Financial Services, generating a reported $5.6 million "paper" profit, and the board naming NFS as the preferred provider for AICPA retirement programs (replacing T. Rowe Price) while this deal was pending. You also noted "continuing and ballooning deferred costs of the computerized CPA Exam" and mentioned that $30 million was drawn from a line of credit (twice last year's draw and apparently never used less than two years before). Our biggest concern throughout all of this is the board's and Council's apparent complacency.

Common reactions were, "I was not involved at the time," accompanied by, "Dedicated volunteers made those decisions; don't disrespect and tarnish their legacies with 20/20 hindsight." Evaluating Council's hurdles requires professional skepticism. By signing a loyalty oath pledging to support Council's decisions, volunteers reap all-expense-paid trips to exotic meeting sites with lavish evening affairs, but the actual meetings offer only sketchy, management-prepared reviews of an ever-changing array of piecemeal financial data (making comparisons difficult), and slick, rosy summaries of management's initiatives.

After this dazzling whirlwind, Council members jet back to the grindstone of their offices. Such challenges aside, volunteers are nevertheless fiduciaries, representing 330,000 members; any deflection of blame demonstrates that denial is not just a river in Egypt.

Just prior to the latest Council meeting, chairman Robert Bunting issued a pre-emptive statement to quell reactions; his defense stated everything was "reviewed repeatedly by the AICPA board, legal experts, the AICPA's independent auditor, JH Cohn, as well as by the CPA2Biz board and their auditors, Grant Thornton."

No disrespect, but this is straight from the lexicon of Enron. Crop provided the chairman with confirmed (by a former AICPA chair), written documentation proving that Crop never received clear, complete or correct responses to questions. We hope that this changes soon.

The foundation of our profession is looking back to move forward with better direction and purpose; we improve from understanding past mistakes. Whoever cannot see the need for major systemic restructuring after examining the AICPA record is blind or failed Financial Analysis 101. It is odd that Bunting chose these words to dismiss the importance of studying the Crop report: "I prefer to focus on securing our future rather than debating our past."

Respectfully submitted by the six signers of the Crop reports,

Andrew Blackman, CPA/PFS, CFP, DABFA, New York;
Mitchell Freedman, CPA/PFS, Malibu, Calif.;
Harold L. Katz, CPA, Los Angeles;
John Levy, CPA, Walnut Creek, Calif.;
Stan Mills, CPA (inactive), Indianapolis;
Kendall Wheeler, CPA/CITP, Fresno, Calif.

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