The American Institute of CPAs’ Fall Council meeting in October focused on the state of the economy, a proposal to internationalize the CPA credential, distinguished service awards and welcoming the upcoming year’s new chairman of the board.

Approximately 500 guests – 263 of them council members – gathered for the three-day event at the JW Marriott Starr Pass Resort & Spa in Tucson, Ariz., to usher in new board and new members, as well as get the accounting profession’s latest news from their peers.

Facilitating the meeting was outgoing chair Randy Fletchall, who touched on the issues plaguing not only the profession, but the country, since the Wall Street crisis erupted weeks ago.

“I thank you even more than normal for taking the time out to be here,” Fletchall said. “I’m very proud that in the time of crisis, the AICPA is rising to the occasion. Our diversity and reach is immensely important. Wherever we are and whatever we do, we serve as an objective financial expert.”

Fletchall touched upon the electronic financial reporting system, Extensible Business Reporting Language, convergence with International Financial Reporting Standards and the controversy over fair value accounting, which some outside the accounting profession have blamed for the credit crisis.

“Fair value has been elevated as a result of these market events,” Fletchall said. He noted that the clarifications recently released by the Securities and Exchange Commission and the Financial Accounting Standards Board were useful for inactive markets. “Clearly there are some real challenges in the application of fair value,” he said. “The current crisis was not caused by the standard. It helped to capture the realities.”

Barry Melancon, president and chief executive of the AICPA, built on that belief the following day in his professional issues update, which lasted nearly two hours. Melancon gave a primer on the Emergency Economic Stabilization Act passed by President Bush, clarifying that the term “Wall Street bailout” was a sound bite and a “few inappropriately muttered words that caught on” that ultimately became a disservice to the public. Melancon said that the act was instead about the financial services sector’s impact on the millions of businesses in the United States.

One provision in the bill mandates a study of fair value accounting to resolve the lingering debate among banking groups, financial analysts, investors and auditors. While some in the banking community say the fair value accounting rules require banks to value many assets at fire-sale prices when they would prefer something closer to a hold-to-maturity price, many Wall Street analysts, investors and auditors believe that suspending fair value accounting could reduce transparency. Melancon, however, noted that bankers are not necessarily opposed to the entire FAS 157 fair value accounting standard.

“When you hear people in the banking community say they are opposed, I think they are overstating their position,” he said, pointing to the hierarchy of the three levels of input data for determining the fair value of an asset or liability as the slice under debate. “They really are opposed to some pieces of fair value accounting. The concern is Level 3.”

The AICPA, according to Melancon, supports the independent standard-setting role of the Financial Accounting Standards Board and an objective review of applying fair value accounting principles in inactive markets, and also has formed a Fair Value Resource Panel to identify the highest-priority member needs.

Following his summary of the economic crisis, Melancon talked about the “brand” of the CPA. He said that the consistent strengths of the CPA brand are resiliency in the face of crisis, yet resistance to re-invention. In a recent survey on the reputation of the profession, the AICPA found that 76 percent of the respondents were more confident in a job done by a CPA than a job done by an uncertified accountant. Concern about accounting fraud has decreased. In evaluating a business professional, the survey respondents viewed CPAs as the strongest on the two most important attributes: integrity and competence.

In January, a new partnership for high school juniors and seniors will team the institute with to educate younger generations about the profession. Fifty-five percent of young non-CPA accountants said they were interested in receiving the CPA credential, and 28 percent said they were interested in other specialized accounting credentials such as the PFS, the CITP, the ABV or the CFF.
Melancon then called upon AICPA senior vice president Sue Coffey to talk about increasing recruitment for the peer review process.

“Two years ago we had 11,000 peer reviews a year and only 1,700 peer reviewers, and that was a significant decrease from five years previous to that,” she said. “Of those 1,700, 90 percent were over the age of 40 and 45 percent were over the age of 55. We have a real problem, just like the rest of the profession, with the pipeline and getting people involved in peer review, and we need to do something about it.”

New standards that go into effect in January will only require a team captain and review captain to enroll in a training course for peer review, she noted.

Melancon also gave an update on FIN 48, including the Financial Accounting Standards Board’s decision to issue a proposed staff position to defer the interpretation for all nonprofit entities until fiscal years beginning after Dec. 15, 2008. He also noted that the recent Certified in Financial Forensics designation has already attracted 1,945 applications.

One highly talked about issue at the meeting was the idea of internationalizing the CPA designation. Leslie Murphy, co-chair of the AICPA /National Association of State Boards of Accountancy Joint Committee on the International Administration of the CPA Examination, and Arleen Thomas, senior vice president of member competency and development at the AICPA, presented a proposal asking Council members to consider offering the U.S. CPA Examination to international markets and issuing a non-audit CPA designation for use outside the U.S.

“The U.S. CPA should be one of the premier international licenses or designations,” said Thomas. She noted that about 10 percent of CPA Exam volume comes from international candidates, and approximately 7,000 individuals come to the U.S. or its territories each year to take the exam. “The value proposition for them is that they can demonstrate the understanding of the U.S. content.”

Once someone from outside the U.S. passes a state U.S. CPA Exam, they could apply for a license and practice in the U.S. or receive an “acknowledgement of accomplishment,” according to Craig Mills, executive director of the AICPA’s examination team. If they apply for a license, they would have to go through the process like anyone in the U.S.

If they opt for the acknowledgement, they would need to submit proof of eligibility that they have met the requirements of the Uniform Accountancy Act. They would then agree to a code of conduct as well as agree to participate in disciplinary action (if necessary) and agree to procedures to keep up with continuing professional education requirements. Those who received an acknowledgement of accomplishment would not be able to do audit or attest work, and they could not use the CPA designation in the U.S.

The committee expects to present a business plan for approval by the board of directors of NASB and the AICPA in December or January of next year, with the goal of launching the program in January 2010.
Still, some council members had concerns, despite an open comment session on the issue.

“I am undecided,” said Henry Rinder, of Smolin, Lupin & Co., P.A. in Fairfield, N.J. “I can understand if we are moving to global reporting and audit, then we will need a global designation. I’m not sure if this is the first step.”

Jim Bourke, a partner at WithumSmith+Brown, in Red Bank, N.J., and a member of the AICPA’s CITP Credential Committee, said in his breakout session that a board member and AICPA staff member were both present to address comments.

“I think the consensus in the room was members had more questions at that point in time,” Bourke said. “They were just introduced to the subject. We left the session with a lot of unanswered questions. I think it’s a really good thing, but I believe more work needs to be done to try to define the role of that credential on an international level.”

The reality is, with a global economy, it is imperative that the CPA credential be viewed internationally, as the "preferred" choice vs. other designations such as chartered accountant, according to Robert Traphagen CPA at Traphagen Financial Group in Oradell, N.J. 

 “We will need to move forward strategically toward a global CPA credential; however, the greatest risk in doing so is the potential dilution of the CPA brand,” Traphagen said. “If there is a two-tiered approach, i.e, US CPA vs. international CPA, the question would then become: is one better than the other? The challenge is to preserve the brand/value while allowing for expansion into the global market. We will need to proceed with diligence in order to maintain the integrity of the CPA brand and its value.”

In other business, Robert L. Bunting, a former AICPA chairman and the incoming president of the International Federation of Accountants, and David M. Walker, a former U.S. comptroller general who is now president of the newly established Peter G. Peterson Foundation, were presented with the AICPA’s highest award: the Gold Medal for Distinguished Service Award.

Fletchall also relinquished his chairman position to Ernest Almonte, the auditor general for the state of Rhode Island. Almonte is the first government official to serve in this position at the AICPA since the institute’s founding in 1887. His term is one year.

“I’m on cloud nine,” he said of the honor. 

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