The column you regularly publish by Profs. Miller and Bahnson has finally reached the point where it can no longer be ignored. While I cannot be labeled a regular reader, I do gaze at it just to see who or what they have decided to flagellate.

It now seems evident that their urge to bash is the dominating factor, supplanting usual considerations in learned works such as accuracy, objectivity and fairness. I have identified articles that I know are inaccurate and have concluded that the professors don't let facts get in the way of the story they want to tell. A case in point involves a column they published a few years back where their chosen target was the American Institute of CPAs. The article contained inaccuracies, demonstrably incorrect statements and misleading assertions that to me, as a past chair of the AICPA Board of Directors and a member of its Governing Council, were simply inexcusable. Since one of the authors, Professor Miller, and I live in Colorado Springs and we know each other, I contacted him to offer my assistance in helping him fill the void in his knowledge about the AICPA. More important, I offered to consult with him if he ever felt moved in the future to write about the AICPA. He did not take me up on my offer; indeed, from that point forward he stopped communicating.

Now fast-forward to the present and the column authored by the professors that appeared in the December 2011 issue of Accounting Today ("Some evidence that the AICPA's management has lost its focus," page 20). This article is riddled with misstatements, inaccuracies and erroneous assertions. To use the current jargon of fact-checkers, some of their claims merit the designation, "Pants on fire." Since the professors have proven that they have no interest in educating themselves about a subject before they write about it, I believe I have no choice now but to do publicly what I previously offered to do privately; hence this letter.

1. The AICPA's mission. The authors assert that, "Without question, the AICPA's justifying mission is serving its members, first, foremost, always and only." Of course the AICPA serves its members, but that is certainly not its singular mission. If the professors had bothered to read the AICPA mission statement, they would have found first and foremost a "strong commitment to serving the public interest." Moreover, if the professors had done their homework, they would have found innumerable examples of the AICPA and its members serving the public interest in countless ways, including an award-winning financial literacy program and serving as non-partisan advisories to Congress on such things as Social Security and Medicare.

2. The obsession with the AICPA's management. Had the professors done their homework, they would have learned that the AICPA is truly a democratic organization in which members and their broad range of representatives have significant input. Indeed, most of their misdirected references to management actions regarded actions that had been approved by members and their representatives in a democratic process, and, in fact, many of them originated at the grassroots of our profession.

Proof of the AICPA's effectiveness can be found in the record-high membership number (nearly 380,000) and retention rate (approximately 95 percent).

3. Sharing the profession's perspective on Capitol Hill and beyond. Member surveys reflect a high level of interest in the AICPA's advocacy efforts. Over the past few years, the AICPA and state CPA societies have worked together to achieve CPA interstate practice privilege in 48 states and counting. This year, the AICPA helped to: repeal expanded 1099 reporting requirements that would have been onerous to small-business owners and rental property owners; prevent mandatory withholding of taxes (3 percent) from government contractor payments; and ban further patents on tax strategies. The institute worked with the IRS as the registered tax return preparer program took shape to prevent duplicative and unnecessary oversight over CPAs who prepare tax returns and to ensure that the term "registered tax preparer" does not endanger the CPA brand. Additionally, the AICPA was able to work with Congress on an agreement to recognize CPAs' "customary and usual" services under the Consumer Financial Protection Bureau, in light of existing regulation of CPAs' advice and counsel.

4. Broadening opportunities to business and industry members. As the authors noted, the AICPA and the 100-year old Chartered Institute of Management Accountants have come together in a joint venture to create the Chartered Global Management Accountant. Council provided extensive input into, and unanimously approved, this effort. The institute's decision to work with CIMA was preceded by extensive investigation and assessment of how best to serve CPA members who provide management accounting services. The AICPA wanted to offer CPAs who work in corporate finance functions an additional credential and associated resources that would further support that expertise worldwide. Members in industry make up about 40 percent of the AICPA's membership.

5. Listening to the needs of private companies. The discussion about accounting standards that recognize the unique needs of private companies and their financial statement users dates back to the 1970s - decades before the current AICPA leadership.

AICPA Council has been instrumental in moving this discussion to action, urging the formation of the Blue Ribbon Panel on Standard-Setting for Private Companies, which was co-sponsored with the Financial Accounting Foundation and the National Association of State Boards of Accountancy. After hearing from various stakeholders, a supermajority of the panel voted to recommend that there be exceptions and modifications in U.S. GAAP for private companies, where warranted, as well as a new standards board authorized to make those modifications (that is, without FASB influence or approval).

6. Helping members stay at the forefront of accounting trends. It is worth noting that IFRS is already an established reporting system in the U.S. Multinational companies with subsidiaries abroad are based here; foreign companies have subsidiaries here. Private companies can use IFRS or IFRS for Small and Medium-sized Entities if they believe it is a better option. Furthermore, IFRS is standard entry-level practice for CPAs today, and CPA Exam candidates have been performing well on IFRS questions.

The AICPA works tirelessly to serve the public interest, to represent its members, to support the accounting profession, and to provide relevant and essential services requested by its members and viewed as key to their ability to serve the public good.

In this CPA's opinion, the AICPA is doing exemplary work, and I am proud to be affiliated with the most prestigious and largest accounting body in the world.

A. Marvin Strait, CPA

Colorado Springs, Colo.


... right on!

Thank you for your recent article. I thought I was the only one who dared to criticize the AICPA and its leadership. Your analysis was spot on in pointing out the conflicts of interest between the organization, its leaders and the membership.

It's absolutely apparent that the organization is first dedicated to self-preservation and personal enrichment, rather than to providing effective and efficient services to the members. As always, follow the money. Please review the compensation and benefits that the employees of the organization enjoy. You will find that they are far in excess of those of the average member.

Just like all government workers, there needs be a rationalization of services provided, those who pay for the services and those who deliver them. These quasi-governmental/nonprofit organizations need to join in the economic reckoning that their members are going through. I would specifically point to the Michigan Association of CPAs for further evidence of this malfeasance. Clearly, term limits need to be established for these organizations. It would be nice to see these leaders have to go back to providing services to clients, instead of selling themselves and their great vision or concepts to the membership.

Thank you for the spotlight you have provided. I hope the membership reacts accordingly. I would like to be treated more as a member and less like a customer.

Michael C. Zack, CPA


... correct on AICPA elitism

I agree with Profs. Paul Miller and Paul Bahnson's assessment of the accounting profession and the elitist attitude of the AICPA.

I am a sole-practitioner CPA in Plano, Texas. I started my practice 30 years ago at age 26. I have been in the peer review program since 1991. I was a founding member of the Texas Association of CPAs, and the current president.

The article immediately struck a chord with me with "Exhibit A: Cognitors." The idea was presented to Texas CPAs in the Texas Society of CPAs' publication Viewpoint in October 2000. At that time I was a member of the society, and still have a copy of the newsletter. Of course, CPAs vigorously slammed the idea to the mat.

It is clear the Cognitor concept was never intended for the sole practitioner. It was meant only for those involved in strategic planning in large firms. Our AICPA leaders were planning to create a new brand, a new icon, to which only a select few would be granted access. And what would happen to CPAs holding the old label? I suggest that they would have been slowly regulated out of business.

The ignominious death of Cognitor provides no evidence that that elitist thinking went away. I believe a new market control mechanism has been put in place; peer review is a mechanism that evolved from the same elitist thinking.

Among small firms and sole practitioners, peer review is almost universally disliked. The accounting "fathers" have found a way to regulate service providers out of the financial statement marketplace.

I attended the Nov. 16, 2011, meeting of the Peer Review Committee of the Texas State Board of Public Accountancy. One item on the agenda was "Review of statistical information on firms (no action required)." The committee chair asked committee members for comments on the graph. There was dead silence for an uncomfortable minute. The proverbial pin drop could have been heard.

According to the graph, there are 1,130 corporations, 78 partnerships and 4,205 sole proprietors claiming exemption from peer review, a total of 5,413 practice units. Why is that significant? It means that these firms cannot issue a financial statement to a client unless they give notice within 30 days of such report and go back into the peer review program. That's over 55 percent of CPA firms in Texas that "cannot" issue a financial statement!

If you are a CPA practitioner in public practice, and you've been going through the peer review program, you know it is not there to protect the public. It is designed to persuade you to leave the financial statement preparation marketplace. If the public were being protected, then there would be plenty of suppliers; the data supports the opposite. The supply of CPAs available to prepare financial statements has dwindled significantly.

I wonder what happens to the price of this service when 55 percent of the suppliers exit the marketplace. And who benefits from the increased price? Certainly not the people who used to do the work! If your firm is staying put, and you have the staff to complete all the nonsense one goes through during a so-called peer review, you may come out a winner. The rest of us will simply be out of that business.

I think of peer review as stemming from the same elitist thinking that went into Cognitor. It was created at the AICPA level, then promoted by the state societies through which the program is administered. Then, too, the regulatory boards press the program into law, saying that it protects the public. Please - it protects the commercial speech in which the AICPA has invested, and it promotes a plutocracy that supports an oligopoly that gets a price increase.

The demise of Cognitor was in no way the demise of the elitist thinking displayed by the AICPA and its supporters. Miller & Bahnson provide Exhibits A through G, and each one of these exhibits is pregnant with the ideas of elitists.

To paraphrase Miller and Bahnson, reconsider paying your membership dues; send letters to the state societies and state regulatory boards that regulate you under color of law while boasting they protect the public. It's sad but true; you get the governance you deserve.

John Furge, CPA

Plano, Texas


Fraud affects many victims

I read your article, "The not-so-usual suspects: Are your clients ripe for fraud?" (December 2011, page 9) and applaud your approach to, and discussion of, this often difficult subject.

Too often a company is on the cusp of failure and then begins to look back into its financial transactions that led up to the fraud. The company may hire a forensic accountant to review the cash flow and transactions. After a bit of digging, certain peculiarities begin to show themselves. The business may find that for the last three years, it had an unknown silent partner.

There can also be fraud impacting different victims. For example, revenues have been declining and the business has been operating at a loss over the past three years. The owner or shareholders are using their personal capital to support the business. The business has a line of credit with the local bank. The line of credit is structured with an advance formula of 70 percent of the eligible accounts receivable (less than 90 days) and 50 percent of the inventory value.

The bank did an examination - not an audit - six months prior on the annual schedule. The business regularly has sent in the accounts receivable aging and inventory reports. These show ample coverage for the LOC after the advance formula is applied based on what the client supplied and depended on in the statements. At times a business may inflate these values. This does not occur in a statistically significant number of businesses, but it does occur.

An example of this occurred a few years ago with a smaller family-owned business in Michigan. The business inflated the accounts receivable. The bank's agent did an exam with too small of a sample and too large an alpha. The inventory was also inflated as assets were purchased - including a car - and classified as salable inventory. The lender walked through a warehouse and saw shelves full of boxes - but chose not to touch a single box, which would have shown that a majority were empty. The bank's agents would simply have had to look at the provided financial statements along with the accounts receivable aging and inventory valuation. The simple conclusions would have provided an immense red flag.

The intent has been to expand on the potential victims of fraud. I hope this has been in the least informational.

Charles Parker

Swartz Creek, Mich.

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