We're confident we're not alone in witnessing a number of questionable decisions by the AICPA's managers. One or two poor choices can be overlooked as normal mistakes, but the pattern is clear, to the point that we wonder why people stay affiliated unless they feel management is advancing their special narrow interests.


Without question, the AICPA's justifying mission is serving its members, first, foremost, always and only. Pursuing this goal used to mean supporting the broader profession through the Journal of Accountancy, the CPA exam, CPE courses, the Accounting Principles Board, the Auditing Standards Board and ethics enforcement. Members' access to inexpensive life insurance was a valuable bonus. For many years, these activities were offered with integrity and efficiency.

In our view, the management has somehow supplanted this mission to the point that today's institute has become a revenue-obsessed juggernaut. We hate to say it, but the managers appear bent on concocting new ways to build a bigger empire, including, for example, a new certificate in management accounting in direct competition with the Institute of Management Accountants.

Further, we note how frequently they get in the news to promote one cause or another. However, the AICPA membership is so large and diverse that its members do not have only one point of view, thus making it highly doubtful that its managers can rightfully lobby for specific political positions.

Take an issue, any issue, and you'll find CPAs in disagreement as to what to do about it. Thus, it strikes us as pretentious for the managers to wear the organization's mantle as they announce one stance after another as if they're shared by all members.

Take, for example, October's aggressive campaign to swamp the Financial Accounting Foundation with uniform one-paragraph letters demanding a private company standards board. Besides being ineffective, this crusade lacked integrity because it didn't provide the equivalent option to send letters supporting the FAF. We don't see how management, or anyone, can believe that all, or even most, members agree with them on this issue.

We have more to say about that effort, but first we'll present evidence of other ways we think the managers have lost focus on the mission.


In 2000, current management tried to increase membership numbers by convincing CPAs to accept other kinds of information professionals into the guild. The crowning indignity was their proposal that all members, CPAs and others, would henceforth be called "Cognitors," whatever that means.

To the managers' consternation, the membership absolutely crushed this proposal with an overwhelming vote. The message was "stick to the basics."


During the Internet bubble, management created CPA2Biz, an online business for selling CPAs all sorts of things, including CPE, computers, books, you name it.

Even if this idea had actually made sense for a nonprofit entity, it was contaminated by management's self-serving motive. Specifically, they wanted cheap stock so they, too, could become Internet millionaires. Chief among them was CEO Barry Melancon.

As reported by the New York Times, he paid $100,000 for 1 percent of the shares that were valued at $5 million only two years later. In response to demands for his resignation, he tried to defuse the controversy by saying he was "thinking about" giving the shares to an unnamed charity, as if that would deflate the issue ("Audit Group's Chief to Donate Disputed Stock to a Charity," New York Times, March 30, 2002).


Enron's collapse in 2001 caused AICPA management to scramble, to the point we recall hearing a representative try to restore confidence by telling a national television audience that only a small percentage of all audits had shortcomings. Just think what would happen if the FAA announced that a comparable percentage of passenger flights crash!

Out of the debacle came Sarbanes-Oxley and the PCAOB, which immediately took responsibility for auditing standards and ethics enforcement away from the institute because it had failed to adequately protect the public.


With our ears to the ground, a widely believed explanation for the AICPA management's unrestrained lobbying for embracing IASB as the source of reporting standards is that doing so could generate more revenue from training and certifying IFRS experts. Many also believe management is trying to help the largest audit firms gain market share. Either way, it strikes us that the managers are exploiting members instead of supporting them.

For example, these moves will surely cause smaller firms to lose clients. We don't believe management can justify using the institute's resources and influence to help some members succeed while impeding the success of others.

Indifference to especially defenseless individuals also appeared when AICPA management added IFRS topics to the CPA exam. This change was imposed over objections from state boards and to the detriment of neophytes who must master a topic that is nowhere near the mainstream of common knowledge. Management's haste to promote adoption compromised the exam's fairness by changing its content before practice evolves, instead of waiting to see what really happens.

Unfortunately for them, management is now heavily and publicly invested in a movement that appears to be grinding to a halt. As evidence, consider the virtual collapse of the trumpeted effort by FASB and IASB to produce numerous common standards before mid-2011.

Somehow, the managers missed seeing the clear obstacle that the SEC cannot legitimately anoint IASB without first convincing Congress to amend the Securities Acts and Sarbanes-Oxley. (See our October column, "The top 11 falsehoods about the IASB, IFRS and U.S. adoption.")

Nonetheless, October's onshore arrival of IASB's chairman Hans Hoogervorst prompted Melancon to roll out a political red carpet by demanding the SEC allow large public companies to adopt IFRS on their own. Thus, he offered an affront to the great many institute members who oppose abandoning GAAP and FASB.

Of course, he has the right to express his own opinion but, in light of his position as the AICPA's chief spokesman, he should clearly disclaim that he is not expressing an official position, just like we do.


Melancon has also taken a very hard public line on the private company standards controversy. On the October day we began drafting this column, the institute's council threatened (surely at his urging) to create its own board if FAF didn't reverse its position. Obviously, all these people seem to have again gone astray and forgotten why the institute was stripped of authority to produce accounting and auditing standards. They've also overlooked the fact that 55 CPA licensing authorities actually have the final say on this issue.

Besides their presumptiveness in disregarding members' alternate views, we question their political acumen. Simply put, after years of bashing FASB and advocating that it be dissolved, they can't actually expect the FAF to comply with their demands.


We also question management's position because it shortsightedly reflects the view of only those who supply financial statements without fully articulating the more important perspective of those who use them. They simply have not adequately contemplated how private company standards need to be reformed and how those reforms would be best accomplished.

To explain what we think they've missed, useful private company statements will assist users in the prime activities of assessing an entity's creditworthiness and its value in an acquisition. From all we hear, lenders routinely disregard potential borrowers' GAAP financial reports and, as one CPA explained to us, acquirers are usually better off working out an offering price on the back of a napkin instead of starting with traditional statements.

We conclude that, besides losing focus, management and petition-signing members have the dubious motivation of wanting to inhibit real reforms that would produce truly useful financial statements based on market values, thereby actually supporting users' decisions. It seems they are inadvertently choking off the best way to improve prospects for success by CPAs in this sector.


Before closing, we point out what we thought was surely the common knowledge that FASB and the FAF don't count noses when they read comment letters. In fact, they tend to react negatively to mass-produced letters. Further, as a letter's length decreases and the number of identical submissions increases, the more the senders' credibility and influence decline because it's clear they haven't legitimately analyzed the issues. In fact, a single well-thought-out comment letter can accomplish much more than a blitz of duplicate negative sound bites.

However, after its first deluge of 3,000 identical letters didn't get the job done, the AICPA management promptly organized a new campaign to try again. To paraphrase Einstein, it just doesn't make sense to do the same thing over and over again and expect different results.


We are not so naive as to think our evidence that the managers (including the council) have lost their focus will somehow persuade them to suddenly change their ways. Thus, a better means of promoting reform is through an outpouring of inputs from members who are willing to express their dissatisfaction or even resign their membership and stop paying dues.

For those readers who are AICPA members, we hope the preceding facts lead you to at least question whether you want to remain part of the institute as it now functions. We think it's hard to justify staying affiliated if you are as dismayed as we are by management's misplaced focus that drives it to keep lobbying for political causes and otherwise grow more entrenched.

If you are bothered but don't want to resign your membership, then we suggest you compose your own letter to the CEO and the council, using your own thoughts and your own words. If you think of it, send us a copy.

Paul B. W. Miller is a professor at the University of Colorado at Colorado Springs and Paul R. Bahnson is a professor at Boise State University. The authors' views are not necessarily those of their institutions. Reach them at paulandpaul@qfr.biz.

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