by Bill Carlino and Melissa Klein Aguilar
Scottsdale, Ariz. — In contrast to the emotional gatherings of years past, the Spring meeting of Council of the American Institute of CPAs last month was a relatively calm affair as the institute’s 240-member Council evaluated a series of measures ranging from increased peer review transparency to continuing the “Big GAAP-little GAAP” debate.
With the institute’s role morphing from the project-heavy and sometimes polarizing entity of several years ago, its two-day confab featured its usual roster of professional issues — although they were noticeably lighter in terms of controversy — and also served as a showcase for new public-service partnerships like its women’s financial literacy campaign.
Council members, meanwhile, proffered their opinions on the subdued climate of the two-day confab.
“I think at this point in the evolution of issues post-Enron and Sarbanes-Oxley, Council is far more willing to look ahead rather than backward,” said Bob Israeloff, senior partner at Garden City, N.Y.-based Israeloff, Trattner & Co. “I think it’s time to do the best we can as a profession without recriminations and disputes.”
“The meeting showed that the members are getting the word out. We understand the public’s concerns and we’re doing something,” said Bucky W. Glover, managing partner at Monroe, N.C.-based Potter & Co.
During the confab, Council members approved the institute’s FY 2005 budget of $146.8 million, which will include hikes of between $5 and $40 on membership fees, an increase of $35 on dues for its Tax Section, and a $100 rise for section members. The 2005 budget also included a 7.4 percent rise in salary and benefits for institute employees.
“No profession has gone though as difficult a time as we have in the past two-and-one-half years,” said AICPA president and chief executive Barry Melancon in his semi-annual report to Council members. However, he noted that the profession’s image rebuilding effort has made “significant progress.”
Melancon also touted the membership gains in the AICPA’s trio of specialty credentials, and noted an encouraging member response to its recently launched series of audit quality centers.
Melancon revealed that 350 firms have joined the institute’s new Employee Benefits Audit Quality Center, which was launched during the first quarter of this year, and added that, thus far, 950 firms have become members of the Center for Public Company Audits, a re-tooled version of the AICPA’s SEC Practice Section, after the congressionally mandated Public Company Accounting Oversight Board usurped its standard-setting authority. A third audit quality center focusing on government audits is expected to be launched in the fall.
Meanwhile, the AICPA’s trio of specialty designations have made membership gains since the institute’s ruling Council approved keeping them at the 2003 Fall Council meeting in New Orleans.
As of April, the institute’s Personal Financial Specialist designation had 3,258 credential holders and another 63 applications in process, while the Certified Information Technology Professional designation had 564 credential holders and another 160 applications in process. The Accredited in Business Valuation designation had 1,630 credential holders and another 17 in process. However, the application fees for all three will rise an additional $200 as part of the institute’s approved 2005 budget.
Big GAAP-Little GAAP
Meanwhile, in its previously stated strategy to help determine if current generally accepted accounting principles meet the needs of users of private-company financial statements, the institute is gearing a member-based Web survey and preparing a resource toolkit to help state societies conduct town hall-like presentations on the subject.
“The complexity of this issue is evident,” said Jim Castellano, who is leading a 16-member task force and serves as chairman of St. Louis-based Rubin Brown & Gornstein. He noted that there are more than 22 million private businesses in the U.S., as opposed to 17,000 public companies. “This is actually a 30-year-old issue, but each time it was studied it was done with the idea that there was a problem.”
The private company financial reporting task force is comprised of a diverse group of members, including bankers, investors, educators, preparers and representatives from six firms. Castellano said that reports associated with the Big GAAP-Little GAAP debate had been issued in 1974, 1981, 1983 and, most recently, in 1996.
“[The Financial Accounting Standards Board] is moving to the direction of fair-value accounting, and there is some consternation as to whether this is the right approach,” Castellano said. “You also have the issue of the convergence to international standards and the fact that FASB is funded by public companies.”
The AICPA collateral materials also will include a Power Point presentation and an instruction booklet for meeting facilitators. Castellano projected a July 31 date for completion of the surveys, and said that the results should be compiled sometime in August.
Once the task force studies the results and formulates its recommendations to the institute, Castellano said that there would most likely be an update on the initiative at the institute’s Fall meeting of Council in Orlando, Fla.
Reviewing peer review
Council members also approved a motion to usher in more transparency with regard to the peer review process.
Attendees affirmed a multi-tiered initiative that includes a comprehensive member education process as a prelude to a referendum that ultimately would allow peer review reports to be shared with state boards.
“Personally, I wanted a little more teeth into the peer review and the transparency,” said Potter & Co.’s Glover.
Outsourcing
With regard to the snowballing trend of outsourcing, the institute’s ethics committee (PEEC) is expected to issue an exposure draft formalizing its position on outsourcing.
Susan Coffey, AICPA vice president of audit quality and professional ethics, told attendees that PEEC’s position is that disclosure is “appropriate” and should be “applied broadly,” meaning that any service that is performed by an entity that the accounting firm doesn’t control should be disclosed to the client — not just services such as tax prep.
Recommendations considered
Council also approved four recommendations made by a task force on the role and responsibilities of Council, and defeated four others.
The task force — appointed in February 2003 — issued 14 recommendations in its report to Council last October.
One of the approved recommendations would require Council to adopt a statement of responsibilities that all Council members must sign. A second resolution requires that after Council has acted on issue, Council members are obligated to present the position of Council, as well as pros and cons. Members may also express their own views on the matter.
The third measure urges state societies to actively solicit nominations to Council from their membership and requires approval either by the society’s board or by a member election. The final resolution requires that all Council meetings, including regional meetings, have an open forum where non-Council AICPA members can participate. While the Spring and Fall meeting already include open forums, the regional Council meetings, which are closed, do not.
The Council members also passed a motion offered by Montana that defeated three task force recommendations that would have changed the term lengths for designated, elected and at-large Council members.
Lastly, Council members defeated a recommendation that would have mandated that Council members forfeit their seat if they missed three consecutive Council meetings, including regional meetings. Currently, attendance is required at three consecutive meetings, but that doesn’t include regional meetings.
Had Council approved any of the measures it defeated, a vote by the full membership would have been required to change the bylaws, which would have cost roughly $300,000.
Reaching out
As part of its efforts to hone financial literacy, the institute teamed up with the National Endowment for Financial Education and The Advertising Council to produce a national financial literacy campaign targeted towards women.
The initiative will cost about $1.7 million over a three-year period. The campaign will be part of a broader financial literacy program to be launched beginning in 2005 with a campaign sponsored by the NEFE and the Advertising Council directed at the general adult market.
The PSA is part of the institute’s broad-based “360 Degrees of Financial Literacy” education program, which was launched in May.
Awards
The AICPA bestowed its 2004 Public Service Award on Austin G. Robertson Jr., partner in the Shreveport, La.-based firm of Robinson, Bailes and McClelland LLP, who has dedicated his time toward the prevention and the treatment of addictive diseases, including problem gambling, alcoholism and drug abuse.
Robertson was instrumental in helping the Louisiana Association on Compulsive Gambling establish CORE, a residential program for problem gamblers and their families.
Paula Bevels Thomas, an accounting professor at Middle Tennessee State University, received the institute’s 2004 Distinguished Achievement in Accounting Education Award. Thomas serves as Advisory Board Distinguished Professor of Accounting and interim chair of the Department of Accounting at Middle Tennessee State University.
She has received the Tennessee Society of CPAs’ Outstanding Educator Award and the Award for Outstanding Performance in the Accounting Profession from the Middle Tennessee State chapter of Beta Alpha Psi, the national accounting fraternity.
