We're pleased to announce that we're going into a brief hiatus from writing new columns. After all, we've written them together nonstop for every issue since 2000, and Paul Miller wrote with Ed Ketz going back to 1996.

This break doesn't mean we're tired or out of topics. Rather, we're participating in a major project that demands our full attention. We'll be back before too long, as feisty as ever. Before we begin our leave, we're going to capsulize five hot issues to alert you to what's going on. We'll also preview what's going to appear while we're away.

 

THE AICPA

First, we think you need to keep your eyes peeled when it comes to the American Institute of CPAs, where we believe that something is brewing beneath the surface that won't be well-received when it's made public.

As we explained last March, look out for the ill-considered effort by the AICPA Elite to create Chartered Global Management Accountants out of thin air by literally selling this designation (not certification) to innocent or guileful CPAs. After spending millions of dollars to promote this, Barry Melancon now proudly reports that 37,000 have signed on, which is barely a quarter of those the institute enrolled for free trial memberships.

We suspect that this number is inflated. For example, we're sure it includes accidental renewals by some who failed to notice the charge on their dues statement for this (at best) dubious or (at worst) bogus credential. In fact, we know a colleague who didn't realize he had accidentally renewed his CGMA until he read our column. He promptly cancelled. We suggest that all AICPA members check to see if they made the same mistake.

Further, we speculate that many others saw an effortless way to put some arcane initials after their names. Surely, some renewed because they felt they deserve the designation because of their experience. However, because both groups got it for nothing, the CGMA carries no real prestige and actually diminishes their résumés, instead of strengthening them.

Finally, we think the AICPA Elite is trying to delude others about the CGMA's legitimacy by pretentiously listing it after their names - never mind that many of them are not now and probably never have been real management accountants.

To make things worse, Melancon now claims that there are 125,000 CGMAs in the world, neglecting to mention that the other 88,000 actually earned theirs by taking a test administered by the U.K.'s Chartered

Institute of Management Accountants.

Here's our most disturbing warning: We believe that the Elite's ultimate goal is to downgrade the AICPA into the Non-American Institute of Non-CPAs by merging with CIMA. It's no accident that they've called their joint venture the "Association for International Certified Professional Accountants," somehow thinking that preserving the AICPA acronym would make the merger more palatable. Of course, they're flat wrong.

Simply put, watch 'em close.

 

IFRS AND IASB

Although many deny it, the years-long campaign to replace U.S. GAAP and the Financial Accounting Standards Board with International Financial Reporting Standards and the International Accounting Standards Board has come to naught.

In his speech at the AICPA's Securities and Exchange Commission conference last December, now SEC Chief Accountant Paul Beswick gave it perfunctory attention by saying -- accurately but meaninglessly -- that, "The staff is working to ensure that the commission is properly informed on the issue." In addition, Commissioner Luis Aguilar revealed the controversy's insignificance by not bringing it up in his speech, other than in his final paragraph's segue to the next speaker, Deputy Chief Accountant Julie Erhardt, who thoroughly explained why adoption would not be as easy as its advocates seemed to think.

These unmistakable signals are just the latest in the huge pile of evidence that this issue is dead, dead, dead.

Why is that so? Simply because Sarbanes-Oxley and multiple other factors make adoption totally impossible, which is good because it never was a worthwhile idea. (Our November column explains why you should no longer fear or hope for this development.)

It's now obvious that the most powerful advocates saw the movement as a self-serving revenue-enhancing scheme and/or a way to enhance their image and legacy, including once again the AICPA Elite, former SEC chair Christopher Cox, the IFRS Foundation's Harvey Goldschmid and Paul Volcker, and the IASB's Sir David Tweedie and Hans Hoogervorst. Along with the chief executives of CPA firms who plunged into this pool without seeing how shallow it was, all these people have egg on their faces.

Incidentally, we've learned there was no substance to widespread rumors that accounting staffs at large U.S. public companies were poised to implement IFRS. Those tall tales were surely fabricated to bolster the false claims of inevitability.

Despite this evidence, some will still try to mislead you while we're away. Pay them no attention.

 

CONVERGENCE

Likewise, plentiful evidence shows that the multi-year effort to converge IFRS and GAAP through joint standards has come to a screeching halt. In our judgment, little good was accomplished other than a revised concepts statement.

In retrospect, this project was destined to founder as soon as it was birthed in September 2003, less than two months after Sarbanes-Oxley liberated FASB from depending on corporate charity for funding. Instead of seizing its new freedom to pursue long-needed reform, FASB plunged into what would be an unworkable alliance with the IASB, which did and still does depend on financial donations. Everyone should have seen there was no way this mismatched partnership could have created innovative and useful advances. Of course, this shortage of significant reforms was exactly what many convergence proponents were hoping for!

In other words, it's time for FASB to move on to better things.

 

AUDITOR INDEPENDENCE

People are missing the point if they think their negative testimony and comment letters can thwart the objective of the Public Company Accounting Oversight Board's auditor rotation proposal. To the contrary, the auditors' vehement opposition actually shows that they're not independent in fact or appearance and want to stay that way. Complaints from managers likewise reveal their desire to hold a sword over their watchdogs' heads.

We believe the proposal confirms that auditors can never be fully independent as long as they're paid by the people they audit. We're encouraged that the PCAOB is trying to address this untenable situation, and we hope it can help stem the seemingly never-ending torrent of restatements.

However, even if rotation were implemented, we fear the only thing it could accomplish would be temporarily breaking down one dysfunctional co-dependent relationship that will be replaced with another.

What rotation's shortsighted opponents don't grasp is that the PCAOB's members are determined to increase independence. If auditor rotation is shot down, we think they'll explore other avenues that will be more far-reaching.

For example, we like the idea of forming one or more independent audit funds to which auditees pay a fee but have no say in which audit firm is engaged. Because this arrangement would improve almost everything about audits, it gets our vote as highly preferable to rotation and the status quo.

We're also detecting a scent in the wind that audit firm managers are backsliding into offering non-audit services to their clients, never mind the clear intent in Sarbanes-Oxley to outlaw them. Of course, clients love having the extra leverage created when their auditors have even more fee income to lose. Watch for the PCAOB to look into this mess, too.

 

PRIVATE COMPANY STANDARDS

Among the topics in our December column was the Private Company Council's plan to look at all of GAAP to see how to improve it for private companies. As we said, that effort makes sense if and only if, as Chairman Billy Atkinson has indicated, the PCC adopts a new paradigm that puts users' needs first. If that's done, the emphasis will be on making statements useful for assessing private companies' creditworthiness and market value. In turn, this effort should lead to reporting more fair value measures, instead of unreliable and misleading residual book values based on historical costs. The next move would be to acknowledge that those changes make sense for public company standards as well.

If things develop along those lines, perhaps, just perhaps, productive reform will eventually take place. We fervently hope so.

Undoubtedly, that outcome would disappoint the 7,000 CPAs who clicked on the AICPA's handy-dandy but specious "send a complaint" link on its Web site. You can expect more parrot-like squawking against any movement toward real progress because these folks want a dumbed down PC GAAP that would purge the status quo of useful disclosures and then leave the rest unchanged forever. It's as if they don't understand that there's little or no profit potential in preparing useless financial statements.

You'll want to watch this one closely.

 

SOME GOLDEN OLDIES

While we're away, we'll keep in touch by reprinting several columns that still make relevant points for today, including some that appeared in 2000 through 2003. We've picked some dealing with auditor independence, education, accounting measurement, and the inherent value of truth-telling. We think they'll help today's new readers assess both our consistency (a good thing) and our profession's incredible resistance to meaningful change (a bad thing).

Like the Terminator, we'll be back. You can count on it.

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.