Let’s look at what we’re doing in terms of positioning for us. You probably have seen some of the recent publications with our new tagline, “America counts on CPAs.” It gets us a little bit more positive than “Never underestimate the value.” I think this is really timely, and it really ties in so well to so many of the new initiatives. We’ve kind of come through a tough period as a profession, and I think we’re now moving into that period where we’re really being very highly regarded, and I think it’s a great time for us to try to reposition ourselves in this very positive vein. This tagline, I think, really underscores the values that we can bring to the community, and I think some of these new initiatives help to reinforce that. We’ve learned that it really resonates positively with the business community. Certainly, we had some focus groups before it was rolled out, but even since then we’ve gotten really positive, positive impact. So it’s terrific. The logo and tagline are available, if you want to download that onto any of your own firm materials, at the AICPA website.
Let’s turn now to our CPA Ambassador program. For those of you that aren’t familiar with this program, it is a very intensive public speaking and media training session that prepares us as CPAs to go out into our own communities and spread the word about the role of CPAs, among various audiences, such as business and professional groups, other civic groups and high school and college students. The materials include everything from speeches to PowerPoints to Op-Ed pieces. And some very good Talking Points and Q&As around each subject matter. They are kept updated and incorporate the latest professional issues and activities – for example we have a section on Social Security Reform. This program grew out of our desire to improve the image of the CPA after the storms that we had surrounding the business failures. After that, we decided there’s not enough money in the world to advertise, and it always appeared somewhat self-serving when we did that. So what we did was say that maybe the best thing to do is unleash the power of all of us to go out into our communities. Those are the people that we work with. Those are the people that know the value we can bring. And perhaps that’s where we ought to be reinforcing our message about the positive things that CPAs do. So that’s how this program was born. It’s been very successful. We’ve now trained in xx different state societies along with yyyy different AICPA committees. We are constantly getting feedback from our members who take the program and from state societies. We have had or are planning some complementary efforts with the state societies including a program to train state society staff so they can pass some of that along to a wider group of members, and some support/advanced skills training for state societies on the media relations side.
Looking at General BDMs, the highest intensity “very favorable” has shown a statistically significant jump from 2003 to 2005. The same phenomenon has not taken place with investors. Regardless, a 90-97% favorable is obviously excellent.
CPAs is the only profession that receives wide ranging support from the top of the business C suite to the investing public. All other professions may have strong support in the BDM Suite but a limited profile among investors or no profile among any of them.
25M-100M BDMs More Likely Think CPAs Essential To Success
The accounting profession will work with the Financial Accounting Standards Board (FASB) to evaluate potential changes to generally accepted accounting principles (GAAP) for privately held, for-profit companies the governing council of the American Institute of Certified Public Accountant (AICPA) announced on Monday..
The new CPA Financial Literacy Resource Center on AICPA.org also is proving to be a great tool for CPAs and the state societies. And its usage is coming through by high rankings on two search engines-- #3 on Google and Yahoo and #2 on MSN Search. Over 126,645 hits on the site since December 2004. Most of these people accessed the site from the AICPA home page, but 5% found it through Google and 3% from Yahoo. AICPA staff will be enhancing this site with added benefits for the state societies and members signed up on the volunteer database.
One of the other things that we’ve done recently is to produce our Social Security report. The report can be downloaded by any interested parties from our website. The study is an update of a study that was previously done in 1998 It was commissioned for the purpose of being a factual document for use by all parties interested in and involved in the debate over this subject. We worked with several of the state societies to pull this together, and we commissioned independent economists to update it along with our staff The Report positions us – the profession - as the information people, the experts who can provide information that decision-makers can then use in crafting solutions, as opposed to us taking a political position on what is a very contentious issue. The rationale is not to give a position or decide whether we’re going to endorse one proposal or another for reform of the system. We think it’s absolutely the right place for us to be, and it’s been extremely well-received on Capitol Hill.
In the same spirit as we are engaging in the Social Security issue, we are also playing an important role in President Bush’s Federal Tax Reform Initiative
In 2002 the AICPA launched a comprehensive Antifraud and Corporate Responsibility Program designed to rebuild investors' confidence in our capital markets and re-establish audited financial statements as a clear picture window into corporate America. The program developed a wide range of new resources and tools that together work to prepare AICPA members to implement SAS 99 and to help corporate America combat financial statement fraud. As the cornerstone of the AICPA’s Antifraud and Corporate Responsibility Program, the Auditing Standards Board issued a new audit standard, Statement on Auditing Standards (SAS) 99, Consideration of Fraud in a Financial Statement Audit , in October 2002. The SAS gives auditors considerably more guidance for detecting material fraud. It puts U.S. auditors on notice that they must approach every audit with enhanced professional skepticism. In an effort to work with corporate America to prevent fraud, the AICPA, working with other organizations, created a document entitled Management Antifraud Programs and Controls: Guidance to Help Prevent and Deter Fraud , which spells out specific recommendations to help boards of directors, audit committees, and management prevent and root out fraud. This document is available as an exhibit to SAS 99 as well as a stand alone document. Corporate antifraud programs and controls, the document explains, must have three fundamental components: a culture of honesty and high ethics, antifraud processes and controls, and an appropriate oversight process. In December 2002, the AICPA launched an Antifraud and Corporate Responsibility Resource Center at www.aicpa.org /antifraud . It features free technical literature designed to support the CPA’s perspective—whether an auditor, a consultant or a member in business and industry or government—within the engagement context; educational materials; training; news on recent developments; and links to supporting products and services. Additionally, the site has a section for educators and students that provides instructors with materials, including case studies, to help bring fraud prevention, detection and related issues into the classroom, and enables students to explore career possibilities and access educational resources. To help businesses prevent and detect fraud, the AICPA and the Association of Certified Fraud Examiners (ACFE) released a one-hour antifraud training program on CD-ROM, “How Fraud Hurts You and Your Organization.” It includes real-life examples of fraudulent activity and a checklist of warning signs. More than 100,000 CD-ROMs have been distributed free of charge to CPA firms and businesses across the United States. An, 8-hour CPE course, “Fraud and the CPA” also was developed by the AICPA and ACFE. The course highlights how CPAs can better assist corporate America in detecting and preventing all types of fraud. The AICPA Business and Industry Team, with support from the AICPA Foundation, published a series of case studies of unethical and illegal accounting practices based on real-life experiences of members. The case studies include expert commentary offering alternatives on how to face unfamiliar situations. The case collection is available through www.aicpa.org , in the Antifraud and Corporate Responsibility Center. To allow CPAs to determine how well their overall skills and proficiencies compare to composite profiles, the AICPA introduced the Competency Self-Assessment Tool. The tool includes a variety of competency models, including fraud prevention, detection and investigation. It is located at http://www.cpa2biz.com/CPEconferences/cat.htm. The AICPA, along with the University of Texas at Austin and the Association of Certified Fraud Examiners, continues to develop a research/think tank to develop superior approaches to prevent, detect, deter and punish fraud and corruption. The Institute for Fraud Prevention will prioritize and support research to determine the extent of fraud and corruption, track trends, document fraud techniques, and predict the environments that lead to fraud and corruption. The AICPA developed a collection of antifraud case studies and ethics for educators to use in the classroom. These studies were culled from the AICPA Professor Practitioner Case Development Program. While they focus on fraud, they also address a wide range of topics including ethics and corporate governance. In addition, SAS 99 teaching notes were distributed and questions focused on fraud detection were incorporated into the CPA Exam. More recently, materials for developing standalone fraud courses and integrating fraud awareness into existing accounting programs, has been added to the Antifraud and Corporate Responsibility Center.
The AICPA’s Auditing Standards Board has issued the Risk Assessment exposure draft (Exposure Draft). The Exposure Draft consists of a suite of eight separate proposed Statements on Auditing Standards (SASs). An explanatory memorandum accompanies the Exposure Draft. These proposed SASs, if adopted, would establish standards and provide guidance concerning the auditor’s assessment of the risks of material misstatement in a financial statement audit, and the design and performance of audit procedures whose nature, timing, and extent are responsive to the assessed risks. Additionally, these proposed SASs establish standards and provide guidance on planning and supervision, the nature of audit evidence, and evaluating whether the audit evidence obtained affords a reasonable basis for an opinion regarding the financial statements under audit. These proposed SASs were originally exposed on December 2, 2002 (except for the amendment to SAS No. 1 which was approved for exposure by the ASB on April 28, 2005). As a result of significant revisions made to the original exposure draft, the ASB concluded that the Exposure Draft should be re-exposed for comment. The proposed SASs would be effective for audits of financial statements for periods beginning on or after December 15, 2006, in order to allow time for auditors to revise their methodologies and train their personnel to plan the initial application of these standards to their audits. Early adoption may be practical for some auditors, and will be encouraged. The Exposure Draft is currently available on the AICPA’s Web site at: http:// www.aicpa.org/members/div/auditstd/drafts.htm . Comments should be sent via electronic mail to Hiram Hasty at [email_address] and received no later than August 15, 2005.
Audit committee members with knowledge of accounting issues and their related business ramifications translates into a higher stock price, according to a recent study by a University of Chicago researcher. Accountants, controllers or other executives with clear accounting experience were deemed the most financially literate for the research, which involved reviewing biographies and assessing the financial literacy of audit committee members of the largest 300 public companies. From the beginning of 2000 to the end of 2003, the prices of shares of companies that increased their audit committee financial literacy ranking increased, on average, 4.6% a year more than did the prices of stocks in companies where audit committee rankings did not improve.
Enhanced business reporting, we are at the stage or near the stage of moving that process, as well, to a consortium notion. We will be bringing a plan to the board either at its April or July meetings. We have again put a lot of effort and leadership into building the notion of broader-based reporting. This goes all the way back to the Jenkins Committee report in 1994. There have been some attempts at implementation that haven’t really gone forward. But in today’s environment there is greater receptivity from the corporate community, and certainly the regulatory community. We have a lot of support from the SEC on this issue. At the same time, it can’t solely be the profession. So we’re taking the XBRL model of building a consortium with other companies, other people putting in resources and effort along with us, and moving that process along. So there are, for instance, on the website, if you look at enhanced business reporting, there are industry examples and things of that nature as to what is meant by enhanced business reporting. So this project is actually moving along pretty well.
The Ph.D. Project A partnership of forward thinking corporations that creates a pipeline of prepared individuals desiring to become accounting (and other business disciplines) professors. In last 10 years the program has doubled the number of minority businesses Ph.D.’s in the classroom who also serve as role models for today’s youth. The Institute has sponsored this program since the mid 90’s.
Main point – U.S. Accounting doctorate production is lower now than it’s been in the two decades since data were initially collected by NSF. AACSB Survey - 394 U.S. responding schools Currently recruiting to fill 240 doctoral degree positions Expect to add nearly 200 new accounting doctoral degree positions in the next five years Expect more than 420 accounting doctoral faculty retirements over the next five years
A number of contributing factors were identified: new examination delivery process flexibility and an increased level of procrastination; Sarbanes Oxley; gap between employer and employee perceptions about support given to take the exam.
Accounting enrollments for the three year period 2000-2003 are up 17%...the increase for 2002-03 was 9% (from 154,510 to 168,620.) Accounting graduates are also up across the board…bachelors up 6% (from 34,995 to 37,010) and masters are up 30% (from 9,700 to 12,655) for a total increase of 11% (from 44,695 to 49,665).
New Directions for a Renewed Profession Louisiana State University Fraud & Forensics Conference July 19, 2005 Barry C. Melancon, CPA AICPA President & CEO
Tracking attitudes and opinions since January 2003
Extent to which confidence has been restored in the profession
New developments in the profession and emerging political/public issues
Message themes and actions to improve the image of the profession
CPA Image/Favorability Are you favorable or unfavorable toward Certified Public Accountants? 37% Very Favorable General BDMs C-Class Investors 38% 47% 52% 42%
Profession Favorability 56/19 85/14 62/32 Management Consultant 61/21 86/10 77/17 Investment bankers 57/29 93/7 92/5 Chief Executive Officers 61/24 95/5 93/5 Chief Financial Officers 70/14 89/7 90/7 Commercial bankers 89/3 95/5 97/2 Certified Public Accountants 53/20 80/16 59/26 Stock research analysts 60/28 79/16 59/34 Stock Brokers 58/37 83/16 69/29 Attorneys 93/4 92/5 93/3 Physicians Favorable/ Unfavorable Favorable/ Unfavorable Favorable/ Unfavorable Investors C-Class General BDMs Are you favorable or unfavorable toward…? RANKED BY FAVORABILITY OF GENERAL BDMS
CPA “Heritage” Attributes Improved % Saying Attribute Strongly Applies to CPAs 63 64 75 Mar 2005 General BDMs 51 56 63 Jan 2003 47 48 61 Mar 2005 C-Class 33 40 48 Jan 2003 42 49 58 Mar 2005 Investors Consistently demonstrates ethics Reliable Committed to the rules of the accounting profession Does this apply to CPAs or not? % Saying Strongly Applies
Does “Is essential to the success of my business” apply to CPAs? % Saying Attribute Applies - Among General BDMs
“ Attributes” of GAAP reporting have high value according to all constituents (e.g., common language, consistency, etc).
Too many GAAP-specific requirements lack relevance or decision usefulness according to all constituents.
A majority of each constituent group believe it would be useful if underlying accounting in GAAP reporting were different, in certain instances, for public vs. non-public companies. (One exception – sureties in broad outreach.)
Directs AICPA management to work with the Financial Accounting Foundation (FAF) and the Financial Accounting Standards (FASB) in identifying and implementing a process for evaluating potential changes in recognition, measurement and disclosure from GAAP currently applied by public companies
Recommend a small joint working group to develop a detailed proposal to implement fundamental change
#1 reason candidates are not sitting for the exam: they are too busy
Response was consistent across all research activities, and mirrors state boards’ experience
In a survey by Maryland State Board for Public Accountancy, 26% of the responses cited demands of employment for not scheduling exam time, followed by family commitments
While cost of review courses and exam was raised, it was not seen as an obstacle to taking the exam
PCPS Efforts to Encourage Firms to Make Time for Exam
PCPS will be working to make sure that firms are encouraging their students to sit for the exam and not postpone it
Managing partners of firms have a great deal of leverage here, and PCPS has already started communicating that they need to encourage their CPA students to sit for the exam as soon as possible, despite the daily pressures of client work