Professional Issues Update
Spring 2009 Edition
Tom Hood, CPA.CITP
CEO & Executive Director
Maryland Association of CPAs

The Formula that blew up our 401(k)s
Source: Wired magazine 17.03 March, 2009

Bernard Madoff
Law of Intractable Systemic Corruption
Any significant breach of a syndrome’s integrity
(Government & Commerce) – usually by adopting an
inappropriate function – causes some normal virtues to
convert automatically to vices, and still others to bend
and break for necessary expedience.
Over the course of time, corrupted organizations
accumulate in society. Without correction, the
accompanying rancid cooperation blurs more than the
afflicted organizations.
-Jane Jacobs – Systems of Survival
Ponzi scheme of $ 50 billion
Facing 150 years in prison

This is the key question –
What will the new normal look like?

“It is increasingly clear that the current
downturn is fundamentally different from
recessions of recent decades. We are
experiencing not merely another turn of the
business cycle, but a restructuring of the
economic order.”
– Ian Davis, McKinsey Quarterly March, 2009
You are not alone

Emergency Economic Stabilization Act of 2008
• Signed into law on October 3, 2008
• $700 Billion
• TARP (Troubled Assets Relief Program

ARRA – American Recovery & Reinvestment Act of 2009

The new normal – Wall Street?
1920 - 2008 2008 - ????

Source: Dr. Anirhban Basu

Mega-trends
1. Regulations &
Standards
2. Globalization Economic Meltdown
3. Workforce – More Government
4. Technology – Less Leverage
/Credit Crunch

MACPA is here for you
But a time of turbulence is also one of great opportunity
for those who can understand, accept and exploit the
new realities. It is above all a time of opportunity for
leadership.
- Peter Drucker, Managing in Turbulent Times
Our goal is for us to survive this
recession together and position
you, our members for the
recovery.
The power of your Profession is
ready to work for you!

Our Agenda - The New Normal?
• The Mega-trends
– Regulations &
Standards
– Globalization
– Workforce
– Technology
• Opportunities
• So what we are
doing for you
• Tools for surviving
& thriving

Regulations & Standards

the basic physical and organizational
structures needed for the operation of a
society or enterprise
The infrastructure for the free market was found to be in disrepair
in this latest market crisis and the CPA profession is a critical
component

CPA Profession in the Spotlight

Fair Value Accounting under fire?

What is under the CPA Profession?

Federal Laws & Regulations –
SEC, DOL, Treasury, GAO, PCAOB
CPA Profession Standards – AICPA
& FASB, GASB, FASAB, IASB, IFAC
State CPA Statutes
police power of the states to protect their citizens vs commerce clause

Another View
Int’l Company
Public Company Private Company
SEC IASB
Financial
FASB
Reporting
FASB IFRS
Attest
AICPA
PCAOB IAASB
Performance
Standards ASB
Code of AICPA AICPA
IFAC
Conduct
PEEC PEEC
CPA
State Oversight & Enforcement of CPA License
Licensure

US Treasury
MD Comptroller
MD Comptroller
MD Comptroller
CAQ
Courtesy of the Maryland Association of CPAs – 2008 edition
Drawing by Carol Kirwan, CPA

A Tale of Two Frauds
Then : December, 2001 Now : December, 2008

Madoff’s auditor
• Sole Practitioner
• Accused of issuing audits of Madoff Securities
• Lied on AICPA membership renewal about peer
review
David Friehling, CPA faces 105 years in prison
For issuing false audit reports

Satyam + PWC
Ramalinga Raju – CEO created $40 billion in
fake billing and cash
PWC auditors missed cash accounts?

Changes in our Infrastructure
The Infrastructure for the CPA Profession is maintained by your
Professional Associations
AICPA & State CPA societies (MACPA)

The Obama Cabinet
The year of the REGULATOR
Timothy Geithner, Paul Volcker, Mary Schapiro,
Secretary of the Chair, Economic Recovery SEC Chief
Treasury Advisory Board
Gary Gensler,
Ben Bernanke,
Sheila Bair,
Chair, Federal Chair, Commodity Futures
Chair, FDIC Trading Commission
Reserve Board

Massive Changes in our Regulatory Structure

First PCAOB now FAOB?
New 5 member oversight board
proposed by Congress – March 6th,
2009

The Real Costs of Changing
FMV?
“Confidence, trust, and numbers that investors
can believe in are the stuff that make or break
the capital markets. When investors question
the validity of numbers, they sell and
wait, rather than buy and invest.
Yet those charged with building confidence and
trust and presenting numbers that can be
believed are under sustained attack -- and they
are losing.”
- Arthur Levitt, Weakening a Market
Watchdog in Washington Post – March
26, 20009

Standards Changes
• AS 5 - PCAOB
• IRFS – SEC International gets legs
• Fair Value Accounting
• XBRL – SEC mandatory
• Codification Project – FASB
• Clarity Project – ASB
– Convergence with international
– Risk-based standards already in int‟l format
(SAS 104-111)
• SAS 112 Communication
• Internal Control – COSO
• Fin 48 delay
• Delay of SOX 404 for “small” caps

US Treasury
MD Comptroller
MD Comptroller
MD Comptroller
CAQ
Courtesy of the Maryland Association of CPAs – 2008 edition
Drawing by Carol Kirwan, CPA

Improving Your Infrastructure –
The CPA License
• Initial Licensure
– Transfer of Grades
• Temporary Practice (mobility)
• Reciprocal License – 4 in 10
• Reinstatement – requires 80 hours of CPE
• Built around „substantial equivalency‟

History of CPA Legislation
KEY In the
Beginning...
Rights & Recognition
Max Teichman,
GOALS/ •Privilege of Self-
RESULTS Frank Blacklock & AG opinion of 1981
Regulation SB 560 Defeated
William Rogers Grants rights to non- Maryland Corporate
•Right to Sole Control CPAs for Reviews & Accountability Act
over an Area of Practice Comps. MACPA requests
HB 1296
reversal of AG Opinion
– “This is not an audit”
Mobility
language added
• CPA Bill signed April 10, 1900
Passes
PROJECTS/
MACPA wins use of
• MD is 3rd state (NY & PA)
STRATEGIES “consultants” in firm Maryland
letterhead at State
Special
Board
Session
State Board of
Accounting Oct – Nov 07
Accountancy Reform task
formed Maryland Force
KEY EVENTS MACPA defeats Sales
addresses
becomes the 1st SOX
Tax on Services
HB 1261 re-writes
state to restrict State Board Hearing
CPA Law - 1986 May 1, 2003 Amends Corporate Tax
practice for CPAs
MACPA amendments Reporting Bill from
to ed requirements fail
special session
PEOPLE MACPA Forms Task Force and
New simpler CPA
surveys members
exam Education Rules
88% Sub Equivalency
76% Peer Review & Safe Harbor
68% Non-CPA Ownership
Terry Hancock
chairs Legislative
PRODUCTS/ Larry Kamanitz
Dawson Grove Committee Allen Deleon
SERVICES/ chairs Legislative
SITES chairs Legislative chairs Legislative
Committee
Committee Committee
Dateline
1900 1901 1922 1924 1974 1976 1981 1987 1993 1999 2001 2003 2005 2006 2007 2008
35
Maryland Association of CPAs

Meet Bill…
• Bill files tax returns in 9
states + Maryland
• Last year he would have
required additional state
licenses in all states (except
OH, VA, MO, WI)
• He would have had to
register as a tax advisor (est
$250)
• He would have to report to
two state boards with different
CPE requirements
• He would have had to
charge & collect sales taxes
What would this cost you?
on his accounting & tax
services

Meet Jane…
• She is a CFO of a mid-
size company operating
in 5 states with original
license in Virginia
• Last year she would have
faced a $1,500,000
penalty and 5 years in jail
• Had to implement Fin 48
• Pay sales tax on all
accounting, tax, and
computer services
• Could use CPA and not
get her MD license
without taking 150 hours

Meet James…
• James is a CFO of a
public company
• He let his CPA license
lapse
• He was told he cannot get
his license reinstated
• He has to make sure his
accounting team complies
with SOX
• Last year he would have
faced a $1,500,000 penalty
and 5 years in jail
• Pay sales tax on all
accounting, tax, and
computer services

Mobility passes Senate
April 7th @ 10:44 pm

And HB 1296

CPA Mobility Legislative Activity 2009
WA
VT
ME
MT ND
MN
OR NH
ID WI
SD MA
NY
WY MI
CT RI
IA PA
NE
NV NJ
UT OH
DE
IN
IL WV
CO
CA VA MD
KS MO KY
DC
NC
AZ TN
OK AR SC
NM
MS AL GA
AK
TX LA
PR
HI FL
GU
V
2009 -2010 Anticipated
Legislative
Mobility Enacted - 32
No Formal Activity
Activity Legislation Introduced 7
Mobility Enacted Only for Other
Awaiting Governor Signature 2
Mobility States -3 GA OK PA
AICPA March 2009

Leg / Reg Changes you
need to know!
 New Mobility Law
 Maryland Individual Tax Preparer Act
 New Corporate Reporting Requirements
Peer Review Requirement – October 1st

 Prevent Sales Tax on Accounting & Tax Services
 Stop trial lawyers efforts at repealing contributory
fault doctrine
 New CPA Exam Requirements
 New CPE regulations
 120 – 150 hours?
CPA Day in Annapolis
January 28, 2009

What you (and the world) would miss if MACPA went away…

Globalization

IFRS – International
Financial Reporting Standards
Not if but when…
Goodbye GAAP?
Think about this – If SEC timeline is 2014 – what year
do you have to convert to show three years of
comparable f/s?

SEC Roadmap released
Early adopters Large
can file using Accelerated
Small-caps
IFRS Filers
2016
2010 2014
2011 2015
Official SEC Accelerated
filers –
decision
point second
wave

Corporate Conversion Timeline

Convergence ≠ Sameness
US GAAP IFRS
– Rules based – Principles based
– Based on a GAAP – No hierarchy, consists
hierarchy (level A – D) of IASs, IFRSs &
– Primary accounting interpretations
standard setting body – Standards and
is the FASB interpretations
– Accounting guidance approved by the IASB
and interpretation is – Interpretations of IFRIC
provided by FASB, and its predecessor the
SEC, AICPA and EITF SIC
25,000 pages vs 2,000 pages

Private Company Reporting
1. IFRS with Private Entities Option
2. U.S. Adapted version of Private
Entities
3. IFRS with differential reporting
4. Separate U.S. Private Co. GAAP -
Revised
5. Separate U.S. GAAP- Maintained
and Updated for Private
Companies

Questions?
• What happens when FASB moves to
IASB?
• FAF Funding goes to IASB
• Who funds GASB?
• Who funds US private company
standards (GAAP)?

Pipeline / Workforce

Pipeline - Good News
20% avg increase in
Graduates & enrollments!

Promoting the CPA Career
New/Young
Tomorrows
MACPA
Professionals
CPA.org
Network

Four Generations in the Workplace
Issue: Generational Differences
• Matures – 1909-45
• Boomers – 1946-64
• Gen X – 1965-80
• Millennials - 1981 +
up (Y2K, Netgen,
Echo-boom, Gen
Y)
Which one are you?

The Benjamin Buttons Paradox

Staff Shortage + Four
Generations in workplace =
Trouble!
90,000,000
80,000,000
Staff
70,000,000 Shortage
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
Matures Boomers X'ers Millenials

Biggest Issue Facing NYPNs
• Bridging the Gap between college & real world
• Under-Developed Skill Sets
– Leadership & Communication
– Time Management & Organization
– Analytical Skills
– Technical Skills
• Work-Life Balance
• Limited Networking Opportunities
• Intimidation
• CPA Exam
• Lack of a Voice in Profession

Meet the NYPNs…
Remember when you were „made‟ to be a
member of MACPA & AICPA?
According to the William E. Smith study of Association
value: Benefits to the professionals and their employers
include higher morale, increased employer
loyalty, networking, professional development, leadership
experience, professional community and big-picture
thinking.

Deloitte‟s Global Workforce Advice
• Long-term career development and multiple
experiences within a single organization
• Sense of purpose and meaning in work
• Availability and access to mentors across the
company. (The focus should not only be on
making senior staff mentor younger
associates, but also ensuring that people
connect and share experiences across all levels
of the organization, and across relevant
departments and areas of expertise.)
• Work-life flexibility
• Tech-savvy work environment (for
example, access to online problem-solving and
learning tools)
• Open social networks that embrace open and
honest communication
Source Deloitte Global Manufacturing survey

CPA Exam changes
Then: Now:
• Paper-based • Computerized
• 2 x year May & • Anytime
November • 2 months per quarter
• 5 sections • Pass all sections in 18
months (to keep passed
sections)
• 4 sections
• 70% new content!

Steps to become a CPA
1. Get Accounting Education – 150 hours
2. Sit for & Complete CPA Exam
3. Take AICPA Ethics self-study & report
grades to State Board
4. Complete 2,000 hour experience
requirement (interning counts) RPE
form
5. Take the official oath at the Swearing-in
Ceremony

Promote the CPA license
Maryland DLLR Swearing-in of new CPAs
Next ceremony - June 16, 2009
At the Maryland Business & Accounting Expo

Meet Karen…
• Recent graduate from U
of MD
• She has 150 hours but
missed a oral
communication course
and has wrong ethics
course
• She does not know what
the rules are or when to
sit
• She is thinking about
sitting in Delaware or
Virginia to get around
rules

New CPAs in Maryland – Filling the Pipeline
350
300
291
250
236
200
194
166
150
100
74
50
0

Technology

“As it relates to science and technology, the
rate of change in the next decade, is likely
to be 4 to7 times faster than in the last
decade. If it is 4x faster it would be like
planning for 2006 in 1890, if it is 7x faster
it would be like planning for 2006 in 1670.”
-Expert on Education Panel, The Aspen
Institute, 2007

Guardians cannot keep up with Commerce
“Even the regulators can't
keep up. A Senate study in
2002 found that the SEC
had managed to fully
review just 16 percent of
the nearly 15,000 annual
reports that companies
submitted in the previous
fiscal year; the recently
disgraced Enron hadn't
been reviewed in a
decade.\"
Source: Wired magazine 17.03 March, 2009

Transparency Now! – A Wired Manifesto
www.xbrl.org
Source: Wired magazine 17.03 March, 2009

Enhanced Business Reporting
www.ebr360.com

Technology & Web 2.0
By 2010, Millenials/Gen Y-ers will outnumber
Baby Boomers.

“If you think about the media
environment an average American
teenager lives in, to walk into a classroom
(or one of our Associations) that doesn’t
have any of that media must be like
walking into a desert.”
– Steve Maher, High School teacher PBS
Special “Growing Up On-line”

Meet the Gaming Generation
• Games make it easier to understand difficult
concepts – 51%
• I would be more engaged in the subject – 50%
• I would learn more about the subject – 46% (56%
of students in K-2 chose this as their #1 reason)
• It would be more interesting to practice problems –
44%
Source: Project Tomorrow – Speak Up 2007 report

Five Learning Trends for 2009
1.Mobile Learning
2.DIY - Do-it-Yourself
Learning
3.Flexible Learning
Environments
4.Virtual Worlds
5.Games & Simulation
Chief Learning Officer Magazine – January 2009

Accounting Educators in Second Life
Dr. Mike Kraten
Suffolk University
Dr. Robert Bloomfield
Cornell University
Dr. Steve Hornik
University of Central Florida

FASB is there!

Tools to keep you ahead of the game
• Listservs
• Podcasts
• Blogs
– CPASuccess.com
– NewCPAs.com
– TCPAblog.com
– CPALegislativeinsider.com
– CPAIsland.com
– SLACPA.org
– CPALearning2.com
MACPA.org -> Resources - > Communications

More ways to CONNECT with MACPA
• Linked-In – MACPA Group
• Facebook – NYPN Group
• MACPA on Twitter
• Tom on Twitter
• Bill on Twitter
• Youtube videos from MACPA
• Slideshare
• Visit us in Second Life

4 tips to cross the digital divide
1. Start Gaming and take a
session in Second Life
2. Do our 33 things in 15
minutes a day
www.cpalearning2.com
3. Get an iPod and listen to
our cool podcasts – CPA
Spotlight
4. Check out our blogs and
post a comment or
subscribe in a blog reader
(RSS)

High Leverage Opportunities

Who will lead us to a better future?

“CPAs ARE the
DISCIPLINE in business!”
Jim Collins

Perceptions of CPAs Largely
Consistent Across All Audiences
Rank
BDMs Large Biz BDMs Sm-Med Biz Investors CPAs YPs
1 Has integrity Competent Competent Has integrity Competent
2 Competent Has integrity Has integrity Competent Has integrity
Able to synthesize Able to synthesize
3 information from multiple Objective Objective Objective information from multiple
sources sources
Able to synthesize Able to synthesize Able to synthesize
4 Objective information from multiple information from multiple information from multiple Able to see the big picture
sources sources sources
5 Focused on client needs Focused on client needs Focused on client needs Focused on client needs Objective
Able to identify potential Able to identify potential Able to identify potential
6 Able to see the big picture Focused on client needs
problems before they happen problems before they happen problems before they happen
Able to identify potential
7 Technologically adept Technologically adept Technologically adept Demonstrates leadership
problems before they happen
Able to identify potential
8 Communicates effectively Able to see the big picture Able to see the big picture Demonstrates leadership
problems before they happen
9 Able to see the big picture Communicates effectively Communicates effectively Technologically adept Technologically adept
10 Demonstrates leadership Demonstrates leadership Creative and innovative Communicates effectively Communicates effectively
11 Creative and innovative Creative and innovative Demonstrates leadership Creative and innovative Creative and innovative

Image is better than pre-Enron highs

The Year of the CFO
As financial skills are valued more
highly, CFOs will make it to the corner
office in greater numbers than before.
Recession, credit crunch and the
increasingly complex nature of global
companies will all play directly into the
bean counter‟s hands.
Source: The Economist Magazine The World in 2009 Nov, 2008

IFRS Opportunity? – Meet Joe Box, CPA -
CFO of Joe Money Machinery
“Well, the IASB is coming out with a
simplified version for private companies.
With IFRS, you mark-to-market more
assets. We're a 72-year-old company that
has real estate on our books at historical
cost, so there could be a big benefit in
IFRS based on the substantially higher fair
market value for that property. Any private-
company CFO should be knowledgeable
about it, to determine whether to consider
adoption.”
“But even more importantly, it has been my
objective that our key bankers consider me
knowledgeable in the issues important to
their commercial portfolio. XBRL is another
one.”

Recession Playbook
Two priorities:
1) manage your short-term
credit, cash and
performance needs
2) effectively position and
utilize assets with an eye
toward post-recession
growth.

CFO Competencies Needed
• Change • Communication &
Management (C) Leadership
• Strategic Ability (S) • Strategic & Critical
Thinking
• Critical Thinking (S)
• Focus on the
• Business
Customer, Client, and
Perspective (C)
Market
• Organizational
• Interpretation of
Agility (C)
Converging Information
• Dealing with
• Technologically adept
Ambiguity (S)
C – Catalyst
S - Strategist

CFO Opportunities
• Business process efficiency – LEAN
• Cash flow & Financing
• Risk Management
• Budget Scenarios
• Young Professionals – reverse mentoring

Firm Opportunities
• Talent acquisition
• Succession planning
• Strengthen value-added relationship with
clients (cash flow, financing & cost
control)
• International
• Governance
• Young Professionals – reverse mentoring

Transparency & Accountability
“Publicity is justly
commended as a remedy
for social and industrial
diseases. Sunlight is said
to be the best of
disinfectants; electric light
the most efficient
policeman.”
- Supreme Court Justice Louis Brandeis
Source: Wired magazine 17.03 March, 2009

Sustainability – green & lean

Financial Literacy
www.feedthepig.org
www.360financialliteracy.org

So what are we doing for you?

Six ways to help you weather the storm
1. 24 Hours of Free CPE
2. New Career Center
3. Economic Resource Center
4. Shared Services Purchasing Programs
5. Maryland Business & Accounting EXPO
6. Promoting & protecting your CPA
license

MDBIZEXPO June 16th & 17th, 2009
www.mdbizexpo.com

Managing in Turbulent Times
1. Context - Understand the “brutal facts of
your reality”
2. Strengths Challenges Opportunities &
Threats – Differentiate yourself for high
leverage opportunities
3. Envision your future
4. Manage for today & tomorrow
– Liquidity (balance sheet
– Productivities – 3 types of IC
(human, structural & social)
– Costs of the future

“You must never confuse faith that you
will prevail in the end – which you can
never afford to lose – with the discipline
to confront the most brutal facts of your
current reality, whatever they might be.”
Holding those two seemingly
contradictory notions in his head
simultaneously was the key to
Stockdale surviving, even
thriving, in his experience.
Admiral James Stockdale 1923- 2005
He returned home after eight years of imprisonment in the “Hanoi Hilton”
during the Vietnam War

Connect – Protect - Achieve!
“Association members
earn, on average, $10,000
more per year than non-
members”
And
“are 19% more likely to
say they are “very-
satisfied” with their jobs
than non-members”
Where the Winners Meet Study by the
William E. Smith Institute for
Association Research

Tom Hood, CPA.CITP
CEO
Maryland Association of CPAs
Business Learning Institute
(443) 632-2301
E-mail tom@macpa.org

Maryland Association of CPAs – founded 1901 to
promote and protect CPAs and help them thrive in
the rapidly changing environment – 10,000
members
Business Learning Institute – founded in 2000 with
a mission to help organizations deliver competency-
based curriculum, courses, content and community to
enhance learning and grow intellectual capital for
organizational and executive leadership
Second Life Association of CPAs – founded in
2006 With 459 members and two islands (CPA
Island & CPA Island 2) with a mission of building a
community of people interested in exploring the
possibilities of CPAs in Second Life