Professional Issues Update Fall, 2007 Edition Tom Hood, CPA.CITP CEO & Executive Director Maryland Association of CPAs

CPA Redux Re-dux - adj. brought back, resurgent The CPA

“ CPAs ARE the DISCIPLINE in business!” Jim Collins

CPA Redux - What is a Profession? Professions enjoy a high social status, regard and esteem conferred upon them by society. This high esteem arises primarily from the higher social function of their work, which is regarded as vital to society as a whole and thus of having a special and valuable nature. Source: Wikipedia

Professions enjoy a high social status, regard and esteem conferred upon them by society. This high esteem arises primarily from the higher social function of their work, which is regarded as vital to society as a whole and thus of having a special and valuable nature.

CPA Redux - What is a Profession? All professions involve technical, specialized and highly skilled work. Training for this work involves obtaining degrees and professional qualifications without which entry to the profession is barred. Training also requires regular updating of skills. Maryland CPAs are required to achieve the 4 E’s to qualify for licensure Education – bachelor’s degree + 30 hours Examination – Pass the Uniform CPA Exam Ethics – Maryland requires a separate ethics exam Experience – 1 year of experience working with a CPA Thereafter, they are required to complete 80 hours of continuing education every two years, including four hours of ethics training. Source: Wikipedia Licensed to serve since 1901

All professions involve technical, specialized and highly skilled work. Training for this work involves obtaining degrees and professional qualifications without which entry to the profession is barred. Training also requires regular updating of skills.

Maryland CPAs are required to achieve the 4 E’s to qualify for licensure

Education – bachelor’s degree + 30 hours

Examination – Pass the Uniform CPA Exam

Ethics – Maryland requires a separate ethics exam

Experience – 1 year of experience working with a CPA

Thereafter, they are required to complete 80 hours of continuing education every two years, including four hours of ethics training.

Welcome – Tom Foard, CPA MACPA Chair of the Board

Learning Objectives CPA Redux – revisit what a CPA is in today’s global economy Gain an understanding of the biggest changes in the CPA Profession at the international, national, & state levels Understand the latest developments in compliance, CPA licensing and multi-state practice issues Identify the major State Legislative & Regulatory threats to your business and your CPA License and what you can do about them How to manage four generations at work and dealing with this "new" twenty-something workforce What you can do to win the talent war - recruiting & retaining top talent Learn how FASB's new Private Company Financial Reporting Initiative affects your firm or company

CPA Redux – revisit what a CPA is in today’s global economy

Gain an understanding of the biggest changes in the CPA Profession at the international, national, & state levels

Understand the latest developments in compliance, CPA licensing and multi-state practice issues

Identify the major State Legislative & Regulatory threats to your business and your CPA License and what you can do about them

How to manage four generations at work and dealing with this "new" twenty-something workforce

What you can do to win the talent war - recruiting & retaining top talent

Learn how FASB's new Private Company Financial Reporting Initiative affects your firm or company

First Up: The Big Picture… Increased economic globalization Growing fiscal pressures on governments Escalating health care costs Shrinking workforce Changing U.S. demographics Growing focus on knowledge-based work Lightning-fast technological shifts The rise of Web 2.0 social media

Increased economic globalization

Growing fiscal pressures on governments

Escalating health care costs

Shrinking workforce

Changing U.S. demographics

Growing focus on knowledge-based work

Lightning-fast technological shifts

The rise of Web 2.0 social media

Right now…

History of the Profession IRS OIG Regulatory Structure of CPA Profession

SOX is the driver… Editorial Reviews Book Description A simple guide to the complex new accounting rules under Sarbanes-Oxley CPAs, lawyers, business owners, and corporate managers of all kinds are currently dealing with the biggest change in corporate governance since the 1930s. As full implementation of the Sarbanes-Oxley Act gets under way-bringing large changes in corporate accounting and disclosure-managers everywhere need a plain-English guide that explains the legislation simply and practically. Sarbanes-Oxley For Dummies provides an implementation framework for firms as they struggle to come into compliance; explains key provisions in the legislation; and identifies specific actions needed to achieve compliance. In addition, this straight-to-the-point guide presents a summary of best practices, smart business policies, and invaluable compliance checklists. Jill Gilbert, JD, CPA (Milwaukee, WI) is a former tax consultant, and an attorney who runs her firm's Sarbanes-Oxley consulting division. She is also the author of two For Dummies technology titles.

500 convictions 30 CEOs

The Professions - Top Five Issues Professional Legislation and Regulation Tax Strategy Patents, Mobility, SOX, Maryland changes Pipeline – Next Generation CPA Recruitment / Retention / Staffing / Generational Issues Public/Professional Accountability Private Company Financial Reporting (FASB) Performance Trends in CPA Firms and Business, Industry, Government, NFP & Education So what are we doing about it? – MACPA’s Agenda

Professional Legislation and Regulation

Tax Strategy Patents, Mobility, SOX, Maryland changes

Pipeline – Next Generation CPA

Recruitment / Retention / Staffing / Generational Issues

Public/Professional Accountability

Private Company Financial Reporting (FASB)

Performance

Trends in CPA Firms and Business, Industry, Government, NFP & Education

So what are we doing about it? –

MACPA’s Agenda

Professional Legislation / Regulation Update 2007

What you need to know Federal level (congress) Tax patents SBWOTA of 2007 & new Preparer Penalties Tax-preparer licensing / regulation (federal & state) State Legislation - Maryland Sales Tax on Professional Services Mobility Tax Preparer Licensing and Attack of Accountants Civil Liability Reform

Federal level (congress)

Tax patents

SBWOTA of 2007 & new Preparer Penalties

Tax-preparer licensing / regulation (federal & state)

State Legislation - Maryland

Sales Tax on Professional Services

Mobility

Tax Preparer Licensing and Attack of Accountants

Civil Liability Reform

Say what?

Tax Return Preparer Standards Raises reporting standard for preparers (“more likely than not”) above the standard for taxpayers (“substantial authority”) potential conflicts of interest - preparer & client affects nature of representation of taxpayers & taxpayer’s right to representation. “ More likely than not” standard results in a fundamental change in the role of the preparer advocate to advisor.

Raises reporting standard for preparers (“more likely than not”) above the standard for taxpayers (“substantial authority”)

potential conflicts of interest - preparer & client

affects nature of representation of taxpayers & taxpayer’s right to representation.

“ More likely than not” standard results in a fundamental change in the role of the preparer

advocate to advisor.

Need to turn back these preparer rules

S 2369 – Tax Patents Major Elements of our legislation Allows the granting of patents for tax strategies Immunity from infringement for tax payers and preparers Software carve out Allows for continued innovation in the development of tax preparation software – TurboTax, TaxCut Other Bills – Patent Reform of 2007 Tax Shelters UPDATE -Passed HR 1908

Major Elements of our legislation

Allows the granting of patents for tax strategies

Immunity from infringement for tax payers and preparers

Software carve out

Allows for continued innovation in the development of tax preparation software – TurboTax, TaxCut

Other Bills – Patent Reform of 2007

Tax Shelters

Sales Tax on Services March 9, 2007 “ Expect states to focus on sales taxes. They’ll target service Industries… everything from accounting to beauty salons …many of which aren’t taxed at all right now.”

Sales Tax on Services Special interests target CPA Services – League of Women Voters & Progressive Maryland

MACPA took a Proactive Approach MD Chamber Sales Tax Study All taxes are not created equal Sales Tax on Services will costs jobs Business is paying its fair share (and then some) Meet w/ Gov, Speaker, Senate President, and Tax writing Committees before special session

All taxes are not created equal

Sales Tax on Services will costs jobs

Business is paying its fair share (and then some)

Meet w/ Gov, Speaker, Senate President, and Tax writing Committees before special session

Educate legislators/Mobilize members Ten Criteria for Evaluating Tax Law 1. Simplicity: The tax law should be simple so that taxpayers understand the rules and can comply with them correctly and in a cost-efficient manner. 2. Fairness: Similarly situated taxpayers should be taxed similarly. 3. Economic Growth and Efficiency: The tax system should not impede or reduce the productive capacity of the economy. 4. Neutrality: The effect of the tax law on a taxpayer’s decisions as to how to carry out a particular transaction or whether to engage in a transaction should be kept to a minimum. 5. Transparency: Taxpayers should know that a tax exists and how and when it is imposed upon them and others. State Tax Committee Chair Bev Richard & Andy Bareham on tour to inform MACPA members

1. Simplicity: The tax law should be simple so that taxpayers understand the rules and can comply with them correctly and in a cost-efficient manner.

2. Fairness: Similarly situated taxpayers should be taxed similarly.

3. Economic Growth and Efficiency: The tax system should not impede or reduce the productive capacity of the economy.

4. Neutrality: The effect of the tax law on a taxpayer’s decisions as to how to carry out a particular transaction or whether to engage in a transaction should be kept to a minimum.

5. Transparency: Taxpayers should know that a tax exists and how and when it is imposed upon them and others.

Educate legislators/Mobilize members Ten Criteria for Evaluating Tax Law 6. Minimizing Noncompliance: A tax should be structured to minimize noncompliance. 7. Cost-Effective Collection: The costs to collect a tax should be kept to a minimum for both the government and taxpayers. 8. Impact on Government Revenues: The tax system should enable the government to determine how much tax revenue will likely be collected and when. 9. Certainty: The tax rules should clearly specify when the tax is to be paid,how it is to be paid, and how the amount to be paid is to be determined. 10. Payment Convenience: A tax should be due at a time or in a manner that is most likely to be convenient for the taxpayer.

6. Minimizing Noncompliance: A tax should be structured to minimize noncompliance.

7. Cost-Effective Collection: The costs to collect a tax should be kept to a minimum for both the government and taxpayers.

8. Impact on Government Revenues: The tax system should enable the government to determine how much tax revenue will likely be collected and when.

9. Certainty: The tax rules should clearly specify when the tax is to be paid,how it is to be paid, and how the amount to be paid is to be determined.

10. Payment Convenience: A tax should be due at a time or in a manner that is most likely to be convenient for the taxpayer.

70 + Bills in special session How do you win? 4 MACPA Committees Legislative Executive Committee CPA Committee for Political Action State Tax Committee Board of Directors Inform & mobilize members CPA Legislative Insider Keyperson alerts E-mail Activate Grassroots 300 + letters & e-mails

4 MACPA Committees

Legislative Executive Committee

CPA Committee for Political Action

State Tax Committee

Board of Directors

Inform & mobilize members

CPA Legislative Insider

Keyperson alerts

E-mail

Activate Grassroots

300 + letters & e-mails

Tax Reform Act of 2007 Sales Tax increase to 6% Sales Taxes expanded to computer consulting Corporate Income Tax Rate from 7% to 8.25% Extensive new reporting requirements (2007) Individual Income Tax Rates new brackets 5.00% for $200,000 5.25% for $350,000 5.50% for $500,001 and up Increase in car titling tax to 6% Tobacco Tax + $1.00 per pack UPDATE – Defeated Sales Tax on CPA services!

Sales Tax increase to 6%

Sales Taxes expanded to computer consulting

Corporate Income Tax Rate from 7% to 8.25%

Extensive new reporting requirements (2007)

Individual Income Tax Rates new brackets

5.00% for $200,000

5.25% for $350,000

5.50% for $500,001 and up

Increase in car titling tax to 6%

Tobacco Tax + $1.00 per pack

What would happen if we weren’t there? UPDATE – Defeated Sales Tax on CPA services! "There's no strong voice of landscaping, computer services and arcade owners. …that's one of the reasons they got picked.” - former Senator Barbara Hoffman "An old adage among politicians is that if you don't holler at tax-raising time, you'll get hurt." – Lou Panos MD Rate 11.5%

State Boards of Accountancy: Regulation of Interstate Practice TREND: Aggressive application and enforcement by some states TREND: Historic agreement & effort by NASBA, AICPA, State CPA Societies Only 4 States with real mobility (OH, VA, WI & MO) at start of 2007 New Principles of UAA: No notification No fees No add-on requirements Automatic jurisdiction over licensee

TREND: Aggressive application and enforcement by some states

TREND: Historic agreement & effort by NASBA, AICPA, State CPA Societies

Only 4 States with real mobility (OH, VA, WI & MO) at start of 2007

New Principles of UAA:

No notification

No fees

No add-on requirements

Automatic jurisdiction over licensee

Mobility

WA OR CA NV ID MT ND SD WY UT CO AZ NM AK HI TX OK KS NE MN IA MO AR LA MS AL GA FL WI IL MI IN KY TN SC NC VA WV OH PA NY VT ME NH MA RI NJ DE MD CT The Start of 2007 Sessions (December 2006) DC Mobility Mobility & Practice Privilege

WA OR CA NV ID MT ND SD WY UT CO AZ NM AK HI TX OK KS NE MN IA MO AR LA MS AL GA FL WI IL MI IN KY TN SC NC VA WV OH PA NY VT ME NH MA RI NJ DE MD CT Looking Forward to ‘08 DC Legislative Action Mobility Board Support NH Mobility First Steps Targets for 2008 Safe States: MO, OH, WI, VA, TX, LA, TN, IL, RI, MN, IN

Next Steps in Maryland State Board of Public Accountancy voted to support Section 23 of UAA Get bill sponsor Seek approval from Secretary Perez & DLLR (in progress) Introduce in Jan, 08 Mobilize grassroots Montgomery County CPAs meet with Delegate Brian Feldman (third from left) to discuss private sponsorship of mobility legislation

State Board of Public Accountancy voted to support Section 23 of UAA

Get bill sponsor

Seek approval from Secretary Perez & DLLR (in progress)

Introduce in Jan, 08

Mobilize grassroots

Maryland Tax Preparer licensing This bill would create a MD Certified / Licensed Income Tax Preparer

Tax Preparer Licensing This letter was sent to MACPA by concerned members Beware of misinformation by unlicensed Accountants (MSA) Their agenda is showing…

This letter was sent to MACPA by concerned members

Beware of misinformation by

unlicensed Accountants (MSA)

Their agenda is showing…

Tax Preparer Licensing – version 2.0 Oklahoma – HB 1752 The current licensing of P.A.s results in a second tier professional that is not functionally different than a CPA The public would benefit from the licensing of a second tier of accounting professional who has proven ability through education, examination, ethics and experience, but is more limited in their scope of practice than a CPA. The second tier of licensing would be more meaningful to the public and give them a true choice in the matter of choosing a professional.

The current licensing of P.A.s results in a second tier professional that is not functionally different than a CPA

The public would benefit from the licensing of a second tier of accounting professional who has proven ability through education, examination, ethics and experience, but is more limited in their scope of practice than a CPA.

The second tier of licensing would be more meaningful to the public and give them a true choice in the matter of choosing a professional.

Tax Preparer Licensing – Risk to CPAs? Unlicensed accountants are using tax preparer legislation as step to second-tier accounting license. Accredited Business Accountant Alert to State CPA Society Executives: CPA VS Unlicensed Accountants

Problems with Licensing Tax Preparers Costly Confusion of public with CPA services that have higher public interest May not stop unethical/illegal preparers Continuing work with consumer group & state to find reasonable approach Consumer education approach Protect low-income taxpayers Emphasis on enforcement first More fiscally responsible Already Successful in … Exempting CPAs from any proposed licensing & CPE requirements, and getting a seat on the proposed State Board Our Approach – Consumer Education Protect the CPA License & Public Interest

Problems with Licensing Tax Preparers

Costly

Confusion of public with CPA services that have higher public interest

May not stop unethical/illegal preparers

Continuing work with consumer group & state to find reasonable approach

Consumer education approach

Protect low-income taxpayers

Emphasis on enforcement first

More fiscally responsible

Already Successful in …

Exempting CPAs from any proposed licensing & CPE requirements, and

getting a seat on the proposed State Board

MACPA & the State Board MD Regulations – uniformity & simplicity CPA Self-study requirements modernized & uniform CPE for Peer review – effective 12/01/07 CPA Exam Educational Requirements Meeting held with educators – May 5, 2007 Proposal voted by board Published in MD Register – comments due by 11/15/07 Should be effective as of January 1, 2008 Mobility technical corrections – Proposed for 2008 4 in 10 (removing out-of-state requirement) Educational Requirements retroactive for reciprocal Update

CPA Self-study requirements modernized & uniform

CPE for Peer review – effective 12/01/07

CPA Exam Educational Requirements

Meeting held with educators – May 5, 2007

Proposal voted by board

Published in MD Register – comments due by 11/15/07

Should be effective as of January 1, 2008

Mobility technical corrections – Proposed for 2008

4 in 10 (removing out-of-state requirement)

Educational Requirements retroactive for reciprocal

Staff Shortage Generational Issues Talent Management Training Trends Training Opportunities Pipeline 2007 ISSUE

Staff Shortage

Generational Issues

Talent Management

Training Trends

Training Opportunities

Demand Continues to be Great The need for CPAs in the U.S., post-Sarbanes-Oxley, is at an at all-time high, resulting in aggressive competition between firms and companies for their services.

Accounting is Hot! Accounting is the new No. 1 major on college campuses Publication: Central Penn Business Journal: Date: May 13, 2005 Based on the number of college freshmen who are making it their career choice, accounting is the new 'sexy' college major. Yes, accounting. 2005 survey: National Association of Colleges and Employers. a CPA

Accounting is the new No. 1 major on college campuses

Publication: Central Penn Business Journal: Date: May 13, 2005

Based on the number of college freshmen who are making it their career choice, accounting is the new 'sexy' college major. Yes, accounting.

2005 survey: National Association of Colleges and Employers.

CPA – Cool People Apply And Cool

Staff Shortage + Four Generations in workplace = Trouble! Staff Shortage

Another view…

Generational Differences

Four Generations in the Workplace Matures – 1909-45 Boomers – 1946-64 Gen X – 1965-80 Millennials - 1981 + up (Y2K, Netgen, Echo-boom, Gen Y) Which one are you? Issue: Generation 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 Matures (born prior to 1946) Duty, honor, country Dedication, sacrifice Conformity, blending, unity – “We First” Patience Hard, hard times then prosperity National pride Doing a good job was most important Age = Seniority

Duty, honor, country

Dedication, sacrifice

Conformity, blending, unity – “We First”

Patience

Hard, hard times then prosperity

National pride

Doing a good job was most important

Age = Seniority

The Baby Boomers (’46 to ’64) Work ethic = Worth. “Workaholic” Competitive Success is largely visible – trophies, plaques, certificates, etc. Optimistic Consumers Defined by their work We are the world, We are the children

Work ethic = Worth. “Workaholic”

Competitive

Success is largely visible – trophies, plaques, certificates, etc.

Optimistic

Consumers

Defined by their work

We are the world, We are the children

Generation X (’65 to ’79) Question authorities. Their heroes are people they’ve met; that they know. Raised as their parent’s friends. Saw lifelong employment end – don’t believe it will happen to them. Can be cynical. Can be pessimistic. Time horizons are shorter than the Boomers or Matures. Time is a currency. Carpe Diem approach – Seize the day! “ Prove it to me.”

Question authorities.

Their heroes are people they’ve met; that they know.

Raised as their parent’s friends.

Saw lifelong employment end – don’t believe it will happen to them.

Can be cynical. Can be pessimistic.

Time horizons are shorter than the Boomers or Matures.

Time is a currency.

Carpe Diem approach – Seize the day!

“ Prove it to me.”

Millennials (Since 1980) Individuals w/ a group orientation (team?) Optimistic Programmed. Coddled. Well looked after. Hard time focusing on anything. Busy & stressed at a young age. Like “X”, raised as their parent’s friends. Are not adults. Are not adolescents. “Adultolescent” phase. “ Future” is very short term. Huge goals. Clueless on the execution.

Individuals w/ a group orientation (team?)

Optimistic

Programmed. Coddled. Well looked after.

Hard time focusing on anything.

Busy & stressed at a young age.

Like “X”, raised as their parent’s friends.

Are not adults. Are not adolescents. “Adultolescent” phase.

“ Future” is very short term.

Huge goals. Clueless on the execution.

The way it is supposed to work… A senior generation assumes they know what the younger generations want (or should want) for themselves; how they should define “success.” The senior generation then prescribes a “pay your dues” process to achieve that “success.” The senior generation thinks, in the back of their mind, that the younger generations will never have to work as hard as they did to become “successful.

A senior generation assumes they know what the younger generations want (or should want) for themselves; how they should define “success.”

The senior generation then prescribes a “pay your dues” process to achieve that “success.”

The senior generation thinks, in the back of their mind, that the younger generations will never have to work as hard as they did to become “successful.

Consider the following: “ What happens when generations define success differently?” “ How do the conflicting definitions of success affect how we motivate, coach and encourage in the workplace?”

“ What happens when generations define success differently?”

“ How do the conflicting definitions of success affect how we motivate, coach and encourage in the workplace?”

What the New/Young Professional is saying The Context Map was used to capture the trends and issues facing the New / Young Professional. Staff Shortage + generational differences = crisis They want support & encouragement

And they get it… If I were managing partner… Invest in training whole firm on consultative selling Change expectations – make the investment in people and training Supervisory training & Conflict resolution Get the wrong people off the bus Fire the “D” clients to match resources with workload Implement specialization to give us better focus and client service Source: MACPA Leadership Academy Participants, Sept, 2006

Invest in training whole firm on consultative selling

Change expectations – make the investment in people and training

Supervisory training & Conflict resolution

Get the wrong people off the bus

Fire the “D” clients to match resources with workload

Implement specialization to give us better focus and client service

Critical Turning Point Success Factors in High Performance Organizations

Top 20 Reasons to Stay with a Firm AICPA PCPS

Retention and Recruiting - Bottom Line They want to be “engaged” in the firm mission , vision and values. They want to be more involved with the client They are accustomed to real time communication They want career growth opportunities and greater clarity of what it looks like They want personalized “one fits one” policies They want interesting, challenging projects It's about the right culture!

They want to be “engaged” in the firm mission , vision and values.

They want to be more involved with the client

They are accustomed to real time communication

They want career growth opportunities and greater clarity of what it looks like

They want personalized “one fits one” policies

They want interesting, challenging projects

Tom’s Top 5 Workplace Tips Be the right person – versus the right organization Be specific and don’t assume anything Define roles and career path (in easy increments and steps) Invest in training – it has high ROI, and is a retention tool Offer challenging work and reward even small steps

Be the right person – versus the right organization

Be specific and don’t assume anything

Define roles and career path (in easy increments and steps)

Invest in training – it has high ROI, and is a retention tool

Offer challenging work and reward even small steps

According to the Generational Experts “ It’s easy to say that these simple demonstrations shouldn’t be necessary. Many people say that employees should enter the workforce ready to work. Blame the parents, the schools, the media or something else. But that won’t change the outcome” “ So deal with it” Motivating the “What’s In It For Me” Workforce - Cam Marston

“ It’s easy to say that these simple demonstrations shouldn’t be necessary. Many people say that employees should enter the workforce ready to work. Blame the parents, the schools, the media or something else. But that won’t change the outcome”

“ So deal with it”

Public / Professional Accountability (Standards) 2007 ISSUE

Lots of changes on the horizon… AS 5 - PCAOB IRFS – SEC International gets legs XBRL – SEC mandatory? Codification Project – FASB Convergence with international 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

AS 5 - PCAOB

IRFS – SEC International gets legs

XBRL – SEC mandatory?

Codification Project – FASB

Convergence with international

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

Standards Convergence

PCIE Report - OMB A-133 single audits “ Based on numbers of audits , the results show significant percentages of unacceptable audits and audits of limited reliability.” Revise & improve standards & guidance Establish minimum requirements on training (16-24 hours CPE) Processes to address unacceptable single audits Next up GAO study Failed

“ Based on numbers of audits , the results show significant percentages of unacceptable audits and audits of limited reliability.”

Revise & improve standards & guidance

Establish minimum requirements on training (16-24 hours CPE)

Processes to address unacceptable single audits

Next up GAO study

CPA Profession in the spotlight

International

Private Company Financial Reporting 2007 ISSUE

Big GAAP – Little GAAP?

Private Company Financial Reporting www.pcfr.org http:// www.pcfr.org

PCFRC’S Agenda for Existing GAAP FIN 48 FIN 46R FASB 123R FIN 48 was selected first because of the upcoming effective date. Recommendation - The PCFRC recommends that the FASB delay the effective date of FIN 48 for private companies. The effective date should be delayed until 1) clarification and guidance is issued on FIN 48’s for pass-through entities, and 2) further consideration is given to the usefulness of FIN 48’s disclosure requirements for private companies. Further, this delay will allow for a higher level of awareness and education about FIN 48. APPROVED

FIN 48

FIN 46R

FASB 123R

FIN 48 was selected first because of the upcoming effective date.

Performance Trends & Issues 2007 ISSUE

IPA Consultant Predictions – Jan 2006 “ An increase of larger firms will result from an increase in mergers. Accounting firms will look more like law firms in terms of size.” -Marc Rosenberg “ There will be more large firms.” – Marc Rosenberg “ Mergers and acquisitions will increase.” – Jeff Pawlow, The Growth Partnership 47,000 to 40,000 Trends Facing CPA Firms

“ An increase of larger firms will result from an increase in mergers. Accounting firms will look more like law firms in terms of size.” -Marc Rosenberg

“ There will be more large firms.” – Marc Rosenberg

“ Mergers and acquisitions will increase.” – Jeff Pawlow, The Growth Partnership

PCPS / TCPS 2007 MAP Survey Tax complexity & changes New regulations & standards Keeping up with standards Keeping up with Technology Work/Life Balance Finding qualified staff New regulations & standards Tax complexity & changes Keeping up with standards Retaining staff Sole Practitioners Firms 2 to 5

Tax complexity & changes

New regulations & standards

Keeping up with standards

Keeping up with Technology

Work/Life Balance

Finding qualified staff

New regulations & standards

Tax complexity & changes

Keeping up with standards

Retaining staff

PCPS / TCPS 2007 MAP Survey Finding qualified staff New regulations & standards Retaining Staff Keeping up with standards Succession planning Finding qualified staff New regulations & standards Retaining Staff Succession planning Developing new partners Firms 6 to 10 Firms 11 to 20

Finding qualified staff

New regulations & standards

Retaining Staff

Keeping up with standards

Succession planning

Finding qualified staff

New regulations & standards

Retaining Staff

Succession planning

Developing new partners

PCPS / TCPS 2007 MAP Survey Finding qualified staff Retaining staff Developing new partners Work . Life balance initiatives Management of human resources - workload Firms 21 or more Running these firms is like…

Finding qualified staff

Retaining staff

Developing new partners

Work . Life balance initiatives

Management of human resources - workload

Top Ten Issues facing Large CPA firms Finding and retaining quality staff Succession planning Attaining and managing growth Technology implementation Training Leadership development Profitability Client retention and development Government regulation Risk management Source : Inside Public Accounting – January, 2007 Consolidation

Finding and retaining quality staff

Succession planning

Attaining and managing growth

Technology implementation

Training

Leadership development

Profitability

Client retention and development

Government regulation

Risk management

Top 5 Issues facing CPAs in Business & Industry Lack of Time Standards & Regulatory Overload Staff Shortage Dealing with Technology Competition & the Speed of Business

Lack of Time

Standards & Regulatory Overload

Staff Shortage

Dealing with Technology

Competition & the Speed of Business

Top Five Issues facing their companies

Managing Financial Statement Preparation and Auditor Relations: In your opinion, has the service provided by your firm’s auditors in each of the following areas, improved, worsened or stated the same since accounting reforms of recent years? In your opinion, has the service provided by your firm’s auditors in each of the following areas, improved, worsened or stated the same since accounting reforms of recent years? CFO – Auditor relations Public Accounting firms are improving Improved Same Worse Don’t know Quality of work 39% 52% 1% 8% Communication and/or responsiveness to the audit team 34% 56% 1% 9% Interpretation of accounting regulations 30% 59% 3% 8% Tactical implementation 29% 61% 1% 9% Strategic Guidance 27% 62% 2% 9% Ability to adequately staff engagements 22% 67% 2% 9%

In your opinion, has the service provided by your firm’s auditors in each of the following areas, improved, worsened or stated the same since accounting reforms of recent years?

Overwhelmed? Maybe you need “Breathing Lessons” How CFOs can thrive under pressure “ CFOs today find themselves scrambling in more directions than a good bartender on New Year’s Eve. And no wonder, pressures for accountability and performance have never been higher.” Lesson # 4 “ Focus on specific decisions that must be made then work backward to determine what information you need”

Maybe you need “Breathing Lessons”

How CFOs can thrive under pressure

“ CFOs today find themselves scrambling in more directions than a good bartender on New Year’s Eve. And no wonder, pressures for accountability and performance have never been higher.”

Lesson # 4

“ Focus on specific decisions that must be made then work backward to determine what information you need”

Business & Industry CPA Hats in the Belfry Courtesy of Tom Foard

The Four Faces of Finance

Business & Industry & NFP SAS 104-111 & SAS 112 New Risk-Based standards will change audits – significantly Webcast scheduled for mid-December Townhall resource page has SAS 112 toolkit Get up-to-speed on internal control (COSO), etc.

SAS 104-111 & SAS 112

New Risk-Based standards will change audits – significantly

Webcast scheduled for mid-December

Townhall resource page has SAS 112 toolkit

Get up-to-speed on internal control (COSO), etc.

Emerging Trends / Issues Enterprise Risk Management LEAN Accounting Supply Chain Management GREEN / Sustainability Enhanced Business Reporting / SEC Simplification

Enterprise Risk Management

LEAN Accounting

Supply Chain Management

GREEN / Sustainability

Enhanced Business Reporting / SEC Simplification

AICPA Top 10 Technologies Information Security Management Identity and Access Management Conforming to Assurance and Compliance Standards Privacy Management Disaster Recovery Planning and Business Continuity Management IT Governance Securing and Controlling Information Distribution Mobile and Remote Computing Electronic Archiving and Data Retention Document, Content and Knowledge Management NEW NEW NEW NEW THIRD YEAR AT #1

Information Security Management

Identity and Access Management

Conforming to Assurance and Compliance Standards

Privacy Management

Disaster Recovery Planning and Business Continuity Management

IT Governance

Securing and Controlling Information Distribution

Mobile and Remote Computing

Electronic Archiving and Data Retention

Document, Content and Knowledge Management

What is XBRL? e X tensible B usiness R eporting L anguage International platform for business reporting An information standard that enhances the quality and efficiency of business information for internal and external consumers Supply chain understanding of a standardized way to communicate business information Provides information with identity and context that can be understood by a range of software applications allowing seamless interface with databases, business reporting systems and spreadsheets Can be used to enhance compliance processes Special session on XBRL at Maryland Business & Accounting Expo on June 17 & 18, 2008 Baltimore Convention Center

e X tensible B usiness R eporting L anguage

International platform for business reporting

An information standard that enhances the quality and efficiency of business information for internal and external consumers

Supply chain understanding of a standardized way to communicate business information

Provides information with identity and context that can be understood by a range of software applications allowing seamless interface with databases, business reporting systems and spreadsheets

Can be used to enhance compliance processes

XBRL: The Bar Code of the Business Reporting World Efficiency Savings Quality

XBRL: What can you do? Educate yourself and your team XBRL conferences and sessions Talk with others who have implemented Investigate/target process areas Develop Project plan and ROI assessment Assess tooling needs, availability, fit Implement and assess cost/benefit realities

Educate yourself and your team

XBRL conferences and sessions

Talk with others who have implemented

Investigate/target process areas

Develop Project plan and ROI assessment

Assess tooling needs, availability, fit

Implement and assess cost/benefit realities

Web 2.0 is here…

Web 2.0 & You “ Web 2.0 generally refers to a second generation of services available on the WWW that lets people collaborate and share information online .” - Wikipedia.com Shared Bookmarks = Shared News = Shared Videos = Shared Pictures = Shared Knowledge = Shared Everything =

Web 2.0 continues to grow Try this professional networking site Coming Soon – MACPA training on Web 2.0 www.linkedin.com

MACPA has a Second Life… CPA Island

Connect - MACPA Blogs, listservs www.cpasuccess.com www.newcpas.com www.cpalegislativeinsider.com Using Web 2.0 to connect and inform our members and connect to the next generation CPA Fed & state tax, PFP, practice & industry, & NFP listservs Subscribe by E-mail here

www.cpasuccess.com

www.newcpas.com

www.cpalegislativeinsider.com

What is your Association doing about this? Connect – Protect - Achieve 2007 ISSUE

Promoting the CPA License! Filling the pipeline… 1. Student members 2. CPA Candidates 3. New/Young Professionals 4. Leadership Academy 1. Recruit Students 2. Promote CPA License 4. Fast Track Career 3. Build CPA Skills Issues addressed: Retention Recruitment Succession Planning Leadership Staffing Generational Issues Successful CPAs

1. Student members

2. CPA Candidates

3. New/Young Professionals

4. Leadership Academy

Issues addressed:

Retention

Recruitment

Succession Planning

Leadership

Staffing

Generational Issues

Student Members www.tomorrowscpa.org

Student Members www.tomorrowscpa.org

Student Recruitment is paying off! www.cpasuccess.com

2. Promote the CPA license The “New” CPA Exam

2. Promote the CPA license 150 Hours of Education Group I – 27 semester hours in accounting subjects Auditing (3 hours) Managerial Accounting (3 hours) US Federal Income Tax (3 hours) Financial Accounting (9 hours) Accounting Electives (9 hours) Maryland Educational requirement Uniform & Flexible

150 Hours of Education

Group I – 27 semester hours in accounting subjects

Auditing (3 hours)

Managerial Accounting (3 hours)

US Federal Income Tax (3 hours)

Financial Accounting (9 hours)

Accounting Electives (9 hours)

2. Promote the CPA license Group II - 21 semester hours in business subjects (at least five of the following subjects: Economics Statistics Corporation or business finance Management US Business Law Marketing Business Communication Ethics – Business, accounting, philosophy of ethics or a course that examines a framework for ethical decision making Uniform & Flexible Maryland Educational requirement

Group II - 21 semester hours in business subjects (at least five of the following subjects:

Economics

Statistics

Corporation or business finance

Management

US Business Law

Marketing

Business Communication

Ethics – Business, accounting, philosophy of ethics or a course that examines a framework for ethical decision making

What are the four parts of the “new” CPA Exam? Auditing & Attestation Business Environment Concepts Financial Accounting & Reporting Regulation The “New” CPA exam update

Auditing & Attestation

Business Environment Concepts

Financial Accounting & Reporting

Regulation

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

Paper-based

2 x year May & November

5 sections

Computerized

Anytime

2 months per quarter

Pass all sections in 18 months (to keep passed sections)

4 sections

70% new content!

2. Promote the CPA license Next date : June 17, 2008 At the Maryland Business & Accounting Expo Maryland DLLR Swearing-in of new CPAs

Swearing-in Ceremony

What you can do to promote the CPA? Understand the “new” CPA Exam Encourage MACPA candidate membership Use CPA Exam tracking tool to track employees progress Support the swearing-in ceremony Create / reinforce firm/company culture that celebrates CPAs

Understand the “new” CPA Exam

Encourage MACPA candidate membership

Use CPA Exam tracking tool to track employees progress

Support the swearing-in ceremony

Create / reinforce firm/company culture that celebrates CPAs

3. New / Young Professionals NYPN All member holiday party Maryland Zoo (in Baltimore) December 13, 2007 6-10pm “ CPE - Certified Penguin Extravaganza”

Defeated Sales Tax on Services 5x Defeated Comparative Fault Legislation 13x Defeated Tax Preparer Licensing Defeated Increases in Filing Fees 3x Prevented MD SOX for private cos. - SB 560 Passed Separate Funding for our State Board Passed Mandatory Peer Review & Regulations Passed Ethics CPE Requirement Connect – Protect - Achieve Why we need a seat at the table? Come help us “holler” “ An old adage among politicians is that if you don't holler at tax-raising time, you'll get hurt." - Lou Panos

Defeated Sales Tax on Services 5x

Defeated Comparative Fault Legislation 13x

Defeated Tax Preparer Licensing

Defeated Increases in Filing Fees 3x

Prevented MD SOX for private cos. - SB 560

Passed Separate Funding for our State Board

Passed Mandatory Peer Review & Regulations

Passed Ethics CPE Requirement

Numbers Count – 188 Legislators Regulators in “hyper-active” mode 2,000+ bills in 90 days Other State Activity aimed to correct problems in accounting profession Special interests targeting CPAs Federal, State, Regulatory levels are all active CPA Day in Annapolis – January 23, 2008 Protect - Legislative Advocacy “our best defense is a strong offense” “ No man’s life, liberty or property are safe when the legislature is in session.” - Mark Twain

Numbers Count – 188 Legislators

Regulators in “hyper-active” mode

2,000+ bills in 90 days

Other State Activity aimed to correct problems in accounting profession

Special interests targeting CPAs

Federal, State, Regulatory levels are all active

CPA Day in Annapolis – January 23, 2008

2008 Advocacy Agenda Stopping Sales Tax on Services Preventing Trial Lawyers from making it easier to sue CPAs & Business Preventing unnecessary Tax Preparer Licensing Enabling your right to interstate practice - Mobility – Section 23 of UAA http://www.cpalegislativeinsider.com/ Keep up-to-date with our legislative insider blog:

Stopping Sales Tax on Services

Preventing Trial Lawyers from making it easier to sue CPAs & Business

Preventing unnecessary Tax Preparer Licensing

Enabling your right to interstate practice - Mobility – Section 23 of UAA

Connect - Financial Literacy – Promoting the CPA Financial Fitness calendars Serving those who serve – National Guard Taxpayer Questions Legislative Tips

Financial Fitness calendars

Serving those who serve – National Guard

Taxpayer Questions

Legislative Tips

Protect your license & Differentiating the CPA BBJ Supplement Smart CEO Articles & PR Managing our Brand "It is like having my own PR agency"

BBJ Supplement

Smart CEO

Articles & PR

Managing our Brand

Connect – you to your Profession CPA Communities – Chapters, Committees, New Young Professionals, Tomorrow’s CPAs, Task Forces Professional Development – public and in-house, technical to executive development Updates – e-newsletter, Statement, Web, member call center Business & Industry Conference Annual Meeting CPA Day Quality – Ethics & Peer Review Swearing-in Ceremony for New CPAs June 17, 2008 Baltimore Convention Center

CPA Communities – Chapters, Committees, New Young Professionals, Tomorrow’s CPAs, Task Forces

Professional Development – public and in-house, technical to executive development

Updates – e-newsletter, Statement, Web, member call center

Business & Industry Conference

Annual Meeting

CPA Day

Quality – Ethics & Peer Review

Swearing-in Ceremony for New CPAs

June 17, 2008 Baltimore Convention Center

Achieve Success – Compliance & Reliance NASBA CPE Tracker Skills for the CPA of the Future - Leadership, Strategic & Critical Thinking, Focus on the Customer, Client & Market “ MACPA leads the nation in on-site custom training for CPAs” - John Toman VP AICPA Multiple jurisdiction CPE On-site Training

Achieve! Top CPE in Nation Maryland Business & Accounting Expo – 16 hours of CPE - $250 MACPA1040 Fast Track “ it’s better than Gear-Up!” Self-study – AICPA CPE Express

Maryland Business & Accounting Expo – 16 hours of CPE - $250

MACPA1040 Fast Track

“ it’s better than Gear-Up!”

Self-study – AICPA CPE Express

Achieve! Member resources MACPA’s Trusted Partners Provident Banking RJP Insurance AON Purchasing Power of the profession Savings of up to 70% off!

Provident Banking

RJP Insurance

AON

Purchasing Power of the profession

Savings of up to 70% off!

CPA Redux - the Maryland CPA!

Questions & Discussion Learning Questions Feedback Form What STuck out for you?

MACPA Connect-Protect-Achieve! Fast tracking your road to success

Resources from today’s program Available at www.macpa.org MACPA’s Town Hall Resource Page http://www.macpa.org/Content/Content/23456.aspx Websites & Blogs www.tomorrowscpa.org (high school & college students) www.bizlearning.net (On-site catalog of programs) MACPA’s Blogs www.cpasuccess.com CPA Success tips www.newcpas.com Fast Track your career here www.cpalegislativeinsider.com Legislative/Regulatory news www.cpaisland.com CPAs on Second Life

MACPA’s Town Hall Resource Page

http://www.macpa.org/Content/Content/23456.aspx

Websites & Blogs

www.tomorrowscpa.org (high school & college students)

www.bizlearning.net (On-site catalog of programs)

MACPA’s Blogs

www.cpasuccess.com CPA Success tips

www.newcpas.com Fast Track your career here

www.cpalegislativeinsider.com Legislative/Regulatory news

www.cpaisland.com CPAs on Second Life

Save these dates… Technology Conference – December 3, 2007 Don farmer Tax Update – December 6, 2008 Member Holiday Party – December 13, 2007 Maryland Zoo in Baltimore CPA day in Annapolis – January 23, 2008 Maryland Business & Accounting Expo – June 17 & 18, 2008 MACPA’s Fast Track 1040 Tax – get in “high gear” next year!

Technology Conference – December 3, 2007

Don farmer Tax Update – December 6, 2008

Member Holiday Party – December 13, 2007 Maryland Zoo in Baltimore

CPA day in Annapolis – January 23, 2008

Maryland Business & Accounting Expo – June 17 & 18, 2008

MACPA’s Fast Track 1040 Tax – get in “high gear” next year!

Tom Hood, CPA.CITP CEO Maryland Association of CPAs Business Learning Institute (443) 632-2301 [email_address] www.macpa.org www,bizlearning.net