Professional Issues Update of trends and issues facing the CPA Profession

1. Professional Issues Update
Spring 2008 Edition
Tom Hood, CPA.CITP
CEO & Executive Director
Maryland Association of CPAs

2. Enduring
• to have or gain continued or lasting
acknowledgment or recognition, as of
worth, merit or greatness
Great Hall, Oxford University
Built 1386
So…
How do we endure and
prosper in the face of
continuous market,
economic, and
environmental change?

3. Did you know?

4. The Big Three Trends
• Globalization
• Technology – Web 2.0
• Workforce Issues

5. Top 6 Issues facing
business
1. Financing and credit crunch
2. Keeping up with Technology
3. Workforce and People Shortage
4. Rising Health Care Costs
5. Rising Energy Costs
6. Rising Taxes

6. Change is the only constant…
“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

7. So you can see farther…
Understanding these trends
and issues will allow you to
better position yourself and
your organization to
succeed in the rapidly
changing marketplace.

8. Professional
Standards,
Legislation &
Regulation
Professional
Standards,
Legislation &
Regulation
2008
ISSUE

9. IRS
OIG
Regulatory Structure of CPA Profession

10. Treasury Advisory Committee on the
Auditing Profession
TreasuryTreasury
AdvisoryAdvisory
CommitteeCommittee
focuses onfocuses on
encouraging aencouraging a
sustainablesustainable
auditingauditing
professionprofession

12. GAO Report on Audit Market
Concentration
• Audit market for large public companies
remains highly concentrated, while
smaller public company market has
become significantly less concentrated
• Market concentration doesn’t appear to
have significant negative impact
• Large public company audit
concentration is unlikely to be reduced in
the near term
• No consensus for addressing market
concentration

13. GAO Analysis of Audit Analytics Data
2002 2006 2002 2006 2002 2006 2002 2006
--------------------------- ----------------- ------------------ ----------------- -----------------
Total companies 3,617 3,643 1,329 1,272 522 561 1,241 1,544
--------------------------- ----------------- ------------------ ----------------- -----------------
Company revenue <$100 million $100 - $500 $.5 - $1 billion >$1 billion
-------------------------- ----------------- ___million__ ------------------ -----------------

14. HUD IPA Roster
Proposal
• Would create an Independent Public
Accountant (IPA) roster of auditors
allowed to perform HUD audits
– Firms register with HUD and agree to adhere
to eligibility requirements
– HUD could remove auditors for various
reasons including failing to maintain
compliance with eligibility requirements
– Once removed, a firm would no longer be
allowed to perform HUD audits
• Comments due in early April

15. Federal & State
Legislative
Issues
Federal & State
Legislative
Issues
2008
ISSUE

16. Tax Strategy Patents
• Comprehensive patent reform bill,
including
ban on tax strategy patents, passed
House
– Led by Boucher (D-VA), Goodlatte (R-VA)
• Baucus (D-MT) and Grassley (R-IA)
introduced companion legislation in
Senate
• The IRS opposes tax strategy patents

17. Say what? MLTN legislation
passed in Iraq funding bill!

18. More Likely Than Not
• Congressmen Crowley (D-NY) and Ramstad
(R-MN) have legislation (H.R. 4318) to
equalize the taxpayer and tax preparer
standards at “substantial authority,” the
current taxpayer standard
• A bill is expected to be introduced in the
Senate shortly
• In Notice 2008-13, the IRS provided interim
guidance

19. Multi State Income Tax
Legislation
• Congressmen Hank Johnson (D-GA) and
Chris Cannon (R-NV) introduced
legislation to create uniform national
standards for state income tax
withholding for employees who work in a
state other than their residence for more
than 60 days per year
• AICPA submitted testimony at a hearing
in the House Judiciary Committee
• AICPA engaged in legislative campaigns
and may be reaching out to state
societies

20. •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 – version 2.0
Oklahoma – HB 1752

21. Tax Preparer Licensing – Risk to
CPAs?
Unlicensed Accountants
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

22. 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
Do you file taxes in multi-states?
Mobility at the end of 2007
DC
Legislative ActionMobility Board Support
NH
Mobility First StepsTargets for 2008
Safe States: MO, OH, WI, VA, TX, LA, TN, IL, RI, MN, IN

23. WA
2008
OR
CA
NV
ID
2008
MT
ND
SD
WY
UT
2008 CO
AZ
NM
2008
AK
HI
TX
OK
KS
NE
MN
IA
MO
AR
LA
2007
MS
2008
AL GA
FL
WI
IL
MI
IN
KY
2008
TN
SC
NC
VA
WV
2008
OH
PA
NY
VT
ME
NH
MA
RI
NJ
DE
MD
CT
States with Mobility Enacted or Legislation Introduced
43 States are moving toward uniform mobility for CPAs!
DC
State Board SupportLegislation PendingMobility Enacted
Mobility Enacted 24
Legislation Pending 12
AICPA –NASBA March 27, 2008
2007
2007
2007
2007
2007
2007
1961
2002
1999
2006
Eleven (11)
States have
passed this in
2008!
PR
PA Passed Senate
on Mar 12th
, 2008

24. MOBILITY
Score Card for 2008
• 24 States with mobility in place
• 12 States have 2008 Bills introduced
• 36 States have legislation passed or
introduced
• 7 State BOAs have voted to support
mobility
• 43 States in place, introducing Bills, or
voting to support

25. FASB and FAF Changes
• Changes to the oversight, structure, and
operations of the FAF, FASB, and GASB:
– FASB board reduced from 7 to 5
– Provides FASB chair more authority
– Secures stable mandatory funding source for
GASB
– Provides the GASB chair more authority to
set the agenda
• FAF appointments
• AICPA comment letter

26. U.S. GAAP Codification
• Jan. 15—FASB released Codification for
one-year verification period
• Codification
– Organizes thousands of pronouncements into
roughly 90 topics
– Doesn’t change GAAP
– More user-friendly set of standards
• Use the Codification in your daily work
and provide feedback to FASB
• Register at http://asc.fasb.org

27. Audit Quality Centers
975 Firm Members
1,528 Firm Members

28. AICPA Center for Audit
Quality Audit Committee
Survey
5% Fair
17%
Good
53%
Very
Good
25%
Excellent
Q9: Based on your experience as an audit committee member, how would you
rate the overall quality of audits publicly traded companies being conducted
today?

29. Peer Review Facilitated
State Board Access Pilot
• Ohio, Oklahoma, North Carolina, Texas,
Tennessee, and South Dakota piloted the
program
• Assessment of feedback is underway
• Implementation will be phased in over the
next 12 to 18 months

30. Preliminary Findings –
Enrollment
• Accounting enrollments up

31. Preliminary Findings –
Graduates
• Graduates increased 20% from 2004 to
2007
53,760
64,221
40,420
47,662
13,340
16,559
Overall Undergrad Masters
2004
2007

32. International
Financial
Reporting
Standards
International
Financial
Reporting
Standards
ISSUE
2008

33. IFRS – International
Financial Reporting Standards
Not if but when…
Goodbye GAAP?
Think about this – If SEC timeline is 2013 – what year
do you have to convert to show three years of
comparable f/s?

35. Slide 35
IFRS: The Globalization of Financial Reporting
A simpler set of accounting
principles
About IFRS
IFRS:
• Standards
- IFRS: 8
- IAS: 29
• Interpretations
- IFRIC: 8
- SIC: 11
• Framework
US GAAP:
• Standards:
- SFAS: 106
- APB: 16
- ARB: 4
• Interpretations
- FSP: 49
- EITF: 108
- FIN: 27
• Concepts Statements: 6
• Other
- FTB: 32
- AICPA Interpretations: 6
- SOP: 51,
- AICPA Industry Audit and
Accounting Guides, SABs,
DIGs…
2,000 pages vs 25,000 pages

36. SEC Chairman Cox

37. IFRS - Top 10
considerations for
transition preparation?
1. Investigate differences between IFRS and
U.S. GAAP
– Revenue recognition, taxes, hedge accounting
– Establish project teams to address top issues
– Review IASB agenda for critical projects
relevant to you
2. Be prepared with large expense
– Larger EU co. spent .05 % of revenues Year 1
– Upgrade IT systems and applications

38. Top 10 Considerations
continued….
3. Expect more disclosures during transition
– This may close the gap or more subjectivity
4. Identify contracts, grants, agreements,
etc. with requirements to provide U.S.
GAAP F/S
• Garner support from those charged with
governance and stakeholders early in the
process
6. Don’t train and educate too early (but do
so)

39. Top 10 Considerations
continued….
7. Outline governance and risk
management processes that will be used
during the transition
8. Make IFRS the basis for internal
reporting, budgets, etc.
9. Be open and transparent about pros &
cons of switch and
10.Ensure communications are clear and
consistent

40. CPAs in
Business,
Industry, Gov’t &
NFP
CPAs in
Business,
Industry, Gov’t &
NFP
2008
ISSUE

41. What’s keeping you up at night?

42. Maryland CFOs Top Issues

43. What stuck out for you?
After the gathering and categorizing of major issues, we asked the group for
their reactions. One insight was that “systems” as an issue has dropped off the
list. The other “ahha” was the issues are very much the same for all levels and
types of organizations.

44. Emerging Issues from AICPA
Tom Foard discussed some of the leading issues he has seen from AICPA Business
& industry Executive Committee and CFO magazine. The group noted that these are
the same globally as well…

45. Source: 2007 Private Company Index Report by Entrex
Private Company Trends per CEOs
Lean
Operations
Workforce

46. Source: 2007 Private Company Index Report by Entrex
Private Company Trends per CEOs
Workforce

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

48. Value creation & CFO

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

51. CPAs in
Practice
CPAs in
Practice
2008
ISSUE

52. 52
PCPS MAP Survey

53. 53
• Human Capital, Technical Training
(standards) and Succession related
issues top the lists
• Retention moves up by firm size
• Firms with 5 CPAs and under are less
focused on Succession, yet the most
vulnerable
• Firms 21+ are all Human Capital
Issues
PCPS Top MAP Issues
Bottom Line

54. 54
Top 10 Reasons to Join a Firm
0 20 40 60 80 100
Career Growth
PTO
Salary
Respect for Company Mission
Challenging Work
Healthcare
Atmosphere
Management Style
401k
Flexible Work
Top Talent Partner

55. 55
Finding Qualified Staff
• Your unique value proposition
• Incorporating newer team members in
Business Development
• A function of marketing
• Social functions
• Websites
• Team Recruitment Action Plan

56. Top 10 Reasons to Stay
0 20 40 60 80 100
Respect for Mission Statement
Career Growth
Salary
Management Style
Challenging Work
Flexible Work
PTO
Atmosphere
Equity Incentives
Training(tie)
401k(tie)
Top Talent Partner

57. Advancement – Partner Track
Top Talent Partners
Firm Has a Ptr
Track
31% 41%
Firm Does Not 37% 55%
Do Not Know 32% 4%
Who Thought Their Firm Had a Partner Track?

58. Advancement – Partner Level
Top Talent Responses
55%
23%
22% Firm Encourages
Them to Pursue Ptr
Status
Firm Does Not
Encourage
Pursuing Ptr Status
Don't Know if Firm
Encourages

59. Alternate Career Paths
• Many young professionals may not want the
partner track
• Most of the survey respondents agreed that
not pursuing a partner track does not have to
hurt your career
Top Talent Partners
Will not Hinder Young
CPA’s Career
65% 83%
Alternate Career Paths
are Available
50% 76%

60. Identify & Develop New
Partners
• Competency assessment
• Technical knowledge
• Client service development
• People development
• Leadership development
• Business Development
• Succession plan and communication
Don’t Miss the Emerging Partner Program at the MDBIZEXPO!

61. Identify & Develop New
Partners
• Give power and responsibility for all to do their
jobs autonomously
• Chart your firm’s skill sets (see PCPS Human
Capital Center for Firm Needs and Competency
assessment tools)
• Identify future potential
• Understand the difference between a top-notch
manager and a leader
• Mentor promising staff
• Get partners actively involved in mentoring and
client contact
• Include junior staff in decision making

62. Identify & Develop New
Partners
• Set the firm requirements for new
owners
• Provide formal leadership training for
appropriate members
• Set a timetable for new leadership
• Don’t underestimate the amount of time
it can take to groom a new partner
• Choose a managing partner that you see
as “the face of the firm”
• Create a compensation plan
Source: PREPARING FOR TRANSITION: The State of Succession
Planning and How to Handle the Process in Your Firm A White
Paper from the AICPA Private Companies Practice Section
(PCPS)

63. Why do I need a succession
plan?
• Consider these facts:
– In 1993, 47% of AICPA membership was over 40
years of age, in 2006, 74% of AICPA members
was over 40 years of age.
– The 2004 PCPS Succession Survey found that of
the nearly 500 firms surveyed, only 25% had a
documented succession plan in place, yet over
60% of the firms had owners in the 55-62 age
bracket.
– In 2008, PCPS updated the Succession Survey
and found that of the nearly 500 firms surveyed,
35% had a documented succession plan. A
marked improvement over 2004.

64. Why do I need a succession
plan?
• Based on current statistics, there will be more
sellers than buyers in the next 5-10 years.
• Succession is about MAP and client transition,
not multiples.
• Many practitioners feel the next generation is
not ready to lead the firm.
• The next generation is not sure they want to.
• Successful succession planning for a partner
takes about five years of preparation.
• Niche practices will have even greater
struggles.

65. Types of Succession
Strategies
• Position the firm for sale so the
owner(s) can retire.
• Position the firm for merger with an
eventual buyout of the original
owner(s).
• Position the firm for internal transition to
future leaders.
• Practice continuation with other firms.
• Turn out the lights at the end of the day.

66. General Succession Steps
1) Have the difficult conversations
2) Multiple partner firms, bring in a
consultant to facilitate
3) Determine the best succession
strategy, internal or external
4) Build the plan

67. 4 Generations in
the Workplace
4 Generations in
the Workplace
2008
ISSUE

68. The Differences are Real!

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

70. Talkin’ bout my generation

71. The Maryland
Perspective
The Maryland
Perspective
2008
ISSUE

72. SUPPORTS
CHALLENGES
VALUES
B O L D S T E P S
2. Legislative / PAC
1. Talent Mgmt/Human Capital Development
3. New / Young
Professionals
4. Financial Literacy
5. Regulation
• Competence
• Objectivity & Integrity
• Openness & member Involvement
• Professional Foresight
The MACPA is a progressive,
professional association dedicated
to serving CPAs in the Maryland
region, enabling them to grow,
prosper and remain viable in a
dynamic, rapidly changing
environment.
TechnologyStrategic
Alliances
Government
Relations
IMAGE
Organizational
Structure
Professional
Development
• Protect the Public Interest
• Responsiveness
2008 Priorities

73. 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

74. Legislative Success!
 Pass Mobility
 Opposed by DLLR
 Opposed by Maryland Society of Accountants
 Stop / Amend Maryland Individual Tax Preparer
Act
 Amend Corporate reporting requirements
 Repeal “Tech Tax” Sales Tax on Computer
Services
 Prevent Sales Tax on Accounting & Tax Services
 Stop trial lawyers efforts at repealing contributory
fault doctrine

75. Mobility passes Senate
April 7th
@ 10:44 pm

76. Maryland Individual Tax
Preparers Act
• Requires registration and examination of all tax
preparers
• Registered Tax Preparers (cannot use terms
licensed or certified)
• CPAs and staff are exempt (along with other
Circ 230 Practitioners
• Out-of-state CPAs exempt
• Independent Regulatory Exam required
• Safe Harbor disclosure required
– “I am not a CPA”
• MACPA seat on State Board

77. Legislative Success!
Corporate Income Tax
Reporting
(amendments to SB 2)
Repeal Tech Tax
Prevent Sales Tax on
Services
Stop Comparative Fault
Over 500 Visits, e-mails, calls by our CPA members!

78. MD Rate 11.5%
What would happen if we
weren’t there?
"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 (commenting on the special
session where they passed the sales tax on computer services)
"An old adage among politicians
is that if you don't holler at tax-
raising time, you'll get hurt." –
Lou Panos

79. Audits of Employee Benefit
Plans
Ian Dingwall, CPA
Chief Accountant
US DOL
• Maryland Plan Assets $127.2 Billion
• Error Rate of 30% over 37 Firms
• Error is failing 1 or more of 10 GAAS
• MACPA Board oversight
• Sessions at EXPO
• DOL workshop

80. So what are we doing
about this?
• DOL Workshop
• SBA Strategic Alliance
• Intuit Partnership Workshops & Resources
• iTunes – Podcasts on breaking issues
• Blogs – CPA Success, New CPAs,
Legislative Insider, CPA Island
• Webcasts on breaking topics
• Learn, Connect, Grow at the
MDBIZEXPO!

81. SBA Strategic Alliance
• Sessions at the EXPO
• Workshops & Resources for CPAs
• Maryland Statistics
– 536,200 small businesses
– 141,700 employer firms
– Employ 53.3% of labor force
– Employing 1.1 million people

82. Intuit –
Future of Small Business Report
• Two sessions at the EXPO
– Future of Small Business
– What CPAs need to know about the future of
small business
• Workshop for CPAs to faciitate strategy
sessions with clients and prospects

83. Phase One –
The Changing Faces of
Entrepreneurs

84. Phase Two –
The Connected World of Entrepreneurs

85. Phase Three –
The New Entrepreneurial Economy

86. “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 Pictures =
Shared Knowledge =
Shared Bookmarks =
Shared News =
Shared Videos =
Shared Everything =
Web 2.0 & You

87. Web 2.0 continues to grow
Try this professional networking site
www.CPALEARNING2.com
www.linkedin.com

88. MACPA has a Second Life…
CPA Island

89. 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

90. 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

91. 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

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

93. 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

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

95. 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

96. 3. New / Young Professionals
NYPN All member holiday party
Maryland Zoo (in Baltimore)
TBA
“CPE - Certified Penguin Extravaganza”

97. Protect your license &
Differentiating the CPA
• BBJ Supplement
• Smart CEO
• Articles & PR
• Managing our Brand

98. Achieve! Top CPE in Nation
• Public Seminars, Chapters
& Committees
• In-house Training
• Business Learning Institute
• MACPA1040 Fast Track
“it’s better than Gear-Up!”
• Self-study – AICPA CPE
Express

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

100. Maryland Business and
Accounting Expo
• 90+ sessions
• $250 for two days of CPE
• 100+ sponsors and providers
• National Thought Leaders on every topic

101. 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

102. 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
1. Education – bachelor’s degree + 30 hours
2. Examination – Pass the Uniform CPA Exam
3. Ethics – Maryland requires a separate ethics exam
4. 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

103. “CPAs ARE the DISCIPLINE
in business!”
Jim Collins

104. Conclusion
“Greatness is not an unblemished
record. It's the ability to right yourself,
to go through the 'valley of the shadow
of death' and come out even stronger.
To be built to last, you have to be built
to change. You can't possibly be static
— it is a dynamic world. You have to
change what you do to preserve what
you are.”
Jim Collins – author of Good to Great
Enduring -

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

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