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SEPTEMBER 2005 - The world of accountancy has changed enormously since I began as the CPA Journal’s editor-in-chief in June 2000. Changes during the next five years will be quieter but just as important: Most changes will occur within accounting firms rather than within the government, the regulators, the standards setters, or professional societies.

New York Legislation

A notable exception will be legislation in New York that redirects the state’s relationship with individual accounting professionals and the organizations that employ them. Just as there were aspects of the original 1896 CPA law that some accountants embraced but others abhorred, the legislation likely to be passed in 2006 will probably be similarly greeted by those that desire meaningful reform and by those that do not. Controversial aspects of the legislation will likely include an expansion of the scope-of-practice provisions, enhanced CPE requirements, broadened disciplinary actions and penalties, more coordination with federal disciplinary actions, and increased practice monitoring.

Private Sector Activity

I foresee that over the next few years CPA firms will become more assertive on accountancy fundamentals. Much of the action that has taken place in the public sector will move to the private sector as boards, managements, CPA firms, and non–CPA firm consultants work out the details of responsibly furthering the spirit of the Sarbanes-Oxley Act of 2002. Firms of all sizes and clienteles are likely to embrace a new vision of accountancy professionalism because of the growing importance of financial statement audits and other services that require independence. There will be greater emphasis on professional competence and ethics in areas of attestation services as they reemerge as mainline offerings. Firms that continue to treat attestation services as loss leaders in an effort to market their consultancy services will find their business viability challenged unless they convert to pure consultancy businesses.

Interdependence of Accounting Principles and Auditing Standards

At some point, someone—hopefully many people—will realize that no useful purpose is served by separating accounting principles and auditing standards into two bodies of knowledge governed by two independent boards. The content of accountancy (accounting principles) and the evidence gathered to ensure fair presentation (auditing standards) are too interwoven to treat as completely independent. Other professional disciplines do not separate the substance from the rules of evidence: diagnostics are not independent of medical knowledge and legal evidence is not independent of law. While there may have been “political” reasons in the recent past for separating accounting principles and auditing standards, there are good professional reasons now for reuniting them.

While it will probably continue to be necessary to proliferate a set of rules for SEC registrants, there will be continuing interest in those rules’ relationship to GAAP. The challenge to accountancy professionals will be as great as that to standards setters, as we reorganize our collective perspective in order to retain an integral set of common-law generally accepted accounting principles that apply to all entities while satisfying the federal statutory demand for increasingly complex rules for enterprises whose financial reporting is regulated by federal agencies. To accomplish this, either the current conceptual framework will be recast to encompass more than guidance for standards setters, or there will emerge an approach that recognizes a conceptual framework to guide standards setters, a set of generally accepted accounting principles, and a detailed set of rules for public companies.

Driven principally by litigation concerns, auditing standards setters in the past 40 years have mostly followed a procedural approach when determining whether adequate evidence has been collected. Outcomes from this approach range from the “checklist mentality” to the choice of audit risk minimization as the objective function. Efforts in the next few years to separate the goals of an audit from how they are attained will require significant cooperation and trust between the federal agencies that have the power to set audit standards and the firms with the responsibility to implement them.

Advocacy and Independence

Perhaps the most perplexing issues that CPA firms will deal with in the next few years involve managing the substance of CPAs’ advocacy role in tax practice and their independence requirements in audit practice. The SEC, PCOAB, and GAO will find that their ability to deal with the underlying problem will be limited to relatively general standards. Inevitably, the effective, practical management of potential conflicts will take place within firms. The firm, along with its management and control systems, will become a more powerful regulator of individual professionals’ behavior.


This is my last column as editor-in-chief. As of mid-August, I am moving on, embracing new challenges and opportunities. The past five years have been extremely rewarding and happy for me. Thank you for reading The CPA Journal and for caring so much about our profession. Your e-mails, letters, phone calls, and visits have made this a very interesting job!

Robert H. Colson, PhD, CPA




















The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

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