A History of the Development of the AICPA’s Specialty Designation Program

By Michael Chiasson, Catherine Gaharan, and Shawn Mauldin

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JANUARY 2006 - The wisdom of the accreditation of CPAs in specialized or specific areas of practice has long been debated. While many AICPA members favor accredited specializations and believe the profession will benefit in the long run, others believe specializations have a divisive effect on the profession. The debate over specializations has surfaced many times over the past 50 years. The history of the efforts to develop an accounting specialization program begins in the late 1950s and continues with the recent decision of the AICPA Council to retain the three specialty credentials and provide financial support for them.

Early Efforts

The AICPA has been struggling with the concept, as well as the practicality, of specialists in the accounting profession since the late 1950s, when it requested a study from the Committee on Long-Range Objectives to determine whether it should create separate sections for groups within the profession with common interests. The finding of that committee was favorable toward specialty groupings. This first serious consideration by the AICPA of any specialty grouping was met with skepticism, and the concept was rejected by the AICPA Council. Such skepticism is not surprising in light of the fact that, until 1981, CPAs were prohibited from claiming a specialty. It was understood that CPAs had special abilities in accounting matters, particularly in auditing; thus, claims of specialties were thought to be unnecessary, misleading, and divisive.

In the early 1960s, the concept of specialty groupings was again considered. With overwhelming support of its 13,000 survey respondents, the AICPA’s Ad Hoc Committee on Sections recommended in 1961 that the AICPA establish several such groupings. Suggested specialty areas included accounting service needs specific to small businesses; tax; internal management; reporting by public corporations; and reporting by government agencies. The AICPA Council, however, did not act on that recommendation. In 1962, the Council again considered the concept of specialties. Although specialization had been effective in both the medical and the legal professions, some CPAs were adamant in their belief that promoting CPA specialties would be divisive to the profession. Because of this strong opposition, the AICPA Council did not further consider the concept. (See C.D. Izard and J.D. McKinney, “The Certification of Tax Specialists: Some Empirical Results,” Journal of the American Taxation Association, Fall 1983, and P.E. Lambert, “Accrediting Specialties in Public Accounting … A Logical Step,” Management Accounting, March 1977.)

Ten years later, in 1972, the AICPA revisited the concept of CPA specialists by requesting that the newly created Committee on Scope and Structure study the concept and make recommendations. The committee (as reported in an exposure draft) recommended that the AICPA support the development of a specialty program for CPAs. The development of individual specialties should be accomplished through the AICPA’s senior committees, which should design specialty credentials in their areas. The design should include developing appropriate examinations and other criteria the credential holder must meet, as well as establishing programs to support individuals meeting the criteria. It is worth noting that this report also suggested the inclusion of non-CPAs as candidates for these specialty credentials. (See E.C. Lewis, “Specialization: Have We Reached True Professional Maturity?,” Accounting Horizons, December 1989.)

As a result of these recommendations, as well as the membership’s reaction to them, the AICPA in 1975 created the Special Committee on Specialization, which was primarily charged with determining whether a need for a specialty program for CPAs existed. The results of this Special Committee’s study formed the basis for creating specialists within the CPA profession that would have commonly accepted definitions of areas of practice, generally understood labels for those who practice in these areas, and uniform standards of accreditation.

Finally, in 1981, due to pressures to offer a personal financial specialist credential, the AICPA eliminated its prohibition of CPA specialists. Under section ET 502.05 of the AICPA’s 1978 Professional Standards, CPAs could not promote themselves as specialists because a method for recognizing competence in specialized fields had not been developed and self-designations would likely cause misunderstanding or deception. Because the AICPA now intended to develop standards to recognize specialized competence, this prohibition was no longer necessary and was eliminated.

Accredited Personal Financial Specialist

After the AICPA’s withdrawal of the prohibition of CPA specialists, in 1985 the Colorado Society of Certified Public Accountants (CSCPA) formally established the profession’s first specialty credential, the Accredited Personal Financial Specialist (APFS). In developing this specialty program, the CSCPA established specific standards for CPAs to meet in order to achieve and maintain the credential, including an examination, experience, attestation of quality from others, and continued experience and education after achieving the specialty credential.

By 1987, the CSCPA had granted the APFS specialty credential to about 70 CPAs. In the wake of the CSCPA’s initiative, the AICPA decided to follow suit, implementing a personal financial specialist program that simply included the same criteria as those of the CSCPA. The AICPA Council determined that it needed criteria to use in the future selection of specific specialties to recognize. It also concluded that it would need basic standards for all specialty programs, both for the initial accreditation and for monitoring the program. To develop these criteria and standards, the Council formed the Specialization Accreditation Board (SAB) (Lewis 1989).

Tax Specialist

In 1989, the SAB established a task force to consider whether the AICPA should accredit a tax specialty. Two years later, the task force disbanded after determining that the Tax Division should initiate any effort to credential tax specialists. In 1992, the AICPA Tax Executive Committee approved a member education and discussion program that could lead to the adoption of a tax specialist (see James A. Woehlke, “Accrediting a Tax Specialty: Is Now the Time?,” The Tax Adviser, Nov. 1992).

The proposed tax specialty never was developed, because it was presumed that CPAs are already perceived as having the specialized knowledge required to provide tax information services and, therefore, additional accreditation was not warranted. According to Bill Stromsem, Manager of Taxation for the AICPA:

The National Accreditation Committee decided on accredited specialties with demonstrated need in the marketplace. In the area of taxation, CPAs are viewed as dominant with no erosion in the market share.

Personal Financial Specialist

The AICPA decided in 1992 to change the name of the APFS credential to Personal Financial Specialist (PFS). According to the AICPA, by July 2004, 3,253 CPAs had achieved the PFS designation. Despite the AICPA’s marketing support, the PFS has not caught up to other well-known financial planning credentials. For example, the Certified Financial Planner Board of Standards, Inc.’s Certified Financial Planner (CFP) credential has about 37,000 holders, of which approximately 6,000 are CPAs (see R.J. Koreto, “Accountants at Your Door,” Financial Planning, September 2001).

Although its numbers lag behind the CFP, the perception of the quality of the PFS does not. One survey (D.S. Mauldin, W.M. Wilder, and M.H. Stocks, “Does AICPA Accreditation of Nonaudit Services Add Value?: The Case of Personal Financial Planning,” Accounting Horizons, March 2000) reported that the CPA designation, used in conjunction with the PFS designation, is generally perceived to signal a higher level of professional attributes than do other financial planning designations. In addition, a CPA with a PFS designation has a significantly greater influence on the public’s choice of a financial planner than do other designations.

General Specialty Criteria

The AICPA again considered the need for general oversight for its specialty program. In 1994, it determined that the SAB should be abolished and that several changes were needed in order to identify new credentials. The AICPA Special Task Force Report on Accreditation, released in May 1994, included details of the proposed changes. Its provisions specified the method for identifying a potential new specialty, requirements for achieving the credential and for maintaining the credential, a business plan indicating the ability of the specialty to be self-supporting, initial AICPA support for the proposal as well as for its broad exposure, and AICPA support after approval of the program.

The identification of a potential specialty credential falls under the AICPA’s executive committees, any one of which may petition the board to consider a new credential. General requirements for achievement of the credential should include passing an appropriate examination after having at least 450 hours of experience in that field over the previous three-year period. In order to maintain the credential, the holder must complete at least 600 hours of experience and complete at least 60 hours of CPE credit in each three-year period after achieving the credential.

The required business plan must be accompanied by the names of 100 CPAs who will take the initial examination. This business plan must indicate that the proposed program will be self-supporting within three years. If a sufficient number of members demonstrate interest, the board will forward the petition to the AICPA Council for final review and approval. The AICPA will then create the necessary committees and provide staff and budgetary support for the specialty credential.

Accredited Business Valuator

The AICPA’s second specialty designation, Accredited in Business Valuation (ABV), was approved by the AICPA Council in October 1996. The primary purpose for the creation of the ABV designation is to enable CPAs to demonstrate competence in business valuations and to compete with non-CPAs holding other valuation designations. The first ABV examination was offered in 1997; 700 CPAs took the first ABV exam, far exceeding the AICPA’s expectations. By July 2004, only 1,671 CPAs had an ABV, fewer than the AICPA had expected; it had expected 2,300 by 2001. (See N.J. Beaton and M.J. Mard, “The ABV Credential: Leading the Way,” Journal of Accountancy, December 2003.)

National Accreditation Commission

After reconsidering its specialty accreditation strategy, the AICPA requested its Strategic Planning Committee to reexamine the program and make recommendations. The committee thought that the poor results from earlier attempts to promote the specialty designations were because these efforts were mostly reactive to other designations already in the market (Mauldin et al. 2000). Because of the dissatisfaction reported by the Strategic Planning Committee, in 1997 the AICPA formed a Special Committee on Accreditation of Specializations (SCAS) to develop more-active methods of identifying specialties. The exposure and promotion of those new specialties were also to be more aggressive. Under this new market-driven focus, only untapped, emerging fields would be considered for the specialty program. To provide general oversight, support, and maintenance for the specialty program, in its 1998 report the SCAS recommended a new body, called the National Accreditation Commission (NAC), which the AICPA subsequently created. The NAC reports directly to the board and is charged with oversight responsibilities, including exposure of new specialties, an accreditation process for candidates, and related support issues.

Certified Information Technology Professional

In 2000, the AICPA Council approved its third designation, the certified information technology professional (CITP). The AICPA created the new credential to establish public awareness of the CPA as an information technology professional, to enhance the quality of information technology services members provide, and to increase practice development opportunities. As of December 2005, 697 CPAs had been granted the CITP designation.

The Global Credential

By 2000, the AICPA, in conjunction with the Canadian Institute of Chartered Accountants, had begun to develop the concept of a new international credential, temporarily designated XYZ. To assure its international status, representatives of accounting institutes from countries around the world were included in the development of the concept (see R.K. Elliott, “A Perspective on the Proposed Global Professional Credential,” Accounting Horizons, December 2001).

The rationale for creating this global credential was the expectation that continued growth in demand for a broad range of business information services will create a need for more specialists than can be met by CPAs and CAs alone. Thus, the global credential holder was not required to be a CPA but was expected to be able to provide information services from a broad knowledge base to businesses active in international markets. The CPA, then, would become a specialty within the global credential, with the global credential representing broad, general business knowledge and the CPA possessing not only the necessary general knowledge but also the particular accounting knowledge. The relationship would be much like a specialist in the medical field who has general medical knowledge but has concentrated his or her education and training in a limited area of medicine (Elliott 2001).

While the AICPA, using millions of dollars, vigorously promoted the global credential, the plan was to form a separate, global institute that would set standards that professionals must meet in order to qualify for the credential. Each participating country would administer the program, but the qualifications to earn and to maintain the credential would be governed by the global institute and would be the same for all participants (Elliott 2001).

In its fall 2001 meeting, the AICPA Council agreed to submit the proposed global credential to a vote of the membership. The subsequent referendum failed, however. According to Bill Stromsem of the AICPA, “The Global Credential Specialty was voted down by members because they felt that it would bolster the credential of non-CPAs to compete with CPAs.”

The Future

With the global credential project shelved, the AICPA turned its attention to its three extant specialty credentials: PFS, ABV, and CITP. Because a relatively small number of CPAs are holders of these credentials, the AICPA Council questioned the practicality of its continued support for them. Early in 2003, the AICPA sent letters to holders of these credentials notifying them of possible changes in its support, redesign of the program, or discontinuation of the specialty. After several months of discussion and debate from AICPA members, the board sent a resolution to the AICPA Council recommending that it keep all three credentials and continue the same level of budgetary support for them (reported in Practical Accountant, April 2003).

At its Fall 2003 meeting, the AICPA Council agreed to provide funding of $4.6 million in excess of revenues through 2006 for the PFS, $5.6 million in excess of revenues through 2008 for the CITP, and $5.75 million in excess of revenues through 2008 for the ABV. Furthermore, the council determined that the AICPA’s efforts would be better spent on developing marketing tools to promote the specialty credentials in local markets rather than at the national level, where marketing costs are expensive.

In addition to the funding and marketing efforts aimed at further building the three specialty credentials, the council agreed that each of the credentials should reach break-even points and meet minimum membership numbers by specified dates. The oldest credential, the PFS, must break even by July 31, 2006, and it must attain a membership of 3,600. The ABV and the CITP must break even by July 31, 2008, and attain memberships of 2,700 and 1,700, respectively.

At the time of the fall 2003 meeting, the PFS had a membership of 3,188, the ABV 1,536, and the CITP 527. As of December 2005, membership in each of the three credentials had increased, to 3,580 for the PFS (a 12.3% rise), 1,833 for the ABV (19.3%), and 697 for the CITP (32.3%). Despite the growth in membership for each of the three designations, each still has a long way to go in order to meet the minimum membership requirements by the specified deadlines.

Although the future of AICPA specialty designations is uncertain, their potential is great. Should these credentials survive, several others have been proposed that could enhance the value of the CPA certificate. For example, the AICPA decided not to offer a specialty in tax as a general field, but it did leave open the possibility of a credential in a specialty tax area. A specialty credential has also been suggested in the areas of governmental accounting and auditing (see R.B. Rogow and Z. Rezaee, “Governmental Accounting and Auditing: Recent Developments Leading Toward Professional Certification,” Accounting Horizons, March 1990), environmental accounting, and fraud detection.

One further consideration is that providing assurance services is an undeveloped area with no organization currently offering a specialty credential. By offering a specialty credential in a particular area of assurance services, the AICPA might have a market advantage. The fact that CPAs are already providing more than 200 types of assurance services (including those related to eldercare and healthcare) indicates that the profession is attuned to customer needs and can adapt to provide services to meet those needs (see R.K. Elliott, “Assurance Service Opportunities: Implications for Academia,” Accounting Horizons, December 1997). Moreover, the Sarbanes-Oxley Act has created a demand for additional assurance services that CPAs are well qualified to provide.

Furthermore, while the proposed global credential was voted down by the AICPA membership, the need for some type of global credential must still be considered. Businesses will continue to become more internationally integrated, with a growing increased need for expert advice on international taxation, laws, and financing, as well as many other matters. It is not unlikely that a global credential will be offered by some institution in the near future. If the AICPA lets the opportunity escape, it may see a repeat of the personal financial specialist credential, where other institutions gained the market advantage of offering such a credential first. So, although the form of the proposed global credential was not acceptable to the AICPA membership in 2002, the development of a restructured global credential may be an advantage to the AICPA membership in the future.

The AICPA has been faced with the question of providing specialty credentials for many years. In the beginning, the AICPA took a cautious stance, offering the PFS credential only after repeated requests from the membership and, unfortunately, after other institutions had a solid market advantage for similar credentials. In the case of the global credential, the AICPA may have been too far ahead of the membership and the marketplace. With increasing concern over the reliability of financial information, customers want assurance that they can rely on the information provided. With the AICPA’s reputation for developing and maintaining high-quality credentials, any future specialty credential established by the AICPA in addition to the CPA certificate would help assure customers that the credential holder has met rigorous requirements for understanding and communicating information in that particular area.

Michael Chiasson, DBA, and Catherine Gaharan, PhD, CPA (inactive), are associate professors of accounting, and
Shawn Mauldin, PhD, CPA/PFS, CMA, CFP, is a professor of accounting, all at Nicholls State University, Thibodaux, La.




















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