| Regulating
the Accounting Profession
What Distinguishes a CPA from an Accountant?
APRIL
2006 - Ask someone on the street what CPAs do and he will
probably tell you that they prepare income tax returns, assist
with financial planning, and keep financial records for businesses.
Some people might have absorbed enough from the Enron debacle,
in which the now-defunct Arthur Andersen played a key role,
to tell you that CPAs audit the financial statements of public
companies. Substitute
“accountant” for “CPA,” and the
answer will be essentially the same; for the average person,
there is no difference between a CPA and an accountant.
“Well, don’t you have to be a CPA to be an accountant?”
is the response most often heard, using the following analogies:
A lawyer can’t practice law without passing a state
bar exam, and a medical doctor can’t practice medicine
without passing the medical boards. Why, then, are accountants
allowed to practice accounting without passing the CPA exam?
Regaining
Respect
The
public looks to accountants for various types of financial
services: tax preparation and planning, financial planning,
business management consulting, financial statement preparation,
and attestation services. Yet the only function that differentiates
a CPA from any other accountant is that only a CPA can sign
off on an audit report for a public company.
CPAs
have worked hard to earn the level of recognition that other
professions, such as medicine and law, have achieved. However,
the accounting profession’s luster and prestige, not
to mention compensation, still lag considerably behind.
According to the 2006 Salary Guide from Robert Half International
Inc., entry-level public accountants can expect to earn
between $36,750 and $46,000, while the average salary for
an entry-level attorney is from $61,500 to $85,750. Physicians’
Search sets the first-year starting salary for a general
practice physician at $90,000 to $130,000.
In
New York, the number of academic credits necessary to qualify
for the CPA licensing exam will increase by 30 additional
credit hours beyond the traditional baccalaureate degree,
effective August 1, 2009. This significantly adds to an
accounting student’s educational expenses, not to
mention the opportunity cost of another year or two of school.
Furthermore, after licensure, CPAs are required to complete
120 continuing professional education (CPE) credit hours
every three years. And we wonder why we’re having
difficulty attracting the best and the brightest to our
profession? A simple cost-benefit analysis provides a clue.
If
we use the medical profession as a model, an individual
must complete postsecondary education (medical school),
pass the medical boards, and complete an internship and
residency to practice medicine. Subsequently, a doctor who
wants to specialize in a particular area of medicine, such
as pediatrics or orthopedics, must complete an additional
course of study and another residency.
The
CPA license should be the basic “general practice”
requirement for entry into the accounting profession. Areas
of specialization could subsequently be recognized as a
result of further education or experience, with a relevant
testing instrument in a specific field. Advanced proficiency
would be validated by additional certifications and designations,
such as certified information systems auditor (CISA), certified
fraud examiner (CFE), and personal financial specialist
(PFS).
Standards
That Reflect Expectations
If
we are to raise the stature of the accounting profession,
regulation must apply to the entire profession, not just
CPAs. Without restrictions and controls, maintaining standards
and enforcing those standards is virtually impossible. There
are several ways to ensure that the public’s expectations—that
all accountants are competent and ethical—are met:
-
Establish separate schools of accountancy, comparable
to medical schools and law schools. This would enhance
the prestige of the programs and provide accounting educators
with the autonomy to determine relevant curricula.
-
Require internships as part of the education process.
Practical experience is an ideal way to expose students
to professional issues. This element should also be considered
part of the accreditation process, which would provide
additional motivation for a school or program to provide
access to hands-on experience.
-
Ensure that the professional licensing exam appropriately
addresses the necessary knowledge, skills, and abilities
to effectively work in the field.
-
Establish a minimum number of CPE credit hours to retain
licensure and the ability to practice in the profession.
n Strengthen the role of the state boards of accountancy
to ensure that standards are maintained through effective
peer-review and that enforcement is brought against those
who do not live up to their professional and ethical responsibilities.
The
creation of the PCAOB indicated the public’s willingness
to assume the responsibility of regulating the accounting
profession if we prove not to be up to the task. The proverbial
ball is in our court.
I welcome
your comments and suggestions on these and other issues.
Mary-Jo
Kranacher, MBA, CPA, CFE
Editor-in-Chief
mkranacher@nysscpa.org
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