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What
Do CPAs Need—and Want?
OCTOBER
2007 - I had the pleasure of attending a CPE seminar in New York
City in June sponsored by the AICPA and the Foundation for Accounting
Education (FAE) of the NYSSCPA. The seminar “Accounting and
Auditing in the Nonpublic Environment” presenters were of
a very high level, including Charles Landes and Michael Glynn of
the AICPA, and Mary Ann White of Practitioners Publishing Company
(PPC).
As advertised,
the new “risk assessment” standards [Statements on
Auditing Standards (SAS) 104 to 111] were covered in some detail.
The point was made several times that there is really very little
new in these standards. Definitions, clarifications, documentation,
seemed to be the buzzwords. It was made very clear that the impetus
for much of these standards was to require auditors to actually
do some systems-type work, versus defaulting to maximum risk and
employment of substantive tests. Obviously, PPC has created several
new forms, checklists, and practice aids to assist auditors in
fulfilling the requirements of these “new” standards.
At the end
of the seminar it occurred to me to voice the following comment.
I’ve obviously had the opportunity to add some clarity to
my observation here, but the substance is the same: If there really
is very little new in these standards, and I would agree there
is not much new, it’s the equivalent of rearranging deck
chairs on the Titanic. The old standards were/are fine; the problem
is practitioners adhering to the standards. What leads these standards-setters
to conclude that practitioners are more likely to adhere to the
new standards than to the old standards? I think it likely that
there will be less conformity rather than more. If the issue isn’t
standards, but rather adherence to standards, why not redirect
AICPA efforts to peer review to strengthen the CPA designation
instead of creating “new” standards?
One other
observation: Landes indicated that if he were able to direct accounting
students into exciting, hot, cutting-edge areas of accounting,
it would include the specialties of fair value/valuation, information
technologies, and personal financial specialist. So one other
thought occurs to me: Let’s change the name of the AICPA
to something more reflective of the various and sundry designations
that these leaders want. Maybe something like “Cognitor.”
It’s obvious to me that being a CPA is way too easy, and
not nearly sexy enough.
All I want
to be is a CPA, in public practice.
Philip
G. Westcott, CPA
Binghamton, N.Y.
Charles
Landes responds:
Based on
what he says at the end of the letter, I believe the writer may
have misheard me. What I said at the seminar is that students
who want to separate themselves from others in public accounting
will want to specialize in fair value, forensics, or IT auditing.
I further said that firms that want to maintain an effective audit
practice will need to have these specialized skills of valuation,
forensic, and information technology available. These skills are
needed to complement the audit engagement team. I said nothing
about other services outside of the audit area.
Charles
E. Landes, CPA
Vice President
AICPA Professional Standards and Services Team
SFAS
159: The Fair Value Option
I read with
interest the article by James Cataldo and Morris McInnes (“SFAS
159: The Fair Value Option; CPAs at a Crossroad?,” August
2007). The authors are clearly proponents of SFAS 159. However,
the doubt and uncertainty of what FASB will do next should not
become a factor in the consideration of reporting entities.
So far, estimates—that
is really what fair value boils down to—often set us back.
Fair value maneuvers are to be blamed in the subprime mortgage
debacle, stock option valuation, and countless situations where
numerous assumptions could be within acceptable range yet results
were unrealistic.
The discrediting
of the matching principle in t he fair value paradigm is also
a slippery slope. “Efforts and rewards” are not a
mere accounting theory; the matching of the two is an underlying
foundation of Keynesian economic principles.
I agree with
the “wait and see” methodology of most accountants.
As the thought goes, if SFAS 159 is so good, let others demonstrate
it. If it is an empty promise, others will learn the lesson, forewarning
us all.
Yigal
Rechtman, CPA, CFE, CISM, CITP
Buchbinder Tunick & Company, LLP
New York, N.Y.
The
authors respond:
It is interesting
that the reader perceives us as proponents of the fair value option.
We’ll consider this a compliment to our journalistic balance,
because in fact we think it is appalling accounting, and equally
bad in its policy implications. The larger issue, and we and the
writer seem to be in complete agreement on this, is where SFAS
159 may lead with respect to a comprehensive fair value–based
reporting system.
The reader
offers a compelling perspective on SFAS 159 as a kind of “market
test” of fair value accounting. To rephrase the letter’s
conclusion, “if fair value is so good, let SFAS 159 be the
chance to demonstrate it.” Despite its offenses against
comparability and consistency, maybe SFAS 159 is necessary to
demonstrate what a fair value future would look like. We just
hope the accounting profession pays close attention to this bold
experiment. In assessing its results, let’s not abandon
the conservatism and professional skepticism that have been so
essential to the status and respect of the accounting profession,
and indeed to the maintenance of a healthy financial reporting
system.
James
Cataldo, PhD
Morris McInnes, DBA
Sawyer Business School, Suffolk University, Boston, Mass.
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