What Do CPAs Need—and Want?

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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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