August 2001

AICPA Teaches the XYZs, but Questions Remain
Officials Speak at Chapter Forums

NEW YORK— The American Institute of CPAs this month stepped up its campaign for the controversial XYZ global credential, as the three-year, $5 million initiative hurdles toward a November vote.

Through Sept. 12, representatives of the AICPA currently are attending open forums cosponsored by the New York State Society of CPAs and hosted by local chapters. The first was held Aug. 8 when members of the Manhattan/Bronx Chapter heard a presentation by AICPA Senior Vice President John Hunnicutt.

“We have tried and continue to try to get the information into our members’ hands,” Hunnicutt told the chapter. “This initiative will not happen without our membership.”

Skepticism prevailed at the first forum, however, despite an ongoing effort to educate the AICPA’s 340,000 members through a profusion of mass-mailings, a survey and speaking engagements. Puzzled members asked why the AICPA is intent on pushing a credential that they do not believe enhances the profession, is without a formal name, and has not garnered wide popular support among its membership.

Eli Mason, a principal with Mason and Company, responded to Hunnicutt’s message by calling the XYZ credential “bunk.”

“Let’s fight bunk,” he told the chapter members, adding that internationally, the credential has already lost steam.

“I spoke to the institutes that pulled out,” he said, referring to accounting organizations in England, Ireland and Scotland. “Those three gave identical reasons for dispensing with XYZ: there was no support and no enthusiasm among their members.”

“I do have problems with this credential,” Vincent Love, a partner with Kramer & Love in New York City, told Hunnicutt during a question-and-answer session. “I don’t see a groundswell of support from the members; I see a push-down effort from the top. If this concept is so great, why don’t they start their own organization?”

“There is no wide call for this,” Hunnicutt said in response. “It’s an idea that came out of strategic planning that the board feels has merit.”

Hunnicutt estimated that 25 to 30 percent of CPAs in the nation want the added credential and the vote would be a question of, “If that 30 percent likes it, do you want to make it available to that 30 percent?” Hunnicutt said.

In a presentation at the beginning of the forum, Hunnicuttt said XYZ was a “market-driven, non-regulatory” credential that would represent a high level of professionalism because of its “rigorous” validation process. Because few CPAs actually do audits and/or compilations and reviews, an additional credential would better reflect the wider scope of work the AICPA membership actually conducts, he said.

“Of our 340,000 CPAs, no more than 20 percent are operating within the franchise,” Hunnicutt said. “Our largest single segment are members in industry—people who don’t want to be pigeon-holed. Essentially, the new credential would be for those people who think it enhances what they offer their clients.”

Despite his presentation, Hunnicutt did not appear to convince the members of the need for the new credential. The fact that the credential would be open to non-CPAs has emerged as the single most contentious issue, Hunnicutt has said in the past. The issue remains a sore spot for members who question why the AICPA is consuming resources on a credential that will invite new competition from other professions, while neglecting to polish the image of the CPA brand.

“I’m confused how the XYZ enhances the CPA credential,” Arthur Bloom, a partner with Marks Paneth and Shron in New York City, told Hunnicutt. “Why is my institution creating this? I would be happy if the institution served me as a CPA. Why isn’t it focused on that instead?”

AICPA officials do not appear to see the confusion, however. According to their research, there is interest among the members in a new credential.

“The question is, ‘Does it afford some of our members to enter a different marketplace?’” Hunnicutt told The Trusted Professional in a recent interview. “There is this 25 percent that are quite drawn to it.”

Those figures are similar to the results found in surveys and focus groups conducted in New York, Illinois and California since the beginning of the year.

A survey of 805 CPAs in California showed that 77 percent agreed they could practice the way they wanted to with the CPA credential; only 13 percent said they needed a new credential to better express their range of service. Nine percent said the public perception of CPAs hindered their practice.

This claim that the public perception of the CPA credential is a hindrance is part of the AICPA argument for XYZ. Barry Melancon, president and CEO of the AICPA, recently said that though the CPA designation is attractive to students because it offers financial rewards and continuing education, big accounting firms are hiring from other professions that maintain far less rigorous professional requirements to perform the work.

“They come from economics, computing, marketing, and business backgrounds. The fact is, young people will not have the background or the inclination to pass the AA requirements,” Melancon said during the AICPA’s advisory board quarterly conference call in July. “(XYZ) is an opportunity for our profession to claim this space…for people who may not be accounting and auditing experts. The profession has an opportunity to exert leadership and set the rules.”

Working within the rules to change the CPA credential would have been too costly, AICPA officials have said, because they are governed by 54 regulatory agencies. But, with XYZ regulations in a formative stage, members at the first forum were left scratching their heads.

“I don’t understand why (XYZ) exists and I still have a lot of questions,” said Tom Goodkind, a comptroller for a real estate firm, to a reporter following the forum. Goodkind said he’d hoped to hear some discussion about auditor independence. “How does the SEC feel about this?” he asked rhetorically.

Members at the seminar were also interested in the source and amount of financing for the credential. Hunnicutt said if the XYZ passes, the new credential would be financed by a $70 million infusion from unnamed sources. “I can’t remember the names off the top of my head,” he told the chapter. But, he said, the money would come from businesses that would provide services to XYZers.

Despite the press, and the AICPA education effort, state societies are finding their membership still does not understand the full meaning of XYZ, though many are adamant that the global credential should only be available to CPAs.

“What we continue to hear is that our members don’t feel prepared to vote on it,” said Susan Waters, executive director of the California Society of CPAs. Focus groups have revealed that their members have a strong desire to limit the credential to CPAs, she said.

“The response has been negative,” said Theodore J. Flynn, executive director of the Massachusetts Society of CPAs. “There were concerns that we would be creating competition for our own members, that our own credentials should be kept within the profession.”

The ultimate fate of the XYZ credential may be swayed in the next few weeks. A new, permanent name—along the lines of “International Business Advisor,” according to Melancon—is expected to be announced by the end of August, and could have as big an effect on popular opinion as the ill-fated “Cognitor” or the seldom-discussed “Synaptist.” And an AICPA survey to determine the gut response to the XYZ credential may also have a bearing on the final ballot.

Meanwhile, international support for XYZ remains, with backing from Australia, Canada, New Zealand, the United States and Italy. Hunnicutt told the chapter that South Africa had “returned to the table” as “observers,” and in July, Melancon said Germany would also sign on. Hunnicutt, however, did not reference Germany at the forum. One chapter member said the departure of Britain, Scotland and Ireland last year and the exclusion of other English-speaking nations made the credential a misnomer.