AICPA Council Mulls Governance Reform N.Y. Presents Restructuring Resolution

By David Cho, Assistant Counsel

New York —Reforms in the profession and the Institute were the key topics at American Institute of CPAs Fall Council meeting in October.

Newly elected Chair William Ezzell aired the concerns that were on the minds of many meeting delegates, calling for the profession to regroup and restore itself during his inaugural speech at the AICPA Council meeting in Maui, Hawaii.

“This profession took some hits during the past year, and we have some serious work to do,” Ezzell was quoted as saying during the Council meeting, according to an Accounting Today story. “To accomplish our initiatives and move forward, this year must be a year of restoration.”

Ezzell, a partner with Deloitte & Touche LLP, succeeded James G. Castellano as chair of the national organization, which boasts a membership of approximately 340,000 CPAs. The chairmanship, a volunteer position, runs for a one-year term.

Addressing the problems the accounting profession has faced over the past year, Ezzell said “restoration” would be the theme of his tenure.

“There is no excuse for failing to live up to the standards of this profession,” Ezzell said. “We must make sure CPAs everywhere—including those yet to enter our profession—truly understand and live by the core values that make us great.”

Citing a number of questions that all CPAs should ask themselves, Ezzell outlined his view of restoration of the profession’s core values, its reputation and a sense of shared purpose in the profession and the AICPA.

Reforms to combat financial fraud was another major theme discussed by the AICPA leadership during Council. President and Chief Executive Barry Melancon told delegates from all state societiesthat the Institute will undertake an aggressive campaign against fraud. Melancon said the Institute will tackle the “huge expectation gap with the public of what auditors’ responsibilities are for detecting fraud,” according to a story in the Electronic Accountant.

Melancon pointed to the AICPA’s SAS 99 fraud standard that was announced just a week before the council meeting, as well as plans to launch an online fraud resource center on the Institute’s web site at www.aicpa.org by December. SAS 99 is the first part of a multi-initiative program that Melancon first announced in a September 4 speech at The Yale Club in New York City.

“The release of the standard officially launches our anti-fraud program,” Melancon said. “The auditor is responsible for providing reasonable assurance that the financial statements are free of material misstatement, whether caused by error or fraud.”

The Institute also plans to hold a fraud summit in early 2003 and to unveil a new fraud competency model.
The Institute’s new initiatives on fraud come months after Congress weighed in on the topic by enacting the Sarbanes-Oxley Act, sweeping legislation that tasks the Securities and Exchange Commission with setting up a public accounting oversight board and regulates, among other groups, CPAs and CPA firms that audit publicly traded companies.

The act sets forth penalties for auditing fraud, and requires CPAs and CPA firms that audit SEC registrants to register with the Public Company Accounting Oversight Board (PCAOB). Recently, SEC Chairman Harvey Pitt drew strong criticism over his selection to head the PCAOB, William Webster, former head of the FBI and the CIA. Webster came under fire in late October with published reports that as head of the audit committee of U.S. Technologies, Webster fired the company’s outside auditor when the firm allegedly asked for permission to disclose confidential details shared with the company’s audit committee.

The Webster disclosure caused more problems for the beleaguered Pitt. New York Senator Charles E. Schumer asked Pitt to step down. Just a year earlier, Pitt—a New York lawyer who represented the AICPA in private practice before being picked to head the SEC by President Bush—was given a standing ovation during his keynote speech at last year’s AICPA Fall Council meeting in Miami, Fla., when he promised the profession a “kinder, gentler SEC.”

This year’s meeting found members talking about reforming the AICPA as well as the profession.

The New York State delegation, led by NYSSCPA President Jo Ann Golden, backed a resolution posed by President-Elect Jeff Hoops for a task force to examine the governance and structure of the AICPA, with the goal of improving the Institute’s responsiveness and accountability to its CPA membership. The task force would have reported with recommendations to the Council next year.

New York’s resolution was quickly followed by a substitute resolution offered by the Ohio Society that also called for the creation of a task force to examine the governing structure of the AICPA.

Both proposals, however, were postponed indefinitely so Council members could continue to weigh the issue, according to a story in Accounting Today.

Golden said the New York delegation succeeded in its goal because the purpose of the resolution was to cause Council members to seriously look at the matter of reform. Ezzell’s inaugural speech, focusing on reform, came after the New York State proposal was addressed.