August 2015
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A Message from the Editor-in-Chief:...
Congratulations on your 85 years of service to the public and profession. You are even younger and more vital today than you were 85 years ago, and your new face will now grace our online publishing platform this fall.
On behalf of the entire editorial team, we hope that, as it has for decades now, The CPA Journal will continue bring clarity to the issues facing our profession; that it will lead where leadership is called for; and that it will help shape the mindset of this still-young profession. Our mission now, and in the future, is to provide our readers with meaningful insight, unique perspective, critical analysis, expert advice, and actionable guidance. Our core values are to remain true to our heritage; remain independent and unbiased; and, unlike many of the accounting publications in America, not shy away from controversy. We are not captive to constituencies, nor are we servants to advertisers. We will balance individual as well as public opinion in our pages.
Transforming The CPA Journal to Face the Future
In this anniversary issue, readers will note the changes that have taken place in the Journal. New monthly columns reflect practice areas of high interest to our readers, including personal financial planning, estate and retirement planning, state and local taxation, and tax practice and procedure. In this issue, we also introduce a new column called SEC Insights, written by Allan Afterman, one of the most prolific authors on SEC practice topics in America. A former national firm partner and professor at the University of Chicago, Allan is now a leading SEC practice expert.
These new columns also reflect the changing demographics of our readers and needs of their clients. As the bulk of the baby boom generation retires over the next 10 years, the greatest wealth transfer in American history will occur. Our objective is to ensure that the Journal provides readers with the expert guidance they need to assist clients and family during this transition. So in September, we will also add a new column, Retirement Plan Perspectives, by author and fiduciary advisor Sheldon Geller. For many of our readers and clients, retirement plans represent their greatest asset and, absent our leadership as trusted financial professionals, the public will be overshadowed by the less scrupulous and unregulated advisors who look at the Investment Suitability Standards as that which is suitable for them, rather than what is in their clients’ best interests.
Finally, in the fall, we will add a new Managing Your Practice (“MYP”) column. It will focus on important firm management issues, including how managing partners need to adapt, incentivize, and improve meaning in order to attract and retain millennial staff, and enable them to participate in the firm's future success.
Refusing to shy away from controversy, we will, in a future issue, assess the Certified Financial Planner (CFP) Board of Standards’ highly effective four-year, $50 million ($40 million from CFP dues) public awareness campaign, which has now made “the CFP mark outrank the CPA license when it comes to what a professional financial planner is expected to hold” (CFP Board in the News, “Consumers Now Prefer Their Financial Planner to Have CFP Certification over a CPA License,” July, 20, 2015). We will ask our readers to weigh in on this issue.
News and Views: A Perspective on Today's and Tomorrows Issues
Our new News and Views section provides interesting commentary on critical issues facing the profession today and, arguably, the future. Perhaps 85 years from now, the grandchildren of today's millennials will understand how these issues turned out. In the spirit of our 85th anniversary issue, here are my picks for the topics that will continue to be debated over the course of the coming decades:
Serving two masters.
This issue rises above all in controversy: What is our raison d’être as CPAs? Are we protectors of the public trust—as George May of Price Waterhouse and Robert Montgomery of Coopers and Lybrand (and NYSSCPA president) envisioned 85 years ago? Are we the gold-standard trusted advisor for our clients? And are these two goals mutually exclusive—do they mean serving two masters? In past issues, a number of our readers have weighed in on this question. In the February 2015 issue, Vince Love asked whether the public interest truly came before profits (“Can Commercialism and Professionalism Coexist?”). And in our July issue, PCAOB Chairman James Doty turned the clock back to the 1930s and the original grant of authority for CPAs to audit public companies and the SEC's fundamental question of “how exactly auditors could avoid fealty to the companies that would hire them” (p. 41).
Skepticism.
The term has already been debated in the auditing literature for about 40 years. It continues to be raised in SEC sanctions of auditors. In our January 2015 issue, Tom Ray provided some expert insight into this issue in (“Auditors Still Challenged by Skepticism,” p. 20). Recent research on the subject looked at PCAOB inspection findings that showed certain audit firms’ culture tolerating audit approaches that undermine the application of professional skepticism (“Demonstrating Professional Skepticism,” by Douglas M. Boyle and Brian W. Carpenter, March 2015, p. 33). Later articles have looked at whether skepticism and brainstorming on an audit engagement may, in fact, be inhibited by the organizational structure of an audit team (“Teamwork versus Groupthink,” May 2015). Future articles will provide additional insights into this audit requirement.
Fraud.
Our responsibility to the public for uncovering fraud is as old as the profession itself. But not all practitioners accept this role—which has clearly been diluted in the recent auditing literature. In our July issue, PCAOB Chairman James Doty critically connects the perception of this issue today to that of 85 years ago when “the climate was hot with public anger … in the midst of criminal investigations and congressional hearing to identify culprits.” At this time, Doty noted, “the accounting profession stepped forward and offered a way to provide the investing public assurance as to the accuracy of corporate financial reporting” (July 2015, pp. 40–41). This came mainly through the leadership of NYSSCPA president Col. Arthur Carter, whose testimony before the SEC led to the accounting profession (by one vote) being granted a virtual monopoly to audit the financial statements of publicly traded companies. But fast forward 85 years to today: Have we been responsible stewards of this franchise? Have we sought out fraud to the extent we should? And, if we have fallen short, will the future leaders of the profession reinvigorate the franchise or will it wither on the vine?
Standards overload, disclosure overload and the focus on simplicity.
In our July issue, Howard Levy, presents some compelling arguments that we are facing regulatory overload (“Finding the Forest among the Trees, Overcoming Overload and Achieving Greater Disclosure Effectiveness,” p. 6). He also looks at the law of unintended consequences in the current regulatory approach seeking greater simplicity through increased disclosure. The Wall Street Journal notes that, at 103,484 words and 257 pages, General Electric's 2014 10-K is longer than Harry Potter and the Sorcerer's Stone (76,944 words), The Hobbit (95,356 words) and A Farewell to Arms (101,000 words). Whose words are more impactful at that length?
Leadership.
Finally, in my mind, the most important issue for the next 85 years is the need for leadership—national profession leadership that will advocate for the CPAs profession and its traditional role in society as the gatekeeper and protector of the public trust. There is no more critical time in our history for leadership to guide the profession into the future. Chairman Doty discusses how accountants rose to the occasion 85 years ago: “It's time again for leadership in meeting the demand of today's markets and investors. Time for something more: Who among you will answer that call?” (Doty 2015, p. 41).
This issue rises above all in controversy: What is our raison d’être as CPAs?
I could not have asked the question better myself. I hope we do not have to wait 85 years to find out the answer.
On behalf of the rest of the editorial staff and everyone else at the NYSSCPA that makes the Journal possible each month, I want to wish a very happy anniversary to The CPA Journal.
The opinions expressed here are my own and do not reflect those of the NYSSCPA, its management, or its staff
Richard H. Kravitz, MBA, CPA. Editor-in-Chief.