Professional Skepticism

What is professional skepticism; and is professional skepticism limited to those providing assurance services?  These are two important questions at the center of a consultation paper released by the International Ethics Standards Board for Accountants (IESBA) last week. The full paper can be found on the International Federation of Accountants website here.  The paper is relatively short with the main body totaling less than 10 pages, but it is a fascinating read on the expectations of professional accountants.

The IESBA believes that professional accountants are expected to (a) approach professional activities with an impartial and diligent mindset; and (b) apply that mindset, together with relevant professional expertise, to the evaluation of information with which they are associated.  The paper then asks if such behavior should be expected of all professional accountants, or if such behavior only applies to certain roles filled by professional accountants.  The paper also brings up the point that the term professional skepticism is already defined in auditing standards, so any defining in the code of ethics will need to address how the two definitions interact.

The IESBA outlines four possible avenues for dealing with professional skepticism in the code of ethics.

  • Require all professional accountants to exercise professional skepticism as it is defined in the international auditing standards.
  • Re-define professional skepticism that would be appropriate for all types of professional activity (and therefore change or deal with the different definition in the auditing standards).
  • Develop a different term to use with the definition of behavior expected of all professional accountants (and leave professional skepticism defined in the auditing standards).
  • Not define professional skepticism, or a different term, in the ethics code, but develop application material to expand upon the concepts underlying fundamental principles supporting the definition of professional skepticism in the auditing standards.

Some of you may think that international ethics standards don’t matter, but this is where change begins.  First the IESBA updates the international standard, then those changes filter down to the AICPA ethics code, which is then incorporated into ethical expectations by most every state licensing Board.  Once that train gets rolling it’s hard to stop, but this is your opportunity to steer the train down the track you think it belongs on; so take the opportunity and let the IESBA know what you think.


Cryptocurrency Accounting

How should companies be accounting for holdings of Bitcoin, Ethereum, and what seems to be hundreds of other cryptocurrencies that to come into existence daily now?  The IRS tells taxpayers to treat such currencies as investments, but tax and GAAP don’t always see transactions in the same light.  The SEC focus is on whether coin offerings should follow securities regulation rather than how a company should account for cryptocurrency holdings. Finally, the FASB staff has undertaken pre-agenda research on the topic of cryptocurrency, but proposals on the potential accounting are still a long way away.

In the meanwhile, accountants must actually do the accounting for cryptocurrency held by organizations.  What do we do? First, we should look at definitions of currency in GAAP.

All balance sheets include cash and cash equivalents.  That term is generally thought to include currency, coins, checks received but not yet deposited, checking accounts, petty cash, savings accounts, money market accounts, and short-term, highly liquid investments with a maturity of three months or less at the time of purchase such as U.S. treasury bills and commercial paper. The items included as cash and cash equivalents must also be unrestricted.

One could take the simplistic view and state a cryptocurrency calls itself a currency so it must be currency, but that is a somewhat circular argument no different than me saying a duck must be a goose because I decided to call it a goose no matter how much it quacks.  The dictionary defines a currency as “a system of money in general use in a particular country.”  If you stick with that definition a cryptocurrency can’t be a currency because it very existence is not related to a country, at least not yet.  Some people may say currency has a second definition of “the fact or quality of being generally accepted or in use” but if you go further that definition is not about monetary transactions.

But could a cryptocurrency still be a cash equivalent as “a short-term highly liquid investment?”  I think the answer is no because such investments generally mean investments that must be redeemed for currency after a set period would rarely, if ever, lose value in terms of an origination’s functional currency.  Cryptocurrencies do not seem to fit either of those requirements.

That leads us to consider treating cryptocurrencies as investments. Such a treatment seems consistent with the SEC focus on treating coin offerings as securities offerings that need to abide by offering regulations. And keep in mind that the IRS has already decided that crypto-currencies are investments for tax purposes, so tax accounting and GAAP accounting would align if cryptocurrencies are treated as investment.

For now, all signs point to treating cryptocurrencies as investments, but the FASB may have the final word on the topic.

Of course, there is one more accounting consideration think about.  GAAP defines functional currency as the main currency used by a business or unit of a business. Functional currency is the monetary unit of account of the principal economic environment in which an economic entity operates.  If Bitcoin or Ethereum ever meets the definition of a currency, I can’t wait to see the first organization that publishes audited financial statements using a cryptocurrency as a functional currency because that is the principle economic environment the organization operates in.  Such financial statements would be the ultimate representation of a borderless multinational organization which will make some people deliriously happy and other cringe with fear.


What do you think of when you hear the word robot?  Does the image of the robot (it doesn’t have a name) from Lost in Space come to mind?  How about C3PO, R2D2 and BB8 from the Star Wars films?  Maybe you think of big yellow machines welding pieces together on an assembly line.  Well, that is too narrow a view today.  Just as everything else in the world is going virtual, so are robots.  Robots, called bots for short, are increasingly software programs or applications designed to sift through data or interact with humans in ways not possible until recently.

The interface to these robots may be through a keyboard or voice commands (Amazon Echo or Google Home Mini anyone?), but the one thing they have in common is being able to do something asked of it that might have required a human in the past.  Robots can be ‘dumb’ and only do a repetitive thing over and over; or robots can be smart and learn and improve through artificial intelligence and machine learning technologies.  Either way, in a world where CPAs are increasingly asked to make sense of volumes of data that would take a person years to read, using robotic tools is the only way to provide the business insight being asked of the profession.

Does the world of robots mean our jobs are in jeopardy?  That depends on how you view your job.  If your job is completing a tax form; then yes, your job is in jeopardy.  In fact, you probably already lost your job.  Think of the millions of tax forms electronically filed by software.  The software doesn’t just present forms to fill out, instead the taxpayer is asked questions and the software knows where to put the answers across the myriad of forms needed to file taxes.  Our jobs now are coming up with those questions when the tax law changes or analyzing the answers for ways to provide additional value added services to the taxpayer.

The reality is that our jobs are changing to interact with robots rather than simply be replaced by robots.  Some of us may actually develop the robots.  Others may provide expertise to help the developers make sure the robots are coming up with the right answers. Many, however, will find the use of virtual robots to become as ubiquitous as the use of spreadsheets and pivot tables.  While I don’t think robots are going to replace CPAs in the foreseeable future, robots will change the profession just like 10-keys and computers have done in the past.  I’m excited about the prospects of providing better and deeper insights to business leaders.  I’m eager to apply robots to data to see what frauds can be uncovered.  I’m enthusiastic about the future of CPAs because I know we are willing to change, evolve, and think anew about what our ‘job’ truly is.


April 2018 TSCPA Executive Board Meeting

Texas Society of CPAs (TSCPA) leadership is focusing on how the organization needs to change to continue the Society’s superior support of the profession and members. Numerous topics were discussed including:

  • Branding
  • Committee Restructuring
  • Peer Review
  • State-Chapter Coordination
  • Sunset Review of the Texas State Board of Professional Accountants
  • Legislative Plans for the 2019 session
  • Membership Dues
  • 2018-2019 Budget

Many of us are rightly proud of our local chapter and the services and opportunities the chapters provide us as members. We are also pleased to be part of a state level organization that can provide benefits and advocacy a local chapter could never provide on its own. Because TSCPA members are all members of both a local chapter and the state organization, finding the best way for the two organizations to work together to better serve our joint members is in the best interest of everyone. We don’t have all the answers, but the executive board looks forward to working with chapter leadership to develop those answers together.

The need for CPA licensure may seem obvious to all of us in the profession. Such state level licenses are even required by some federal agencies such as the Securities and Exchange Commission. So asking the legislature to support the continued existence of the Texas State Board of Public Accountancy would seem an easy thing to get accomplished. But just ask the doctors in the state about how obvious licensing requirements can get caught up in politics unrelated to anything to do with the licensing process. The TSCPA is working for you to see that such a thing doesn’t happen so our 26,000 members don’t have to worry about such events in the middle of our busiest time of year.

Finally, we wouldn’t be CPAs if we didn’t think about the numbers. Our budget is the result of well-considered decisions on how to spend the dues trusted to us to provide important benefits you can’t get anywhere else. If there is more we can do, we would love to hear from you.

I would love to see my Texas readers at the TSCPA annual meeting this year in late June.  The meeting is taking place right here in San Antonio. Check out the TSCPA website for details on dates, times and how to register.

Afraid to Provide Feedback

I recently read an article that talked about how ratings for gig economy service providers are at an all-time high, but the high ratings are not necessarily because service levels are at an all-time high.  The conclusion of the article is that ratings are inflated because customers don’t want to say negative things about other people.  In some ways this goes back to one of the golden rules which is if you can’t say something nice, don’t say anything at all.  I think rating inflation also points to another issue.  People don’t want to do the hard work of helping someone improve.

I see the same effect in personnel evaluations.  Supervisors want to take the easy road and tell an employee that their performance during the past year was not just fine, but increasingly, that the performance was exemplary.  Educators have talked for years about grade inflation, and the same phenomenon is going on in work evaluations.  Some companies fight the trend by creating rules that force distributions across all ratings.  The problem with such a requirement is that it can force managers to give undeserved ratings on both the high and low end of the scale.

The real solution to rating inflation is in the mirror.  We supervisors must take giving ratings seriously and embrace the hard work of telling our staff about their actual performance – the good and the bad.  I think one of the reasons that mentorship programs are all the rage today is because people are starved for actual feedback on how to improve.  Supervisors are not doing their employees any good by sugar coating feedback.  Here are three thoughts on how to get started in giving better feedback.

Take the time to give feedback – this means taking the time to really observe what your employees are doing, and then making the time to give feedback, both good and bad, constantly.  I know we are all busy and have a thousand deadlines, but if you aren’t observing and providing feedback then you aren’t supervising, and you need to find another job, probably at lower pay, where no one reports to you.

Truly be constructive – criticizing someone is easy.  Finding a way to help someone improve is much harder.  Start with eliminating the word ‘but’ from all your evaluations and discussions.  From there, think about what advice you would want your employee to embrace if you ended up working for them some day.  Who knows, such an event might occur.

Extraordinary ratings deserve extraordinary performance – if you can’t point to what the person did that was unusual and far above expectations, then maybe the person should just get a solid good performer rating.  I’ve been working for thirty years and have done some extraordinary things on occasion, but most days I show up and do the work expected of me.  Yes, I’ve deserved some extraordinary ratings, but I’ve also deserved a lot of good solid, job well done ratings.  As supervisors we shouldn’t be afraid to tell someone they did a good job.  What is so bad about that?

In the end, you will sleep better knowing you were honest in your assessments, and your employees will eventually appreciate the help you provided in enhancing their performance which will open more, not fewer, career opportunities.

Why A Generation Z’er Chose Accounting by TXCPA2B Blogger Liz Wood

I still have family friends ask me about my career path with a response similar to this: “Accounting, huh?  That seems…interesting.”  It is hard for people to try and act excited about my college path, especially when they still think of my generation as the technological savvy, entrepreneurial, adventurous type.  However, I think a lot of individuals confuse Millennials with Generation Z; furthermore, there are actually a lot of Gen Z’ers that are interested in fields like accounting.  Here is a list of reasons why I, as a fellow Gen Z’er, chose accounting:

Diverse Opportunities

“Accountants are boring.”  Some of my friends continue to joke with me about this idea, but I laugh it off!  I think a lot of non-accounting majors do not understand the vast routes you can take.  For instance, by the time I graduate, I will have engaged in three internships—all of them will be based on accounting but are completely different at the same time.  My first internship was in corporate accounting for a private company in an office-like environment.  My second internship will be in internal audit with a lead producing company.  I will be able to visit multiple facilities in France, California and New York and assist with conducting audits.  Finally, my third internship will be in external audit with a Big Four firm.  This will allow me to engage with different clients and review their financial records and documents.

And it doesn’t just end there.  There are SO many other different pathways to take in an accounting career, and each one will help you develop a new skill set.  Accounting is great for the indecisive but also for those who want to work the same job until retirement.

Stability and Growth

I am personally not a huge risk-taker. In fact, I have already started a Roth IRA to save up for my retirement because I like having a cushion to fall back on.  With an accounting career (especially public accounting) I can feel safe knowing that I probably won’t be laid off any time soon.  Also, a public accounting career provides almost guaranteed promotions after a certain timeframe.  “Hmm, I wonder if I will ever get promoted to senior associate?” is not a question new auditors typically have to worry about.  It certainly takes a heavy weight off my shoulders!

Accounting is not Always Forever

But what if you end up hating accounting?  This is a question I receive a LOT, and here’s my take on it:

As I mentioned earlier, there are different routes to take, so I could always try a different accounting sector.  Even then, if I still did not enjoy my career, I am not forced to stay in accounting just because that is what my degree is in.  I know many individuals who have switched from accounting to marketing or human resources and are currently executives at a company.  Accounting provides such a strong foundation that is integral in all parts of a business and can allow you to branch out to new departments.  That’s why I personally think accounting is a strong degree to pick for undecisive business majors.

I’ll be honest, accounting is typically not the first major that comes to a student’s mind in terms of studies (it may be a last choice for some, in fact).  However, the benefits, learning experience and ability to grow, and even travel, are just a few of the factors that attract Generation Z’ers to this field.  I think accounting is a hidden gem that not many young students think about, so I consider myself lucky to have discovered it so early!

Blogger: Liz Wood








TXCPA2B is a blog written by Texas students in pursuit of the CPA certificate. The views expressed here are those of the authors and not necessarily held by TSCPA or our members.

Being Prepared

I write this blog after witnessing a bench player lead Villanova to the NCAA Basketball National Championship last night. I realize Donte DiVincenzo was the third leading scorer for Villanova during the past season, but he still had to come off the bench, which meant being mentally ready to provide whatever his team needed when he came into the game. Professionals could learn a lot by thinking about DiVincenzo’s attitude and work ethic he displayed during the game. You never know when the moment to shine will come, but if you are prepared you can show the world your best. If you are not; if you are pouting because you weren’t given the top project or the starting role, you’ll never be ready when the moment hits.

If you watched the game, the 31 points that DiVincenzo scored wasn’t the only feature of his game that was impressive. He also made several key defensive plays. As professionals, we need to be prepared to do the hard, sometimes dull work that makes our companies successful. There may not be much glory in the scorebook for such work, but it is noticed by those around you. Your co-workers then want to get you more involved, and just as Villanova fed off Donte’s energy, your coworkers can feed off yours.

Finally, when Michigan realized he was going to make those three-point shots, he changed his game and drove to the basket. As professionals we must be prepared to change our game. The needs of our company are constantly changing, and the expectations they have of you are constantly changing as well. It’s up to you to change to help yourself and your company continue to be successful.

While DiVincenzo’s performance cost me winning our office bracket, he was still a wonder to watch. Do your co-workers think you are a wonder to watch?