The Professionalism of Preparers

The dictionary defines a profession as a calling requiring specialized knowledge and often long and intensive academic preparation.  I would further say that another element of a profession is a code of ethics that is adhered to by all members of the profession.  By that definition I would say CPA preparers of financial statements are definitely part of a profession, and I want to make an important point that our fellow CPAs working in the public side as auditors and other service providers would readily agree (or at least most of them would) that preparers are an important part of the CPA profession.

Unfortunately, or fortunately, depending on your prospective, regulators do not seem to see CPA preparers as part of a profession, or at least they do not see any difference between a CPA preparer and a non-CPA preparer.  In many ways I think this is the biggest gap (pun intended) in our public company financial reporting model today.

CPA preparers have to abide by the same code of ethics as CPA auditors.  While independence is not required of CPA preparers, objectivity it required as well as the same requirement to put the public interest above one’s own personal interests.  If you don’t believe this, you simply need to ask a few CPA preparers out there about their own personal experiences.  Fortunately I work for a company that takes its ethical responsibilities very seriously and has no tolerance for those that would do anything but reflect the transparent truth in our financial results.  Some of my colleagues working for other companies were not so fortunate.  When talking about careers and jobs I’ve heard more than a handful of my colleagues mention that they left a good paying job because they just were not comfortable doing what they were being asked to do.

Ultimately, that is what CPA preparers have to be prepared to do – quit their job – along with other actions.  Those other actions usually start with simply using your own judgment and skepticism to ask questions of others in the company about why transactions are being accounted for in the way they are.   If those answers are not satisfactory, then it is incumbent on the CPA preparer to explain their position up the chain of command.  In a vast majority of companies the issues are resolved appropriately by this stage, but if they are not then the CPA preparer has to take the next step of continuing to escalate their concerns first to the audit committee and then the external auditors.  Now the SEC also has a process for whistleblowers to report issues, and if it’s big enough, even pay them a portion of any settlement.  The final step in the AICPA Ethics decision tree for CPAs in Business and Industry is to leave the company. 

CPA preparers are the front line in proper financial reporting and as shown above are ethically bound to do so, but nowhere is credit given for the professionalism of CPA preparers.  No auditing standard allows auditors to modify their risk assessment based on the fact that the preparers of the financial statements are CPAs and there is no mention by the PCAOB or SEC that having CPA preparers gives a different level of assurance when it comes to internal controls.  In fact the requirement that the audit committee have a financial expert doesn’t even mention the term CPA.

The launching of the new CGMA credential was a great start in highlighting the benefits of CPA professionals to business.  I think another great step would be to acknowledge the critical role that CPA preparers play in financial reporting system and give credit to companies that make sure their preparers are professionals of the highest caliber – CPAs.

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