As I near the end of my 3 year term on the AICPA Board of Directors, I embarked on my last Journey to New York, but as fate would have it there were a few bumps in the road – or in this case storms in the air. I had planned to come in Tuesday evening to get to the hotel, get a good night’s rest and start my final day of committee meetings refreshed, but that was not to be. All flights into New York were cancelled and I got to get up at 3:30 in the morning to make a 6:00am flight. My friends like to give me a hard time about “having” to go to New York and put up with the glamour of the travel and hotels. All I will say is that nothing seems vary glamorous at four in the morning.
Like any Chairman of an Audit committee, I had a close working relationship with the Chief Audit Executive of the AICPA. So when the AICPA CAE resigned to take a step up the career ladder with another employer I was happy for her while feeling a loss at the same time. As Audit Committee Chairman I also realized that I would have a roll to play in selecting the next CAE for the AICPA. Like many of you I found myself of two minds on this “opportunity.” Frankly, I did not relish having to add yet one more thing to my never ending list of “To Dos, “ but I must admit that many Audit Committee Chairman never get the opportunity to replace a CAE and I thought this will be a great experience that I can learn from and use again in the future. The good news is that the AICPA had done a great job of recruiting and retaining talent and the best candidate for the job came from inside the AICPA. Audrey Foster is the new CAE for the AICPA and I am looking forward to working with her over the next couple of months until my term as Chairman ends.
At the Board meeting itself we continued to discuss a number of issues that have both immediate and long-term impact on the profession including potential standards for personal financial planning services, developments in governmental financial reporting, implications of the changing Health Care industry for the profession, integrated and sustainability reporting and the impact of European developments on the profession.
One of the many points of pride I have about the profession is our efforts to support people in the communities we live in. The AICPA saw a way to help our members in those efforts when it launched the 360 degrees of financial literacy effort several years ago. One outgrowth of those efforts was working with the Ad Council on a series of Ads staring Benjamin Banks. The Financial Literacy ads staring Benjamin Banks are now the most placed ads from the ad council leading 60 other efforts including Smokey the Bear and McGruff the Crime dog. Its always fun to be number 1, but it’s even sweeter when it is for something so important as the financial health our your friends and neighbors.
I have truly enjoyed my service on the AICPA Board of Directors and as I roll-off the Board I am looking forward to new challenges as I continue to be involved in this fantastic profession.
It hit me as I was preparing for this Board meeting that this was my next to last meeting in New York with the Board. My three year term is nearly up. It has been a great three years, and I am looking forward to the last meeting in August and my final act of making the audit committee presentation at the October AICPA Council meeting. Of course this just marks the end on one stage of my involvement with the profession. I will continue to serve on the AICPA council for two more years as I was nominated to complete the remaining two years of an unexpired term as a member at large. I will also continue to serve through the end of 2014 as the AICPA representative on the IFAC Professional Accountants in Business committee as well as the TSCPA Business and Industry Issues committee. Even though my term on the Board is nearing an end, there are plenty of issues that the Board will have to deal with this year and beyond. Some of them are highlighted in the remainder of this blog.
Mandatory Auditor Rotation – a big topic of discussion was the PCAOB and EU proposals around mandatory auditor rotation for public companies. We had a specific agenda item covering the results of the recent PCAOB roundtables on the subject, but it was also discussed within several other agenda items including the report from the CEO, the report from the Center for Audit Quality (CAQ), and the report on what is happening in Washington. The PCAOB proposals were seriously questioned by members of Congress (both Democrats and Republicans) at recent congressional hearings. The focus of the questions was on what issue is mandatory rotation trying to solve and are there better, less invasive ways to solve those issues. The PCAOB has made it clear they will be discussing this for a while before they even consider proposing any actual rule changes, so we all need to keep up with this issue as it continues to develop.
Cyber Security – If you weren’t aware, the AICPA was the subject of a spoofing attack recently. Over 90 Millions emails were sent out under a spoofed AICPA address stating that the AICPA was canceling your license. Putting aside the fact that the ACIPA has no authority to cancel your CPA license, the incident had many impacts. Clicking on the link in the email resulted in an attempt to install malware on your computer that would potentially send key financial information to the people who launched the spoof. In addition, millions of the emails had bad addresses, so the AICPA email system was temporarily brought down by getting hit with millions non-delivery email responses in less than 15 minutes. Keep in mind, this email didn’t come from AICPA systems – they simply sent out emails from other systems that made it look like they came from the AICPA. The costs of dealing with this attack were significant, but not nearly as much as they would have been had the AICPA systems been actually breached. And this goes beyond just the immediate costs as shown by these statistics.
- 25% of businesses have had a merger, acquisition or new product roll-out stopped or delayed by a Cyber breach per a McAfee/SIAC study
- 20% of victims who have had data compromised cut ties with the institutions that compromised their privacy.
Like all businesses, the AICPA takes security and privacy very seriously and we have extensive controls and procedures to protect your personal information, but as always the controls start with you. If you get an email that looks or sounds strange, don’t be afraid to question it. Did it really come from the purported sender? Is this legitimate? Always ask those questions, no matter who the email is from and don’t be afraid to call the sender to make sure it is real.
Total Tax Insights – the last thing I want to do is mention a tool that will soon be introduced by the AICPA in conjunction with its 125th anniversary in May. This tool will enable people to determine their total tax burden from all taxes (income, property, sales, gasoline, telephone, electricity, alcohol, cigarette, etc.) they pay down to the county level – all 3,035 of them. It will be a great way for people to understand the full tax burden incurred by different people at different income and wealth levels across the country. Be on the look-out for the launch of this fantastic tool.
The AICPA Spring Council meeting and 125th anniversary will take place in mid-May and I will update you on what happened at that meeting and other items impacting our great profession in the coming weeks.
The AICPA Board of Directors met January 18 – 20 and continued to explore a number of areas critical to the future of the CPA profession. Major topics included such diverse subjects as the CGMA Launch, Private Company Financial Reporting, IFRS for Public Companies, Standards for CPE programs and the three-year strategic plan for the AICPA. Let’s hit a few of these.
The Board received an update on the FAF proposals on Private Company Financial Reporting. 7,700 letters have been sent to the FAF with a vast majority supporting the position that the Blue Ribbon Panel recommendations need to be implemented in full. That would mean a separate Board from the FASB that would result in differential standards for private companies. The comment period has closed and the FAF is now conducting a series of 4 roundtable sessions across the country to gather even more detailed feedback. The first session already took place in Atlanta and the last session will take place in Boston. We should hear more from the FAF on the impact of this input on their proposals sometime in March. I know this is a very important issue to many of you so I will continue to keep you updated as additional information becomes available.
We spent most of Friday morning reviewing, discussing and providing feedback on the AICPA’s three year strategic plan. As I discussed in last weeks blog, the AICPA really does turn the strategic plan into concrete actions and goals. Those actions and goals and then assigned out to various direct reports to the CEO of the AICPA. They are then measured, rated and compensated based on the achievement of those goals. The strategic plan is the starting point for a whole performance management process.
The Board heard a proposal from the Personal Financial Planning Executive Committee on the possibility of granting standard setting authority to the committee. With increasing regulation in this area, it is more important than ever to show that CPAs already have the right standards and processes in place and don’t need any additional regulation. This topic will be discussed further at the regional council meetings in March and then again at a future Board meeting so there is plenty of time to give your input on the idea. And if standard setting authority is granted, any standard would go through a full exposure and comment process before it was adopted. Please feel free to share your thoughts with be directly or as a comment to this blog.
Next week the AICPA and CIMA will be launching the Chartered Global Management Accountant (CGMA) credential. This credential will be a game changer for CPAs working in the B&I space. It will be a way for you to build on your CPA designation in differentiating yourself from other accountants and finance professionals in the workplace. In conjunction with the launch, the AICPA-CIMA JV will issue a number of thought leadership papers and tools covering a variety of topics from risk and innovation to business models to the skills and talents needed to continue to be successful in your career. In addition, the AICPA and CIMA will be there with practical ways to help your business and therefore your career. Please look for a blog covering the CGMA after it is launched.
The variety of issues the profession is dealing with can be mind boggling, but with the help of a great staff and great volunteers, the AICPA will continue to be there to serve you no matter what part of the profession you are in.
The AICPA Board met last week. November is the first Board meeting for newly elected members of the Board, but while this was not my first board meeting it still included a first for me. It was my first meeting as Chair of the Audit Committee. It was also the beginning of my last year on the Board. It’s hard to believe I am entering the last year of my service on the Board. While I am now the experienced “old hand,” looking around the board room I am confident that we will continue to be led by talented people with a deep passion for the profession. The Board once again covered a tremendous number of topics from private company financial reporting, to peer review, to activities in the EU related to the “Green Paper” recommendations, to updates from our government and employee benefit plan audit quality centers, as well as an update on the current banking and insurance industry issues and audit risks. As usual I will highlight a few of the areas covered.
The Audit Committee functions just like most audit committees. The Director of Internal Audit reports directly to the audit committee; we are responsible for the engagement and relationship with our external auditor – JH Cohn; and we are very focused on risks and controls not only over financial reporting, but increasingly over compliance and operations. The AICPA has a great Director of Internal Audit. Her department not only provides support to the external auditor, but also audits the CPA Exam process as well as other key internal processes. Audit areas are determined based on a risk analysis and are approved by the audit committee on an annual basis. I could spend this whole blog talking about the audit committee, but instead I will reference you to the AICPA Audit Committee Toolkit. We use this toolkit extensively to help run our audit committee and ensure that we are utilizing best practices in our governance process
The CPA exam was successfully launched internationally earlier this year and additional changes have also been implemented. The exam continues to be one of the preeminent professional examinations and the latest changes are designed to continue to keep it there. For example, the test questions continue to evolve to be even more like the real world. I will go into more detail in a future blog on all of the changes, so be on the lookout for it.
EU Green Paper
I know some of you would question why the AICPA Board spends time covering proposals related to auditing in the European Union. The simple answer is that activities in the EU are providing impetus to PCAOB proposals in areas like mandatory auditor rotation, dual auditing and independence. For example, one of the EU proposals is to ban auditing firms from doing anything other than audits. This is beyond the notion of no client consulting work. It would include no tax work, no valuation work, and other areas of critical knowledge in order to perform an effective audit. Simply put, in this global world, nothing goes on that doesn’t eventually work its way back to impacting the U.S. and therefore the U.S. CPA. The Board is simply taking its responsibility to ensure the long term prospects of the U.S. CPA by looking at things going on in the rest of the world.