The AICPA had its traditional Spring council meeting in Washington at the beginning of a new Congress, this time the 113th Congress. We now have 10 CPAs in Congress with two more added to the mix in the 2012 election. We got to hear from these two newest CPA members of Congress at the Council meeting. As you would expect from CPAs they are looking for ways to get the financial mismanagement of the Federal Government back under control and accomplish some of those basic things like actually passing a budget and brining attention to the long-term structural issues that we have to deal with if we are to truly put the Federal Government on a sound financial path forward. It was actually heartening to see that one was a Democrat and one was a Republican. Our fiscal crisis is a crisis caused by both parties and it must be solved by both parties. Listening to their down to earth problem solving analysis one has to wonder if we would even be in this mess if instead of having 10 CPAs and 225 Lawyers, we had 225 CPAs and only 10 Lawyers in Congress.
Members of Council from every state “went to the Hill” to meet with their Congressmen and Senators and ask for their support for three pieces of legislation.
- The Employee Mobility Act to set a safe harbor period of 30 days before an employee working in another state becomes subject to that state’s income tax withholding and reporting requirements.
- The Tax Return Due Dates Act which changes dues dates for several forms and puts them in a logical order so that forms that are needed to file subsequent forms, such as K-1s are due before the subsequent forms are required.
- The Municipal Advisor Act which would exempt CPAs doing normal CPA work such as compilations and assurance work would not be considered advisors to municipalities issuing bonds.
We also offered our help on tax reform with a number of common sense suggestions like bringing together the 15 different education credits and the many different deductions and exemptions into one coherent system.
We did take care of some business at the meeting too. The council voted to authorize the issuance of AICPA credentials such as CFF, PFS, ABV and CITP outside of the United States (the CGMA is already offered across the world). We will work with our partner CIMA and other national accounting organizations that have comparable ethics, education and other requirements to the AICPA. This is a way to increase the value of these credentials for all of our members by making them valued around the world.
Finally I had the privilege of being part of a panel that discussed the CGMA credential. What it means, what it is worth and what CGMAs bring to a business that is different from other “accountants.” Serving on the panel reminded me of the great career I have had because I joined a profession that is willing to look to the future and make the changes to stay relevant in this ever changing world.
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 held its four regional meetings of Council over the last couple of weeks. Regional meetings of Council are smaller assemblies that only members of Council attend (no guests or members of the press attend). This, along with the smaller meeting size, allows for greater and more frank discussion among members of Council. The AICPA took advantage of this opportunity to have in-depth discussions on its strategic plan down to actual implementation initiatives.
If you are like many of us buried in work these days, you might have missed the impact the JOBS Act will have on our profession. Dodd-Frank exempted public companies with a market cap below $75M from the section 404(b) (obviously logic evaded congress as it is precisely these small companies that are most susceptible to fraud and the most in need of controls). Congress continued to defy logic by exempting new public companies for their first 5 years of being public from 404b if their market cap is under $750M and their revenues are under $1B. If that wasn’t bad enough, congress also decided to get into the accounting standard setting process. Under the act, new public companies that qualify for exemption from section 404(b) will be exempt from implementing any new accounting standards if the standard includes a delay in implementation for private companies. Most new standards today include a delay for private companies, so this in effect delays all new substantive accounting standard changes for new public companies for the same period of time. This is congress’s first successful attempt to set accounting standards since the exchange acts of 1933 and 1934 which gave the SEC standard setting authority (which the SEC then passed to the private sector for the most part). This is a dangerous precedent and we need to be on alert for additional attempts by congress to legislate accounting standards. As vocal as I have been about the FASB, I still see the FASB as a far superior alternative to congress setting accounting standards.
And a word for those opposed to differential standards for private companies. Where are your voices against this set of differential standards? Congress just set up a scheme for two different sets of standards for two different classes of public companies. This makes even less sense given the users of new public company financial statements have the exact same needs as the users of existing public company financial standards.
The exemption also applies to auditing standards. There is a 5 year exemption from new auditing standards for companies meeting the 404(b) exemption threshold. This may prove to be the most contentious exemption between a new public company and it’s auditor. Auditing standards are essentially minimum requirements for an auditor to meet when performing an audit. An auditor can (and should) go beyond the minimum requirements depending on the audit. My guess is the auditor will often follow all current standards regardless of the exemption, but that sets up the contention. I can see the discussions now between the business and the auditor with the business asking why certain procedures that are costing time and money are being performed when they are not required by the older auditing standards. Even better, can you imagine the auditing standard on the auditor’s report being changed, but the business requesting the old report format be used because they don’t want disclosures required by the new report to be included.
There were a lot more topics covered in the meeting, but in keeping with the theme that the regional meetings are more private, I won’t go into them in detail in this blog. I will, however, continue to keep you informed of the issues through this blog as they become public over the coming months during the April AICPA Board meeting and the May AICPA Council meeting open to the public.
As I was starting to write this Blog I realized there was very little to write about. Congress was on recess most of August so not much has happened in Washington since their return. Europe traditionally takes a summer break in August so the IASB does too. As a result, the FASB focused on non-convergence issues which meant that its agenda was much lighter than normal for the past few weeks. Third quarter doesn’t end until September 30, so there is no reporting crunch, and the squeeze everything in before the Holiday’s rush of November and December are still too far in the distance to cause worry. What is a normally busy CPA to do?
I do feel sorry for all my tax brethren with the September 15 and October 15 deadlines bearing down on them, but not too sorry. I mean, they’ve had eight or nine months to get everything done. I don’t hear a lot of pity from them when we CPAs in business and audit are killing ourselves to get the year-end financials done in twenty days or so before the press release is issued. You say you thought it was sixty days before the reports are due to the SEC, well; I would like to see you explain to the CEO and Board why the numbers they issued in the press release would have to be revised. It would probably be your first and last time doing so.
So while our tax brethren are struggling through these final self-inflected weeks of overwork and under-sleep, the rest of us are enjoying a break. Football season is new and all the games mean something because no one is out of the bowl or post season hunt yet. Baseball season is just getting to the good part with the Braves and Rangers in the thick of it once again this year. The miserable heat of the summer is giving way to cool Fall mornings, just perfect for taking the dogs for a walk – in the neighborhood or along your favorite trail. The leaves (at least on the trees that are still alive after the drought) will be turning bright colors soon to make those hikes even more enjoyable.
The Texas state fair is ready to open with its cacophony of new fried foods ready to destroy your diet. Six flags is still open on the weekends with those ghouls and ghosts ready to entertain you and your children at their annual Fright Fest. The ocean water is still warm enough for a trip to remember (as long as you can avoid the occasional hurricane). The mountains are beckoning and its cool enough to enjoy that evening fire and make a s’more over the glowing red coals.
Yes, it’s time to take a break. Congress will start making noise soon enough. The IASB and FASB will be issuing the re-exposed EDs on Revenue Recognition and Leases. The PCAOB will continue in its efforts to fix all that is not broken about our audit process. The IRS will begin its quest to fingerprint everyone in the U.S. – I mean everyone who prepares a tax return. And before you know it we’ll be ringing in 2012 and putting the finishing touches on the press release about the financial results for the year that was 2011. So take that break now before it’s too late!