AICPA April 2012 Board Meeting

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.

Congressional CPA Caucus

Sometimes as CPAs it is very frustrating to see what is going on in Washington these days.  Whether you believe the answer is increasing taxes, reducing expenses or some combination of both, almost all CPAs recognize that the status quo is absolutely unsustainable.  When you add the unfunded Social Security and Medicare liabilities, the total “debt” goes from $14 Trillion to over $50 Trillion.  It is clear that these sacred cows, along with Defense spending all need to be part of the conversation on how to develop a sustainable path forward. 

I will be the first to say I don’t have the magic answer.  In fact, I’m not sure one exists.  But I do know we had better start with the same facts.  One fact I think congress needs to get straight is that a cut in the growth rate of spending is not a spending cut.  I don’t care if the 8% increase was reduced to 2% increase; an INCREASE is an INCREASE in my book!  The second fact we need to get straight is that Social Security is not some pension fund where people are putting away money to get back in the future.  Nor is Social Security a government Ponzi scheme; Social Security is like many other government programs, it taxes individuals today to pay money to different individuals today.  And if you agree with my second fact, then you also must be willing to include Social Security tax paid as well as income tax paid when deciding how many people actually pay tax to the Federal Government.  The reality is that for many people, Social Security is the largest tax they pay and when you include Social Security taxes paid, the number of people who pay tax to the Federal government is a lot more then the roughly 50% you keep hearing bandied about back and forth on the radio these days.

The problems in Washington can make most CPAs shake their head in disbelief, but there are eight CPAs and two Accountants that are doing a little more than most when it comes to trying to change things in Washington.  These ten people are members of the House and Senate.

Brad Sherman, D-California
Bill Flores, R-Texas
Michael Conaway, R-Texas
Lynn Jenkins, R-Kansas
Mike Enzi, R-Wyoming
Steven Palazzo, R-Mississippi
Ron Johnson, R-Wisconsin
Collin Peterson, D-Minnesota
John Campbell, R-California
James Renacci, R-Ohio

These ten CPAs and Accountants formed the first Congressional Caucus on CPAs and Accountants.  Brad Sherman and Michael Conaway co-chair the House Caucus and Mike Enzi and Ron Johns are the co-chairs from the Senate. The goals of the caucus are two-fold.  The first is to harness their unique professional skills to develop innovative policy approaches to issues that affect CPAs, including tax administration and compliance, and accounting and auditing standards.  The second goal of the caucus is to provide input on issues being debated by Congress on which CPAs have particular expertise, including budgeting and fiscal issues.

I am proud that these CPAs have taken their professional obligation to serve the public all the way to congress.  I only hope that they can be a voice of fact and solution for the country.