American Express

Texas and Amex Pause

T he Texas State Board of Public Accountancy and American Express appear to have ended their disagreement without reaching a resolution. In a press release the TSBPA claimed a victory, saying that State District Court Judge John Dietz refused to grant a motion for summary judgment to American Express Tax and Business Services. This would have allowed American Express CPA employees to issue financial statements in Texas. TSBPA Executive Director William Treacy told the Journal that this affirms what the board has argued all along: "CPAs not working for a CPA firm cannot do compilations or reviews. They can't do 'Opella' reports either." The latter are approved formats that non-CPAs can issue, because only CPAs can claim compliance with statements on standards for accounting and review services. (See "Confusion on Compilations in Texas," JofA, June96, page 19.)

Sarah McKenzie, American Express vice-president for government relations, told the Journal the issue was not resolved because the judge said he did not have jurisdiction in this instance and thus refused to make any ruling at all. She said American Express still believed its CPAs should be allowed to perform compilations.

The question in Texas is only philosophical now, as American Express no longer owns any firms in the state. However, McKenzie emphasized this will continue to be an important issue as American Express intends to return to Texas when the issue is resolved.

IFAC proposes

IFAC Proposes Ethics Upgrade

The International Federation of Accountants issued for exposure modifications to its Code of Ethics for Professional Accountants . The revised code includes more guidance on the disclosure of confidential information and the employment of nonaccountants for certain engagements. Comments on the proposals are due no later than June 30.

Disclosure vs. confidentiality

According to the proposal, there are times when professional, legal or other requirements may override the need for confidentiality. The revisions provide guidance to accountants who have determined they should disclose information that otherwise would be considered confidential. "This draft focuses on the sensitive nature of such situations," said John W. Gruner, IFAC director general. "It is not always easy to determine when or when not to disclose confidential information."

The ED also covers guidance for accountants who employ the services of nonaccountants. Because increasingly accounting firms are being called on to do nontraditional accounting work, they often employ the services of other professionals, such as lawyers, actuaries and valuers. According to the proposal, regardless of who actually performs a service for a client, the accountant must take ultimate responsibility. Therefore, the ED emphasizes that accountants must communicate to nonaccountants their basic ethical requirements by asking them to read the appropriate ethical code sections and to request consultation when potential conflicts arise.

Use the code!
The ED reinforces the concept of the IFAC code as a model on which national guidance should be based. "We always have had a paragraph in the front cover of the ethics code about the applicability of the international code of ethics as national requirements," said Gruner. "We added this language to the code itself to emphasize that no matter how diverse various regulatory regimes are, certain basics of the IFAC ethics code have to be adhered to."

The ED also amends the IFAC Statement of Policy on Implementation and Enforcement of Ethical Requirements , including recommendations that professional accounting institutes provide support, and help lines, for individual accountants on ethics issues.

Free copies of the exposure draft are available by calling the IFAC in New York at 212-302-5952. The ED also is on the IFAC Web site at http://www.ifac.org .

News

We Want a Single Set of Standards

A majority of multinational companies would prefer to use a single set of harmonized accounting standards, according to Survey on Derivatives , a poll of 136 companies published by the International Accounting Standards Committee. Here are some of the highlights of the survey results:

Ninety percent think international comparability is important to their businesses.
Approximately half of the companies intend to increase the number of risks they hedge and the volume of the derivatives they use.
Few use derivatives for speculative purposes.
Only half see any problems in the way they measure derivatives.
Forty-five percent use hedge accounting and 10% use the realization of financial instruments to avoid volatility in reported earnings.
Interest rates and foreign currency transactions are the most frequently managed risks.

Copies of the survey can be obtained from the IASC for $25 by calling +44-171-353-0565, faxing +44-171-353-0562 or e-mailing at iasc@netcomuk.co.uk .

Clarification

Clarification

"Litigation Services: Standards and Ethics" ( JofA, Apr.97 ), stated that Interpretation 102-6, "Professional Services Involving Client Advocacy," does not apply to litigation services engagements. It should have more narrowly said that it does not apply to expert witness services engagements. It is possible to have a litigation services engagement not involving expert witness services in which the practitioner is acting as an advocate for the client.

The GASB issues

New Accounting Proposals

T he Governmental Accounting Standards Board issued a proposal on the accounting and financial reporting for nonexchange transactions. Such transactions occur when governments give or receive something of value and do not directly receive or give something of equal value in return, such as certain taxes, grants, contributions or donations. Comments on the proposal, Accounting and Financial Reporting for Nonexchange Transactions, are due by June 20 .

According to Penny Wardlow, GASB research manager, little guidance currently exists on the accrual basis of accounting for nonexchange transactions. She also said the financial reporting standards for such transactions were limited in scope and needed clarification. To make recognition easier, the GASB grouped nonexchange transactions into four classes:

Derived tax revenues . These include taxes imposed on exchange transactions, such as sales and personal and corporate income taxes.
Imposed nonexchange revenues . These include taxes other than those imposed on exchange transactions, such as property taxes and fines.
Government-mandated nonexchange transactions . These occur when a government at one level provides resources to a government at another level and requires that government to use the resources for a specific purpose, such as federal programs that state or local governments are mandated to perform.
Voluntary nonexchange transactions . These result from legislative or contractual agreements entered into willingly by two or more parties, such as certain grants or private donations.

Wardlow said the proposed standards would force governments to analyze the substance of a transaction rather than pay attention only to its label. "It also would solve the problem of having different governments around the country use different terms for the same thing," said Wardlow. For example, she said franchise taxes were not really taxes but, rather, they were exchange transactions. "Just because something is called a fee doesn't mean that in substance it cannot be a nonexchange transaction," said Wardlow.

The proposal will go hand in hand with the GASB's new financial reporting model proposal that was issued in January (see JofA, Apr.97 ). "If the new model is finalized, all governments will have to prepare entitywide financial statements that include accounting for nonexchange transactions," said Wardlow. "We are hoping people will consider this proposal while they look at the new reporting model exposure draft because it covers an important part of what their new financial statements would look like under full accrual accounting." Public hearings on accounting for nonexchange transactions will coincide with hearings on the new reporting model. The proposed effective date is June 15, 2000.

One copy of the exposure draft is available without charge until the comment deadline from the GASB order department by calling 203-847-0700, ext. 555.

Short takes

Short takes, notes and items of interest

Small Businesses Pay the Piper

If a small business such as a hair salon plays a radio as background music, the business owner may have to pay a royalty even though the radio station is already paying a licensing fee. However, Congressman James Sensenbrenner (R-Wis.) has introduced the Fairness in Music Licensing Act (HR 789) to eliminate royalties on incidental music. At Journal press time, the bill was still being discussed in a House Judiciary subcommittee.

Know Your Benefits-and Everyone Else's
The Employee Benefits Research Institute published the fifth edition of Fundamentals of Employee Benefits Programs . This 557-page book, which describes a wide variety of private- and public-sector employee programs, covers the Small Business Job Protection and the Health Insurance Portability and Accountability acts. For more information, call the EBRI at 410-516-6946.

Play "Space Invaders" on Your Own Time
It's been estimated that 23% of PC game players use their office computers to play. Now DVD Software has released its AntiGame 3.0 program, which is designed to strip thousands of games off office computers. For more information, call DVD at 714-757-0615.

Cook Gets Another Chair
J. Michael Cook, in addition to heading Deloitte & Touche, is also chairman and president of the Financial Accounting Foundation and a past chairman of the AICPA. Recently, he also became chairman of the board of governors of United Way of America.

FASAC's New Head Comes From Biotech
Robert C. Butler, senior vice-president and chief financial officer of Celgene Corp., a biotechnology company, was named chairman of the Financial Accounting Standards Advisory Council, which advises the Financial Accounting Standards Board. Butler formerly was senior vice-president and chief financial officer of International Paper Co.

Their Cup Overfloweth
For the first time since its 1974 creation, the Pension Benefit Guaranty Corp., which guarantees pension benefits, has a surplus-$869 million. The improved condition is a result of increased premiums exceeding $1.1 billion, investment income of more than $900 million and an absence of major plan terminations. In 1993, the PBGC's deficit was a record $2.9 billion.

OK
Congressman Jim Moran (D-Va.) has introduced legislation (HR 883) that would permit governments to pass fees and surcharges on to people who make mandatory payments, such as taxes, fines and penalties, to governments with their credit cards. The bill would require governments to disclose the fee amounts and limit the amounts that can be charged for credit cards to settle such payments.

Keep Your Standards at Hand
The International Accounting Standards Committee published its 1997 Bound Volume of International Accounting Standards . The volume can be obtained for $64, including postage, by calling the IASC at +44-171-353-0565 or by e-mail at iasc@netcomuk.co.uk .

FASB Gets New Assistant Director
Financial Accounting Standards Board staffer Leslie F. Seidman, CPA, is the FASB's new assistant director of research and technical activities, replacing the retiring JT Ball (read more here ). In her new position, she will supervise staff members involved with implementation and practice issues. Before joining the FASB in 1994, Seidman was a vice-president in the accounting policies department of J. P. Morgan and an auditor with Ernst & Young.

Kaplan Will Head AcSEC
David B. Kaplan, a partner and associate national director of accounting services at Price Waterhouse, will succeed G. Michael Crooch as chairman of the American Institute of CPAs accounting standards executive committee on October 1. Kaplan currently serves on AcSEC's planning subcommittee. This month, Crooch became an AICPA delegate to the International Accounting Standards Committee.

There's a Bug in My System!
The Intenal Revenue Service will not impose deposit penalties on companies enrolled in the electronic federal tax payment system that make errors when attempting to use the system before the official start date. According to information release 97-20, IRS Commissioner Margaret Milner Richardson said there was no reason to impose penalties on businesses that were simply trying to get comfortable with EFTPS but made mistakes doing so. Approximately 1.2 million businesses are required to begin using the new payment system by July 1.

More women

More Women at the Top Worldwide

Entrepreneurship among women is a growing international trend. In fact, female-owned companies constitute a quarter to a third of all businesses in the world. In the United States alone, the number of women-owned businesses is increasing at nearly twice the national average. Here's a look at some more interesting facts.

Source: National Foundation for Women Business Owners, Silver Spring, Maryland.

Banking:

Preparing for the Future

Community bankers agree their industry will have to change over the next five years, but they differ on the steps they need to take. Here's a look at some of the results of a survey of 612 commercial banks and savings institutions from across the United States.

Business/Industry:

Electronic Records Storage

R ecord retention bedevils many businesses because they must maintain sufficient records to substantiate virtually every item reported on tax and information returns. Some companies have defined and even limited the documentation they must maintain by entering into a record retention agreement with the Internal Revenue Service. However, such agreements are not always an option and often do not adequately address electronic data. In Revenue Procedure 97-22, the IRS provides guidance on maintaining records by using an electronic storage system that either images hardcopy books and records or transfers computerized books and records to an electronic storage medium.

The procedure makes clear the IRS is very concerned about the integrity of electronic storage systems and puts the onus on taxpayers to prove their systems are accurate and reliable and have not been tampered with. In addition, the IRS insists that a taxpayer's electronic systems support the taxpayer's books and records, include indexing and retrieval systems and provide an audit trail between the general ledger and the source documents. The taxpayer also is obligated to provide the IRS with the resources necessary to locate, retrieve, read and reproduce any electronically stored books and records.

Observation : The new procedure may allow taxpayers to eliminate some paper records; however, if a system fails to operate as required in the procedure, the taxpayer may face penalties if it has not maintained its books and records in original or authorized micrographic form.

Companies that change their computer storage systems must consider how they will provide the IRS with access to data from old systems. Corporate tax departments could help by developing electronic storage systems that both meet the procedure's requirements and assist them in providing the requested data to the IRS during examinations. A tax department would have to be able to show the IRS the links from the financial accounting records to the tax returns and produce specialized documentation, such as transfer pricing information.

—Tracy Hollingsworth, Esq., staff director of tax councils at Manufacturers Alliance, Arlington, Virginia .

CORPORATE

Why Publicly Traded Partnerships Should Buy Back Stock

A corporation that repurchases its stock from a shareholder has no corporate-level tax consequences.

Conversely, if a partnership has an IRC section 754 election in place and redeems all or part of a partner's interest, the partnership realizes an increase in the basis of its remaining assets equal to the gain the partner recognizes as a result of the buyback.

Because of a statute in the Revenue Act of 1987, partnerships that were publicly traded on or before December 17, 1987, and are not engaged in real estate or natural resource activities will convert to corporate status on January 1, 1998. If those entities are contemplating buybacks, now is the best time. Why? Because the distributee partner's gain would yield an asset basis increase for the partnership. This basis increase would remain available to the entity when it converts to a corporation.

Observation : The amortization of this basis (most likely over a 15-year period) will reduce the new corporation's tax liability. If a buyback is delayed until after the conversion, the transaction will yield no corporate-level tax benefit.

—Robert Willens, CPA, managing director at Lehman Brothers, New York City .

LINE ITEMS

Filing for Help

According to Internal Revenue Bulletin 1997-9, cash paid in 1997 to a household employee such as a housekeeper is not subject to Federal Insurance Contribution Act taxes if it is less than $1,000. When a household employee receives more than $1,000 in 1997, then all the cash paid that employee is subject to FICA taxes.

Taxing Tenure
A state university allows tenured professors to retire early and receive up to a full year's salary in exchange for the termination of their employment and the surrender of their tenure rights. In private letter ruling 9711001, the Internal Revenue Service ruled that since tenure is granted based on a faculty member's past performance, any payments to a retiring employee to give up tenure are wages for FICA tax purposes. Had payment been made to cancel the employee's employment contract, no FICA taxes would be owed (revenue ruling 58-301).

Distributions Balancing Act
The Small Business Job Protection Act of 1996 allows employees (other than 5% owners) to begin receiving distributions from qualified plans by April 1 of the calendar year following the later of either (1) the calendar year in which the employee reaches age 7012 or (2) the calendar year in which the employee retires. In announcement 97-24, the IRS said an employer may give employees who attain age 7012 after 1995 and who do not retire the option to defer qualified plan distributions even though the employer's plan hasn't been amended to provide for this option. The IRS is expected to provide guidance for employers on how to allow for retroactive plan amendments and how to allow employees who are 7012 and are receiving distributions to stop receiving them.

True or False?
The IRS released five fact sheets (FS 97-5 through 97-9) that (1) explain the examination and audit process, (2) describe the collection process, (3) provide an overview of IRS programs for tax-exempt organizations, (4) discuss political activity by exempt organizations, and (5) explain the appeals process.

How Late is Too Late?
A woman's father mailed the IRS a $7,000 check in 1984 along with his application for automatic extension to file his 1983 return. The father died in 1988, at age 98, and his daughter was appointed administrator of his estate. The daughter soon discovered that the $7,000 check should have been for only $700. Her taxpayer refund claim was denied because the statute of limitations had closed-she sought to avoid the statute under a principle known as "equitable tolling." In the past, some courts had used this principle to allow late refunds when there was a case of senility and mental incompetence. However, the U.S. Supreme Court has now decided that courts cannot toll the statutory time limitations for filing refund claims under for "nonstatutory equitable" reasons (U.S. v. Marion Brockamp , no. 95-1225, U.S. Feb. 18, 1997). The Treasury Department is considering a proposal to extend the limitation period.

—Michael Lynch, CPA, Esq., associate professor of
accounting at Bryant College, Smithfield, Rhode Island .

The FASB

Comprehensive Income Compromise

T he Financial Accounting Standards Board has concluded its deliberations on its exposure draft Reporting Comprehensive Income . The final statement retains most of the provisions of the ED, with a few exceptions. (See "FASB Seeks to Revise Comprehensive Income Reporting," JofA, Sept.96, page 19). "There were two changes that affected entities are likely to see as major," FASB Project Manager Cheri Reither told the Journal .

"We eliminated the requirement for reporting comprehensive income per share." This was seen as an area of contention when the ED was first issued. "Also, we modified the ED's requirement that comprehensive income be reported in a statement of financial performance." Companies may report comprehensive income in a statement of changes in equity or in an income statement-type format. They may think the final statement is therefore less stringent than the ED, but Reither stressed this is not the case. "We still require a total. Companies have to add net income to other comprehensive income."

Reither said that if companies choose the equity format, they will have to display a statement of changes in equity as a primary financial statement, even though the Securities and Exchange Commission allows companies to place that statement in the financial statement notes.

Also, the effective date was pushed ahead one year to fiscal years beginning after December 15, 1997. Reclassification adjustments will not be required, but will be encouraged, for earlier period financial statements presented for comparison with the first period in which the final statement is adopted. Further details of changes are discussed in the FASB Action Alert of March 19, which is also posted on the FASB Web site, http://www.fasb.org .

To order the statement, expected later this month, call the FASB at 203-847-0700, ext. 555.

Proposal to Expense Start-Up Costs

M any CPAs have searched for broad authoritative guidance on the financial accounting of start-up costs. Except for those in a few specialized industries, noted below, most have been unable to find such guidance because there is none. The American Institute of CPAs accounting standards executive committee (AcSEC), looking to fill the gap, issued an exposure draft of a Statement of Position, Reporting on the Costs of Start-Up Activities .

The ED defines start-up activities broadly as "one-time activities related to opening a new facility, introducing a new product or service, conducting business with a new class of customer or beneficiary, initiating a new process in an existing facility, or commencing some new operation." AcSEC noted that entities currently use different terms, such as preopening and preoperating , to describe start-up activities and costs. The ED uses start-up to describe all those costs and activities.

Main provisions
The ED requires that start-up costs be expensed as incurred. Although specific guidance already exists for construction contractors, federal government contractors, airlines and casinos, it all would be superseded by the proposed SOP.

AcSEC had considered whether start-up costs should be capitalized, given that entities undertake start-up activities expecting them to result in future benefits. However, the committee concluded the future economic benefits of start-up activities have indeterminate lives and, if those costs were capitalized, amortization periods would be arbitrary. Also, it had not heard a good answer to the question, "If these costs are capitalized, what exactly is the asset?"

The ED, which applies to all nongovernmental entities, would affect the accounting for start-up activities of entities in the development stage as well as those that are established operating entities, as defined by Financial Accounting Standards Board Statement no. 7, Accounting and Reporting by Development Stage Enterprises .

AcSEC believed the ED would reduce the current diversity in financial reporting. Currently, some entities capitalize costs while others expense as incurred. For years, AcSEC has heard complaints about inconsistencies in the financial reporting of start-up costs and about the lack of authoritative accounting guidance. In fact, the Securities and Exchange Commission staff has expressed concern periodically about the accounting for these costs.

The ED represents the next phase of AcSEC's series of projects related to reporting on the costs of certain activities undertaken to create future economic benefits (for example, start-up, training, customer acquisition and other similar activities). The first phase resulted in the issuance of SOP 93-7, Reporting on Advertising Costs .

Tax issue
Organization costs are excluded from the ED's scope. However, AcSEC's definition of organization costs is narrower than that contained in the tax code. The SOP could thus lead to temporary tax differences related to costs technically outside the document's scope. Most FASB members would have preferred the ED to include organization costs in the scope and that those costs also would be expensed as incurred. However, they cleared the document anyway.

AcSEC invites opinions on these and other issues identified in the document. One free copy of the ED (product no. 800113JA) may be ordered from the AICPA order department at 800-862-4272. It is also on the AICPA Web site (http://www. aicpa.org) in the accounting standards area. Comments are due by July 22.

—Charles L. McDonald, chairman of the start-up costs task force, and Daniel J. Noll, technical manager, AICPA accounting standards

Ball, FASB Staffer, Retires

J T Ball, who has been with the FASB as long as there's been a FASB, announced his retirement effective June 30. Currently assistant director of research and technical activities, he started at the Financial Accounting Standards Board in 1973 as senior technical adviser to the chairman and the board. Before that he had spent four years with the FASB's predecessor, the Accounting Principles Board, as an American Institute of CPAs staff member preparing interpretations of APB opinions. His original job at the AICPA was assistant director of examinations, a post he held for two years, preparing and supervising the grading of the Uniform CPA Examination.

At the FASB he's worn many hats over the years, supervising staff members handling implementation and practice problems. He is the liaison with the AICPA accounting standards executive committee-"I've missed only one meeting of AcSEC since its inception," he said-and with the Securities and Exchange Commission.

In an interview with the Journal he discussed some of the early years and milestones of the FASB. "At the beginning," he said, "the FASB had inherited a lot of projects from the APB. The big problem was which were the most urgent, the most important. Meanwhile, we kept hearing questions-still around today: Can the FASB succeed? Will it stay in business?" There were growing pains-"just the usual agony of any new organization."

Red-letter dates
"In my opinion, one of the biggest events in the FASB's history was the formation of the emerging issues task force in 1984," he said. "For the first time there was an organized mechanism to deal with the crisis problems of the day." Another highlight was the creation of the successful fellows program in 1974. Although an article in the FASB's Status Report praised Ball for organizing the program, in which more than 70 fellows have participated, he is modest about it. "It actually originated with Ray Groves, who was managing partner of what is now Ernst & Young. You could say I was just the messenger who presented the idea to the chairman, Marshall Armstrong."

FASB Chairman Dennis Beresford, who is also retiring on June 30, said Ball is "truly one of the pioneers of the FASB and the standard-setting process...His technical knowledge, professionalism, institutional memory and dedication will be greatly missed."

Deposit Accounting Gets Its First Treatment

In the proposed Statement of Position, Deposit Accounting: Accounting for Insurance and Reinsurance Contracts That Do Not Transfer Insurance Risk , the American Institute of CPAs accounting standards executive committee addresses an accounting issue that has been brought up but never fully dealt with in various Financial Accounting Standards Board statements. (These include Statements no. 5, Accounting for Contingencies , no. 60, Accounting and Reporting by Insurance Enterprises , and no. 113, Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts .) The exposure draft uses deposit accounting to refer to the accounting method for such contracts but does not address when to apply it. Also not covered are long-duration life and health insurance contracts, which are already covered by FASB Statements no. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments , and no. 113.

"A key provision is that this SOP would apply to all entities, not just insurance companies," R. Larry Johnson, an AcSEC member who chairs the deposit accounting task force, told the Journal . "This may be controversial, because some of the affected entities may believe AcSEC is not simply interpreting generally accepted accounting principles in this area but is creating new GAAP, which is the province of the FASB."

Johnson also said that under certain circumstances, assets and liabilities would be measured at their discounted value using a risk-free rate that essentially doesn't change. "Also, we've proposed that in a contract in which the liability or asset is measured at its discounted cash value, the debitor credit would end up going through the claim-loss account." Two FASB members voted against releasing the ED largely for that reason. (Only five of the seven FASB members need to approve an ED for it to proceed, however.)

The exposure draft will be available by the end of this month and will have a 90-day exposure period. Copies will be available by calling 800-862-4272 or by downloading it from http://www.aicpa.org .

Most Recent Stats of the Past. The Internal Revenue Service released its 1994 Corporation Source Book, which includes aggregate statistics on assets, liabilities, receipts, deductions, tax and tax credits presented by industry groups. Printed copies can be purchased for $175, and floppy disk and magnetic tape copies are available for $1,500. A list of industry classifications and tape specifications is available without charge by calling the IRS at 202-874-0410. Bank Wants Personal Treatment n The American Bankers Association (ABA) urged the Organization for Economic Cooperation and Development (OECD) to adopt international tax policies that accept taxpayers own valuations of transactions. The ABA was commenting on the OECDs discussion draft on the global trading of innovative instruments. The ABA said that, without such analysis, "each tax authority would be free to apply its own version of economic reality, which could lead to disagreements and double taxation." Congressional Revenue Smell Test? n Senate small business committee chairman Christopher Bond (R-Mo.) and Senator Richard Shelby (R-Ala.) introduced legislation that would give Congress the ability to review any regulatory action that increases revenue. Although the Bond-Shelby proposal is not aimed specifically at the IRS, it is a response to a controversial IRS proposed regulation (REG-209824-96) that would have the effect of imposing self-employment taxes on the investment income of taxpayers disqualified as limited partners in limited liability companies.

Roundtables reveal

Women's Roundtable Results Published

Only 9% of male CPAs, but 36% of female CPAs, who have left public accounting cited "dissatisfaction with advancement opportunities" as a reason. This is just one of the insights gained from focus groups sponsored by the American Institute of CPAs women and family issues executive committee (WFIEC) at an AICPA industry conference. The three focus groups-consisting of a total of 32 CPAs, a third of whom were men-were designed to compare the experiences of men and women in business and public practice.

Some results pointed out differences between male and female experiences, but others highlighted the similarities: family time, for example, is not just a women's issue. Some companies had more "family-friendly" policies than others.

The focus groups were conducted by the Families and Work Institute for the WFIEC. Some results are in the box below. A full report, Experiences and Views of CPAs in Industry , contains more data plus quotes from group participants. It is available free by calling Ramona Perry-Jones, AICPA manager of women and family issues, at 212-596-6226, and it's posted on AICPA Online, http://www.aicpa.org .

CPAs Head for Wall Street

Young CPAs are doing more than looking at other peoples' income statements; they're trying to increase their own. A large New York-based financial recruitment firm, A-L Associates, is getting an increasing number of calls from Wall Street firms for bright CPAs with two to three years' experience in a Big Six firm. "Usually, we have about 100 open jobs to fill," said John Gramer, CPA, managing director of A-L's accounting division. "But in the past eight months, that's increased to 150 and, in the last two months, as high as 160." Why Big Six CPAs? "It's perceived the Big Six hire the best and the brightest college graduates. And Wall Street companies want people with strong accounting backgrounds who understand internal controls, for example. They want people who have inquisitive minds, which come from having an auditor perspective." The growth in the last 18 months in the New York financial market has spurred Wall Street growth, opening jobs for CPAs at companies such as Goldman Sachs, Lehman Brothers and J. P. Morgan.

According to Gramer, the lure is both glamour and money. "Traditional public accounting may be losing its luster. Some of the top new CPAs want to move out of auditing into the consulting and investment advisory divisions if they stay at their firms." Also, by moving to Wall Street, they could get a 10% to 15% raise plus a 20% to 25% annual bonus. Although this particular exodus is fueled by a boom market, Gramer said it could be long term as CPAs branch out into different areas. For the first time in 16 years at A-L he's seeing large firms making counteroffers to departing CPAs. Also, more senior CPAs, including partners, are exploring other possibilities. "Partners see former managers who worked under them now making almost as much as they are. Traders are earning $200,000 to $300,000. An audit director can go to Bankers Trust or First Boston and make as much as half a million in salary."

Neil Tessler, president of Dryden-Cross, a New York executive search firm specializing in the financial industry, also has seen an increased call for CPAs. "Wall Street wants CPAs for their analytical skills," he told the Journal . "It's happening at a faster pace. I think the bonus structure-so common on Wall Street-is part of the attraction."

Who's not leaving-and why
Fran Engoron, senior partner-intellectual capital at Price Waterhouse, told the Journal that her firm has not seen wholesale departures, however. "Some people stay with us for a while, get great experience and then leave for corporate positions, often with one of our clients. We don't encourage it, but it's expected." She agreed that Wall Street salaries could be very attractive but emphasized the other incentives PW has, such as "flexible career models, not just the standard accounting firm 'up-or-out' model. Some stay on to become directors, an alternative to the partner destination that doesn't rule out a partnership at a later date. We invest a lot in people development, and some remain with us for that accelerated on-the-job training."

She also pointed out that although PW demands a lot from its people, it does have flexible work arrangements. "I don't think many investment banking firms have that very high on their list," she said.

Also, A-L's Gramer warned that only about 5% of all CPAs moving to Wall Street will end up in the highest paid revenue areas. The rest will find work in trade support, such as in financial reporting and analyst roles. But that doesn't seem to slow anyone down. "These CPAs say to me, 'Why can't I do trading work? I'm just as bright as the traders they have. I'm the best-I'm willing to give it a shot.' If this continues, I think the Big Six are going to find themselves really squeezed for employees."