Steering a Course for the Future

The new chairman hopes to use his position to help CPAs take advantage of the opportunities of a new century.

ith an eye on the future, yet mindful of the strong foundation built by his predecessors, Robert K. Elliott assumed the AICPA chairmanship at the Institute’s annual meeting in Seattle in October. “I’m aware I’ll be in the chair when the digits ‘click over’ to the year 2000. I suppose that’s symbolic of the beginning of a new century or even a new millennium for the Institute and for the profession.” Elliott thinks this time of transformation—as exemplified by the CPA Vision Project—provides a good opportunity for people focused on the future to lead the profession. He says the changes will be dramatic—both for members and for the AICPA.

Elliott’s resume reflects his forward-looking focus. He chaired the AICPA strategic planning committee and the special committee on assurance services. He also served on the special committee on financial reporting and the Auditing Standards Board. Elliott graduated from Harvard with a bachelor’s degree in math and earned an MBA in public accounting from Rutgers University. He joined the Philadelphia office of KPMG immediately thereafter and has worked for the firm for his entire career. Today he is a partner in New York City, a member of the firm’s office of the chairman and a trustee of the KPMG Foundation.

For much of the Institute’s 112-year history, Elliott points out, the speed of change wasn’t very great. The AICPA and its predecessors created enormous value for members by being “constant and steady, the profession’s conscience and ballast.” And the results have been spectacular. “We have a profession that is both highly regarded by the public and beneficial to our economy.” But Elliott says the days when the accounting profession could steer a steady course based solely on its traditions are past. “That doesn’t mean we give up the traditions, but the course we must steer requires greater organizational nimbleness than the Institute has had to demonstrate before.”


As the economy moves to a postindustrial, information-based era, Elliott says CPAs’ basic role as “information people” will become increasingly important. “To prosper, an information-era company must have even more information and knowledge and use it even more quickly than ever before. The positioning of the CPA profession is ideal to capitalize on these opportunities.”

Whether CPAs themselves are ready to take advantage of the opportunities is a more difficult question. “The competencies needed to prepare financial information such as GAAP reports and tax returns focus on applying a set of rules to get a standardized product. The competencies in a more customer-oriented environment require CPAs to get into the heads of decision makers, determine their information needs and supply exactly what they need. It’s much less a standardized, one-size-fits-all product.”

While the old competencies are still relevant, Elliott says, “we need new ones. Many CPAs today already have those competencies, especially financial managers and those in public practice who do tax or management consulting.” But some members are struggling to make the transition. A lot of work can be done by increasingly smart software, and standardized products are “under threat of technology substitution. Someone trying to compete with cheap software is under price pressure.” And that, Elliott says, is “not a happy place to be.”


Elliott sees the CPA’s current image as a bundle of mostly positive qualities. He cites “our reputation for integrity, objectivity, honesty, industry, competence and diligence.” But, he says, the profession displays what some regard as negative qualities—being too detail oriented or technical. “We must be careful not to position CPAs only as statutory auditors.” For Elliott, the question is, “How can we reposition the CPA—if you think of the designation as a brand—to carry forward the positive attributes while shedding the negative ones?” That’s the focus of the AICPA image campaign. “As we implement the Vision Project, the public will eventually recognize the role CPAs play in this new postindustrial space and the image will change.” Citing the trend away from firms marketing themselves as CPA firms, Elliott says this tells us something about “the attractiveness of the CPA brand in the marketplace.”

Elliott says the most important thing learned from the CPA Vision Project is “where our members want to go.” Collectively, he says, members have an articulate and forward-looking vision of the future. “It comes down to two desired changes: Reposition CPA services as having a higher value and broaden the range of services to cover a wider array of activities and ways to create value for clients and employers.”

Another lesson learned from the Vision Project is that members are able to think about the future and its implications. Elliott sees that as a positive trend. “We learned that as an organization we can think creatively about our future and rearrange what we’re doing to make that future come true.” He says other professions have looked carefully at what CPAs have accomplished and see it as a strategic asset. He cites some in the legal profession who say the AICPA is far ahead of the American Bar Association. It means CPAs will be better positioned for the future.

The Vision Project also has “huge implications” for education. Elliott believes a distinction should be made between the traditional education to enter the profession and nontraditional skills. On the traditional side he sees positive curriculum changes at a number of institutions. However, he’s concerned that many schools still train people only to prepare and audit financial statements. “While this is a core service of the profession, the education is not broad enough to equip graduates to take advantage of all the opportunities the Vision Process identified.” Curriculum changes are needed. “We have developed a set of required competencies for the new profession and we’re letting educators know what students will need to be able to do in the world they’ll actually enter.”

Noting that CPA firms are going to traditional accounting programs less often to recruit new staff, Elliott says that of the people his firm now hires, less than 20% come directly from traditional bachelor’s or master of accountancy programs. The rest come from less traditional sources, including MBA, engineering, computer science and law programs. Because these professionals won’t be doing audits, many never will become CPAs. Elliott points out that this is true in a number of practice firms of all sizes and says these people, like CPAs, “are working to improve the quality of information used for decision making. If we had, over the years, broadened our concept of the CPA, they would now be CPAs. Our failure to broaden the designation is a weakness in our profession.”

While only a small minority of members actually audit financial statements, the credential needed to join the AICPA is the CPA certificate. It’s “an audit qualification,” Elliott says, “based on a curriculum and an exam that both stress auditing and, in most states, on auditing experience.” The CPA license, he says, “is a license to do audits (expanded in some states to include reviews and compilations).” Fewer people will be willing to follow the audit track if their end objective is to go into tax or management consulting, industry, government or education, and, Elliott says, we must “think carefully about either the breadth of the CPA license or who will qualify as Institute members. We have to change one, or we are destined to become the Institute of People Licensed to Do Audits.” Elliott says the AICPA must address these issues.


Elliott says CPAs in business and industry must adapt to the changing environment, just like CPAs in public practice. “Companies can’t run at peak efficiency in a competitive marketplace using only periodic standardized reports. The ’game’ is moving away from such reports to online access to information by anybody who needs it.” The result, he says, is that managers and other employees get information at the level of detail and in the format they require. “The role of a CPA working in business and industry is to anticipate the information needs of internal customers and make sure that information is online, waiting. It’s exactly the same shift members in public practice have to make, away from standardized, one-size fits-all products to anticipating—and meeting—the information needs of customers.”

More broadly, Elliott says members in business and industry should try to reposition themselves as practitioners of the “new finance.” The AICPA business and industry executive committee uses this term to describe the global changes that have taken place in financial management in the last decade. Elliott points out that new finance “encompasses hard-core management accounting topics such as cost management, discount rates and capacity management; manufacturing issues including just-in-time production, distribution channel management and competitive intelligence; and softer topics like benchmarking, performance measurement and managing change.” He says the new finance is “less about accounting and more about becoming strategic advisers and decision makers in our companies. Members in practice could benefit from developing similar competencies.”

Elliott also points to the AICPA Center for Excellence in Financial Management, which he calls a “focal point for helping members in business and industry and government reinvent themselves within their organization, move up the value chain and provide a broader range of services.”


As a former chair of the special committee on assurance services, Elliott is pleased the profession is “beginning to realize these services can create big new revenue streams.” He is also encouraged that the international accounting profession is moving in the same direction, citing a global assurance services network with 11 countries participating and more planning to join. “Our committee did this in conjunction with the Canadian Institute of CAs, so it’s been international from the start.”

As more countries join, Elliott says, this is testimony to the richness of the ideas. “Some of the services are taking off rapidly. Comprehensive risk measurement is generating hundreds of millions of dollars of revenue for the big firms. WebTrust SM , which meets some important needs in the e-commerce marketplace, is beginning to catch on. The government has said clearly that the private sector must come up with ways of assuring reliability and integrity in e-commerce or it will step in. WebTrust is the best solution.”

Other services are also gaining revenues, according to Elliott. “As we move forward, the products and services we offer as a profession will change more rapidly than in the past. We did financial statement audits for more than a century. While the details changed, the basic service did not. Now we’re seeing that new services must be developed and rolled out continually, not just in assurance, but in tax and consulting as well. We have many members who don’t have the resources to develop such services from scratch. Assurance services are a model for how we’re going to have to work in the future.”


The AICPA, in Elliott’s view, “absolutely” should be in the standard-setting business. “Our self-regulatory function has much to do with the quality of our performance and the prestige we enjoy as a profession.” Even though members are sometimes concerned that the AICPA formulates rules that “hem them in,” Elliott believes that nearly all members realize there’s a huge payoff in the end from creating a consistent public image of high quality service.

As CPAs move into new practice areas, Elliot counsels, “we have to be careful we don’t set standards prematurely.” One of the assurance services strategies is to stay away from standards and instead use best practices. The goal, Elliott says, is to avoid premature standardization and instead let rules be “hammered out on the anvil of the marketplace.” Elliott recalls that auditing standards began to be articulated only in 1939. “We did audits for decades without formal standards. The AICPA’s standard-setting role is very important, but at the same time we don’t want to ’overstandardize.’ ”


Elliott says the accounting profession does not have the necessary racial diversity. “At the entry level, we’re not getting enough African-Americans, Hispanic-Americans or Native Americans. That concerns me.” Elliott says black kids see black teachers, doctors and clergy but not CPAs. Then they go to college, and they don’t see any black faculty members in business and accounting. “So why should they think of accounting as a career?”

He cites statistics that show while 4% of doctors are African-American, fewer than 1% of CPAs are. He points out that “becoming a doctor is a much bigger investment in time and energy than becoming a CPA. We need to work on that, and the place we need to start is by attracting more young people.” Elliott is involved with the KPMG Foundation’s PhD Project, which “encourages minority accountants to get their PhDs and teach so we can break the cycle.” He says the program has already substantially increased the number of African-American faculty members, not only in accounting but in other areas of business as well. “I encourage every member who sees promising young minority students to reach out to them.”


Elliott acknowledges that a year as AICPA chairman is “nothing” in terms of being able to make significant changes. “I don’t have a lot of things I want to do differently.” Instead he plans to concentrate on the programs he has been working on for years. Looking at his predecessors, Elliott says, “We’ve been very fortunate to have consistency of vision. We don’t have a situation where each year we get a new chair and the organization bolts off in a new direction. I hope we’ll maintain that consistency during my tenure.” Elliott says one of the advantages the AICPA has over most other professional organizations is its capable and dedicated staff. “Barry Melancon and I agree our staff is a world-class resource that will ensure we continue to provide members the kind of value we have in the past.”

There are several bills on information technology, encryption and security in Congress that, Elliott says, will be of interest to the profession in the year ahead. “In the tax area, we want to work closely with Congress and the IRS to make sure that whatever comes out is the best it can be for both taxpayers and members.” Because of success in recent years, Elliott does not expect any major thrusts in tort reform this year.


Elliott is pleased the AICPA has “taken ownership” of XFRML, the project that will lead to the development of an XML-based financial reporting language. “We staked out the territory, and we’re going to set the standard. We’ve energized some of our brightest and most creative members. The team that’s working on this project is doing a fabulous job—both the staff and volunteers. I have, however, encouraged them to come up with a more user-friendly name.”

Elliott says XFRML represents a way to vastly increase the utility of financial information. “The first half of the information revolution was about pumping out more and more information. The second half will be about acquiring, refining and using information. XFRML is an important part of that effort. It allows users to search out the information they need and find it in an interpretable, consistent and analyzable format.”

Today, Elliott points out, most companies put their financial statements on their Web site as a PDF file, or the equivalent, where “you can read it, but you can’t analyze it.” If you’re an analyst and want this information, you wind up keying it into your own spreadsheet. “The new language will reduce the information float in the marketplace. It has huge potential to improve the way the financial markets work. Ultimately, I hope it will facilitate online, real-time access to information by a wide variety of users.”

Since the project was announced in August, Elliott says the AICPA has heard from a number of parties, including Congress, who are interested in how they can be involved. He believes the financial community will also support the project “because it’s to their benefit.” The alternative, he says, is multiple competing standards, which “is not the way to go. We have the credibility, talent and resources to do this right. It’s going to be a big advantage to the business community and a prestige item for the AICPA.”


Elliott sees the Internet as another important tool in an accountant’s IT tool kit. “Four years ago, most of us weren’t on the Web. When I put the report of the special committee on assurance services online, it was still a strange thing.” Even now, he says, we don’t know all the ramifications. “The Internet has enormous implications for the way business is done. It’s forcing business to redesign products, services, distribution channels and markets.” Where do CPAs fit in? Elliott points to the Vision slogan, “Making sense of a changing and complex world.” If CPAs can position themselves to be the people who make sense of that world, the opportunities are limitless.

While the Internet will be central to every organization, Elliott says, “it’s especially essential to ours because it’s an information utility and we’re the information people.” The implications go beyond disseminating information to members. “It’s about creating a community of members so information goes from us to them, from them to us and from member to member.” Elliott says everyone can benefit. “We need to position ourselves as the portal of choice and become the Yahoo of the accounting profession.” He believes the percentage of AICPA members not online is decreasing. “A hundred years ago you might have asked, ’What about those members who don’t have a telephone?’” Elliott encourages CPAs to get online because “they’re not going to have much credibility with their clients if they’re not plugged into this resource.”


Some professionals will have enormous opportunities in the next century: Elliott hopes they’re CPAs. The key, he says, is the development, refinement and use of information. An avid sailor, Elliott uses the analogy of a sailboat. “Almost anybody can make a sailboat go forward. But when the boat finally gets ’in the groove,’ it suddenly takes off and shoots ahead.” What will permit a postindustrial company to find its groove and outrun its competitors? The answer, Elliott says, is a company that best takes advantage of knowledge. “CPAs must reposition themselves as the professionals who enable people and organizations to achieve their objectives through the strategic use of knowledge and knowledge management. If we don’t, somebody else will.”

CPAs have several assets they can use to win this game. “Customers—our clients and employers—are giving us the right of first refusal for this new space. They trust us and are willing to buy these services from us. But they’re not going to wait forever. To take advantage of these opportunities, we have to transform ourselves.” If CPAs make the right moves as individuals and as a profession, Elliott says they will be at the center of the action in the next century. “As chairman, my objective is to do everything I can—through the AICPA—to position our members to realize those opportunities.”

Peter D. Fleming is a senior editor with the Journal of Accountancy. Mr. Fleming is an employee of the American Institute of CPAs. His views, as expressed in this article, do not necessarily reflect the views of the AICPA. Official positions are determined through certain specific committee procedures, due process and deliberation.


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