"A" Is for "Assurance"
In August 1995, I heard Robert K. Elliott speak about the future of the profession and the importance of assurance services when he was a keynote speaker at the American Accounting Association annual convention in Orlando. He mentioned a problem that was not addressed in the article he wrote with Don M. Pallais, "Are You Ready for New Assurance Services?" (JofA, June97). Simply put, the problem is that the publics perception of what a CPA currently does will limit the CPAs ability to move into totally new practice areas outside of accounting, auditing, tax and consulting.
I spoke with Elliott after his speech and suggested that one solution might be as easy as redefining "CPA" to mean "certified public assurer. " CPAs have long provided reasonable assurance on companies financial statements, so why not provide the same level of assurance on a mutual funds performance, a colleges graduation rate, the adequacy of health/elder care or the claims of the hottest Web site? This new designation also would mesh with the American Institute of CPAs recent publicity campaign, which pushed the term "CPA" without actually saying what it meant.
Certainly, such a change would require a great deal of legal work in the 54 jurisdictions that license CPAs and might take a decade or more to accomplish. In the meantime, I strongly recommend that the Institute take steps to register "certified public assurer" as a trademark now, before some other group grabs the term. Just consider what some companies have had to go through to buy back their own names or abbreviations, just to be able to use them as their Internet addresses.
Kevin Feeney, CPA
New Canaan, Connecticut
Letters to the Editor
The Journal encourages readers to write letters on important professional issues in addition to comments on published articles. Because space is limited, letters submitted for publication should be no longer than 500 words. Please include telephone and fax numbers.
Tax Break for Flood Victims
I enjoyed the article "After the Flood" (JofA, May97). I agree that CPAs clients seek them out more and more in order to understand their larger financial picture and related issues.
I would like to note the potential tax benefit one may receive under Internal Revenue Code section 165(i). Generally speaking, this section allows a taxpayer to consider a deduction for a loss attributable to a presidential-declared disaster in the year preceding the year in which the loss occurred. A taxpayer who qualifies for this election receives the benefit of the loss deduction sooner should the loss not be covered, in whole or part, under the insurance contract.
Keep up the great work.
Samuel T Broomer, CPA, MST
West Springfield, Massachusetts
Charge Cards Cause Problems
Thank you for printing "Charge It!" (JofA, July 97). I am an experienced invoice auditor who witnesses hidden costs and control breakdowns in the purchasing/accounts payable arena. It is very true that most organizations have difficulty controlling small transactions such as maintenance, repair and operating (MRO); supplies; and the odds and ends of running a business. However, I find it astounding that it can cost $150 to process such a transaction as stated in the article; my observation is that $10 is more accurate.
I do find that a big problem is the requirement at many companies to use a purchase order (PO) designed for large-scale orders of materials or equipment. This is usually driven by the software written as part of inventory systems. The way to streamline the ordering process is not to give up on it but to create ways to make ordering easier through a simplified PO. Simplifying can mean combining requisitions and POs, using blanket orders and changing payment terms to reduce check frequency. Some office supply companies have simplified customer billings this way.
What one wants to do is retain important controls such as purchasing oversight and independent observation of receipts of goods or services. Corporate purchase cards eliminate these basic controls. Many items such as paper, power tools and fax machines can be purchased from a variety of overlapping suppliers at a variety of prices. And do you want to find out that the wheelbarrow you paid for never entered the property?
The use of purchase cards has other hidden costs such as making it very easy for employees to buy high-profit "point of sale" items that are always on display or to engage in unplanned buying. I have even seen a company buying truckloads of pallets on the American Express card. And keep in mind that your suppliers are paying about 3% to the card company to get their money sooner. Wouldnt it be more cost-effective to pay the vendors once a month (saving transaction costs) and getting a 2% discount?
The basic control being suggested in the article is the "cap" on total purchases each month. How much imagination is required to see that if your total is reached, you will either raise your limit or try to use someone elses card temporarily?
It seems to me that most companies take plenty of control risks as it is and should reject purchase card schemes such as this.
Michael Korschun, CPA
Cost Recovery Services
Lawyers Can Help With State Boards
"Letter From the State Board: What Should You Do Next?" (JofA, May97) contained valuable advice. I would like to emphasize that the first step a practitioner should take when receiving notice of a complaint is to consult with legal counsel.
State boards of accountancy are not infallible, and practitioners generally are not familiar with the legal nuances that might be applicable in a given situation. Only a lawyer upon review of the legitimacy of a particular complaint can best advise a cooperative attitude or a not-so-friendly response to an inquiry from a state board of accountancy.
Frank M. Zaveral, CPA
Journal Makes Counting Error
According to the texts Ive read, the new millennium begins on the first of January 2001, not 2000. Therefore, there are fewer than 1,300 days until the new millennium, not fewer than 1,000 ("Uniformity at Last," JofA, July97). Just because its popular to say it begins in the year 2000 doesnt make it correct.
This may seem like nitpicking from a retired CPA, but my objective is to improve the breed.
G. A. Tobey, CPA
Editors reply: The Journal apologizes for the error and thanks G. A. Tobey for pointing it out. (Those concerned about the so-called Year 2000 computer problem, however, should note this problem begins January 1, 2000, no matter what you call it.)
Readers Pet Peeve
Heres an item to add to your excellent article "Writing in Plain English" (JofA, July97): Spare us letters beginning "Please find" (scavenger hunts excepted).
Arthur R. Abrahamson, CPA