LOWELL S. PETHLEY, CPA, is a retired partner of Deloitte & Touche and a certified management consultant. His e-mail address is firstname.lastname@example.org . RICHARD I. FREMGEN, CPA, is a retired partner of Deloitte & Touche. He is a professional specialist in the Department of Accountancy at the University of Notre Dame, Notre Dame, Indiana. His e-mail address is Richard.I.Fremgen.email@example.com .
Over the years, we, as CPAs in public practice and as auditors and as consultants to client management, have had the opportunity to provide accounting, auditing and consulting services to many clients. Our clients' needs have compelled us to expand our service horizons. Here is what we have learned.
he accounting profession—CPAs in public practice, working in business and industry and those in education and government—is facing profound changes. The marketplace, clients and professional expectations are suddenly different. Clients expect many more services as they constantly reassess their processes and products in order to deal with worldwide competition. Clients also expect their CPAs to warn them in advance of the effect accounting changes will have on financial reporting and to advise them about systems changes needed to meet new marketplace demands. At the same time, the profession is grappling with what services are appropriate to offer. The profession is expending a great deal of effort—with the Vision Project and the proposed new assurance services, for example—to reposition itself to face these often confusing marketplace demands.
There is a need for establishing professional requirements and qualifications for information consultancy to meet the needs of clients in defining, developing and using information in a high-tech global environment. Although many people today can assist clients with these needs, some lack recognized, well-established professional qualifications. Accounting is a long and well-established information-oriented profession, well-suited to fill the role of information consultancy under the aegis of the designation "Certified Information Consultancy."
In the past, the profession's literature and services emphasized financial information and the accounting systems from which it is derived. As computers bring us more information faster, it has become clear that an "accounting system" is in some ways an abstraction and that almost all of an organization's information eventually has financial significance. Today, financial information is inextricably woven together with other information needed to operate, manage and assess an organization's activities.
This new, integrated information universe makes it possible for management, auditors and consultants to better understand an organization's activities and how they affect its well-being. The profession has met clients' demands by, for example, expanding its information-oriented services, improving the analytical processes in audits and using technology tools to improve other services.
As the information revolution continues to gain speed and the accounting profession's involvement in it becomes more challenging, the direction the profession needs to take is clear: understanding information.
A NEW DEFINITION REQUIRED
We believe that "accounting" or "accountancy" no longer adequately describes a profession moving to higher levels of information management. We propose that the profession redefine itself as being "concerned with the definition, acquisition, analysis, reporting and use of information (financial and nonfinancial, internal and external) required to effectively operate, manage and assess an organization and its various activities." This definition is based on the broad concept of information and it better characterizes the profession's present activities and provides the breadth required for its future growth. We purposely draw our definition broadly, along the lines of medicine and law, to provide adequate opportunity for specialization (audit, tax, computer systems, industry, management reporting). We also suggest that the profession rename itself "information consultancy" in lieu of "accounting" or "accountancy." This best describes the profession as we know it now and its capacity for the future. The new definition would leave room for expansion of services and interpretation of scope as the profession evolves.
The body of knowledge that would qualify a person as an "information consultant" should include management techniques, computers, computerized information systems and the various functions needed by an organization to carry out its mission (including accounting). To understand that information an individual would have to understand the underlying business activities.
Our definition would describe the profession's many roles in managing the whole of an organization's information rather than some abstracted part of it. It would recognize the realities of practice today.
HOW A NEW DEFINITION WOULD HELP
Renaming the accounting profession would help it in several areas where it faces challenges.
Reducing audit failures. Many recent court cases have highlighted audit failures. We suggest audit failures are not really failures of the audit process but failures of individual auditors to properly analyze and interpret the information they review and the financial statements they help prepare. As a result, auditors may fail to detect and report adverse changes in an organization until such changes result in losses.
Broadening the educational requirements and competencies of CPAs involved in the audit process will expand their understanding of all forms of information, make them more effective and reduce the risk they will miss significant implications. The information consultant performing the audit will have extensive knowledge of the kind of information required to operate, manage and assess specific functions based on training and experience related to each activity in a business.
To illustrate, let's assume that an audit client has been losing market share—which could lead to an adverse going-concern opinion. The information consultant performing the audit would review the information management uses to assess the market then discuss management's plans to reverse the decline. The information consultant would review the client's understanding of the problem (how the market is defined, who the competitors are, and how market penetration is measured). If the information consultant found the information the client used to assess its market position inadequate, he or she would recommend revisions and reassess the resulting information. The consultant/auditor would not be required to assess the strategy the client intends to use to deal with the problem, only to assess the reasonableness of the information system the client used and how much the client appeared to understand the implications of the information as a basis for sizing up the market position and improving the situation. In order for the information consultant to provide the services referred to in the example, the consultant must understand the marketing function and the kind of information it requires.
The marketplace. Organizations with global operations and competition and those that make significant use of computers place a premium on the value of information used to operate, manage and measure performance. Clients need consulting help in mastering such information requirements.
To extend the market share example referred to above, let's assume the client has made a substantial financial commitment to establish itself in a foreign country and the consultant's role is to assist management rather than to conduct an audit. The consultant can help the client in many ways: develop the information that it will need to monitor and manage its market progress; make adjustments to inventory levels, model mix, promotion programs and personnel; define its new competitors and develop information to monitor the actions of this new competition; identify cultural or legal peculiarities, and determine whether the information system helps deal with them; develop the information system required to use customer and competitor information that can alter products to meet market demands.
The contentiousness between auditors/accountants and consultants . The current relationship between many auditors/accountants and consultants is a destructive force within accounting firms. Though consulting's tremendous growth has exacerbated the problem, the differing educational backgrounds and experience of staff in each area also have led to contention. Consulting engagements use the competencies of personnel drawn from many different disciplines. Auditors/accountants, on the other hand, tend to be drawn from the same academic streams. Redefining and educating the accounting profession as information consultants would permit firms to draw a major portion of the consulting staff from the same academic stream as the auditors/accountants. Broader education would qualify students for employment in a wider range of activities. A common professional base for both staffs would promote a mutual purpose and respect, as would the use of the term "information consultancy." In addition, acknowledging that activities of both groups have their roots in a common body of knowledge applied by professionals that have reached high competency levels will likely ease the conflict that now exists.
A new definition, and a new identity as information consultants, should also lead to the development of a more positive self-image. Many clients—and many CPAs themselves—seem to think that only consultants provide consultative services. In our experience the actual consulting (providing advice and counsel) component of the auditor/accountant's services and the consultant's services is about equal, and both groups work with information and information systems.
The lack of a broad view of the profession. The emergence of assurance services as a new business avenue offers an example of the current, somewhat constricted view of the profession. This same constricted view provides unclear signals to academicians about the curriculum improvments needed.
The AICPA's Special Committee on Assurance Services presented a proposal for the profession's adoption of certain assurance services. The committee's conclusions are driven in part by the recognition that they represent an opportunity for the profession to increase its services in an area where client need is evident and in part by the recognition that the skills required are an extension of the profession's acquired knowledge. In the article "Are You Ready for New Assurance Services?" ( JofA , June97, page 47) Robert K. Elliott and Don M. Pallais state that "new competencies must be developed" and CPAs "must stretch their perspective beyond financial statements." They go on to observe that "practitioners will require a new mind-set, communication skills, business knowledge and the capacity to make inferences from relationships between business circumstances and economic and industrial trends."Adopting information consultancy as the new direction for the profession dovetails with these requirements.
Even with the expansive view of competency Elliott and Pallais called for, however, the perception of the profession as primarily an "attestor" remains. The special committee defines assurance services as "independent professional services that improve the quality of information, or its context, for decision makers." Elliott and Pallais comment that, "This broad concept includes audit and attestation services and is distinct from consulting (although similarities exist) because it focuses primarily on improving information rather than on providing advice or installing systems" (italics added for emphasis).
In our opinion, to view audit and attestation as distinct from consulting is too narrow. Though the services may have differing products, the kinds of skills Elliott and Pallais outlined, along with information competency, are required for both audit and attestation services and what we today call consulting services. Accounting and auditing, as they have been practiced for many years, have been, in part, attestation but have also, if done effectively, been consultative processes, including advice to management. Our clients often did not make a distinction between consulting and attestation. Providing information-related advice (consulting) is not substantially different from improving information, which is the objective of the new assurance services.
The new 150-hour education requirement has spurred universities to redefine their educational programs for CPAs. Educators are struggling to figure out just what the profession wants and needs. On one hand they want to produce graduates with a broad understanding of business, and on the other they must produce graduates who can pass the CPA examination—which requires knowledge of accounting, taxation, financial reporting and business law.
Information consultancy as the professional goal would provide a base on which educational institutions could develop a strong, coherent set of academic programs.
TIME TO CHANGE
It is often said that timing is everything. Now is the time for the accounting profession to deal with the challenges it faces and to take a step into the future. We have arrived at a point where we must articulate a sharply defined view of our enhanced services and of the body of knowledge that qualifies us to offer those services—for the sake of the public, future professionals and their educators.