Spotlight Remains on CPE: Another Approach
For the last eight years, I have been developing and presenting seminars to help CPAs meet their state CPE requirements. The December 1998 article by Nita J. Clyde, "CPE Is Broke; Let's Fix It," ( JofA , page 77) was excellently done.
In the JofA letters column (Mar.99, page 84), a writer recommends that an exam be used to measure a CPA's competency. Testing is not the answer. As an approach it will accomplish only one thingCPAs will learn how to pass tests rather than how to better serve their customers, clients or employers.
As brought out in Clyde's article, an outcomes-based system is preferred over the current input-based system. The examples given in the article under "What About Cheaters?" are so true. It can be frustrating to a seminar presenter to realize that people are there just to get the credits.
In my search for an instructional format that meets current state licensing board requirements while offering a real learning experience, I have developed an approach that participants have found beneficial because it is outcomes-based.
The program is called the Financial Roundtable and involves eight or more CPAs from companies in a similar industry. The roundtable has a broad topic such as financial reporting and decision making. (My own experiences have been mostly in the private/industrial accounting field, so I focus on that market.) Each participant is required to discuss one of the most significant achievements in his or her company on the selected subject matter. Then, one or two others put on the table a challenge or issue they are struggling with on the job. These become the case studies. Ultimately, an action plan is developed for those individuals to take back to their jobs or clients.
Since the participants come from similar industries, everything discussed becomes pertinent. The roundtable approach makes every CPA both teacher and learner.
By being exposed to what others in similar positions are doing, the CPAs can better understand what should go into their individual competency assessment.
The roundtable approach may not be the final answer, but it gets us closer to what we are trying to achieve with CPE requirements.
Robert Gianninoto, CPA
Trenton, New Jersey
Many Specialty Areas for CPAs
I just read the letter, "A Replacement for CPE" ( JofA , Mar.99, page 84), and was a little surprised.
In the past, an accountant's role was more limited, and an understanding of all facets of accounting was probably obtainable. However, in today's world, it's hard to believe that someone, especially an individual involved with the accounting profession, could think that any accountant could study all changes as they occur and still have time to practice a pr ofession. Just as the world of medicine has grown so that there are many specialty areas, so has accounting.
The accounting industry needs to allow the public to acknowledge that not all accountants, CPAs or otherwise, are versed in all realms of accountingthey're not all interested in the same issues.
A CPA friend, with a master's in taxation, will not do personal income taxes; instead, he concentrates on corporate, sales and property taxes. I also have friends who are specialists in leases. I'm sure the letter writer has friends who would have great difficulty forcing themselves to study other accounting areas that have little or no impact on their individual practices.
Let's get real and rethink the process. The CPA exam could be the foot in the door. Other tests later would allow additional letters to be added to the CPA designation, such as TS for tax specialist or IMS for international management specialist.
The public needs to be reeducated to ask what a CPA specializes in instead of relying on those three letters.
Less Detail and Better Quality in Financial Reporting
Dennis Beresford's essay on the problem of creeping GAAP complexity ("It's Time to Simplify Accounting Standards," JofA , Mar.99, page 65) was both fascinating and thought-provoking. His background as a senior partner in a Big Five firm and 10 years as chairman of FASB give him a unique perspective regarding possible solutions to financial reporting problems.
Beresford's challenge to FASB to "just say no" to more detail comes at an especially significant point in standard-setting history. The International Accounting Standards Committee (IASC) recently completed its core standards project. If the standards are accepted by the International Organization of Securities Commissions, of which the SEC is a member, there will be a movement throughout the world to use IASC standards in cross-border capital market listings. For example, assuming the SEC goes along with this approach, international companies could list their shares on the New York Stock Exchange using IASC standards. No conversion or reconciliation to U.S. GAAP would be required.
How good are the IASC standards? We need to ask this question, not only because U.S. investors may have to rely on them, but also because U.S. companies, whose shares are listed on overseas markets, may wish to use them. Until quite recently, the IASC standards were criticized because they allowed an excessive number of alternative treatments. But, IASC's "improvements project" has identified specific benchmark treatments, and most alternatives have been eliminated. Today, the most commonly heard criticism of the IASC standards is that they lack adequate specificity when compared, for example, to U.S. GAAP.
But how legitimate is that criticism? As Beresford calls to our attention, U.S. GAAP has probably erred on the side of being excessively detailed. First, SEC Chairman Arthur Levitt and, more recently, the Blue Ribbon Committee on Improving the Effectiveness of Audit Committees have issued challenges to the U.S. financial community to focus more on the quality, not just the technical acceptability, of a company's financial reporting.
Why do the IASC standards tend to be less detailed than U.S. GAAP? Agreement on general principles of accounting can almost always be reached. But, considering the number of countries involved, is it possible to address and answer every application question encountered around the world?
Of course not. Thus, financial statement preparers and auditors operating in our ever-growing global capital markets will be called on to accept IASC's general principles and to apply them in good faith to satisfy the requirements of financial statement readers.
Is U.S. financial reporting at a crossroads? I think so. Shall we continue down the road of producing more answers to more detailed questions? If the answer is yes, we may well become known as guardians of an old, nationalistic way of doing things.
Alternatively, shall we join the international movement toward, as Beresford suggests, "enough specifics to ensure parallel application without going overboard on detail?" If the answer is yes, U.S. accounting and auditing professionals will be leaders in the worldwide development of quality financial reporting.
John P. McAllister, CPA, PhD
Chair and Professor of Accounting
Michael J. Coles College of Business
Kennesaw State University
Right on Target
The opinion expressed in the article, "It's Time to Simplify Accounting Standards" ( JofA , Mar.99, page 65) is right on target.
The increasing complexity of business transactions in recent years has resulted in a profusion of equally complex accounting rules to accommodate them. It appears that our zealous standards setters choose to add to our mountain of rules rather than try to fit new situations under existing standards.
The problem is even more pronounced in the case of small, nonpublic entities. Most of these companies have a more limited reporting audience, with more limited needs than their largely publicly held counterparts. Nevertheless, they have to follow the same rules.
For years practitioners have advocated exempting the smaller entities from applying those standards that have little relevance to them. What they were looking for was freedom from esoteric rules that do nothing to enhance the quality of financial reporting of nonpublic companies and only result in unproductive time spent on accounting and audit engagements and provoke client irritability.
Accounting standards are overloaded. Let's take a step backwards, review what we have and lighten the loadfor the small as well as the large.
Charles Chazen, CPA
Favors New Rules for Expert Testimony
The new rules for expert testimony, reported in "Tougher Rules for Expert Witnesses" ( JofA , Feb.99, page 11), should help the profession.
A problem not addressed is the use of the word "expert." Many CPAs are called upon as experts. In one case I witnessed, a CPA was used by litigation counsel as an expert in an international tax-related case. The case had no merit, and the jury vote of 12 to 0 for acquittal in five minutes was testimony to the fact that the trial was a huge waste of time. For the companies involved, the financial cost was significant.
Litigation counsel can always find CPAs willing to comment on issues about which they have no defined expertise. Even though their testimony may eventually be discounted by a jury, many CPAs still lend themselves to the "expert for hire" tactic to generate fees. Litigation, therefore, often seems justified during a trial's early stages because an "expert" has testified on the matter.
While not technically unethical, unqualified professionals who sell themselves as expert witnesses do a great disservice not only to their clients but to their profession as well, all in the name of fees.
Brian Rowbotham, CPA
Age Factor in the Job MarketAnother Look
As a retained search consultant heading an executive search firm, a CPA and someone who's over 50, I agree with the survey results ("Age Still a Factor in Job Market," JofA , Mar.99, page 16) showing a longer job search for older job seekers. However, I have also seen a number of job candidates who use such figures to excuse their own poor skills. Age becomes less of a factor when candidates appear energetic, nondefensive, and computer-savvy.
The figures are also a warning for younger workers to grow capabilities along with their years. For example, a 55-year old CPA should have more to offer than one who is 20 years younger. If not, there might be a temptation to blame age discrimination.
I met a man many years ago who was in his seventies and seeking work. I asked him who he thought would hire him. His response was, "I have something to offer that few others haveI can be the CFO for a company that has a number two person not quite ready for the top slot. I can train and nurture that individual. And because of my age, I will be far more effective than a younger person since no one will be threatened by me." He got that position.
Somers, New York
Praise From a Kentuckian
In the March 1999 issue, I was excited to read about Olivia Kirtley, the first person from Kentucky, the first member from business and industry and the first woman to be the AICPA chair ("Update: Fall Council and Annual Meeting," JofA , page 78). She has worked very hard, and all CPAs from Kentucky are proud of her.
I just want to mention that in the state of Kentucky we have always spelled "Kentuckyian" as Kentuckian. I am not sure we're in accordance with proper grammar and spelling, but that's the way we spell it in Kentucky.
Congratulations to the AICPA for choosing such an impressive chair.
John A. Hamilton, CPA
Additional Technology Tips
"What You Really Need "( JofA , Apr.99, page 65) was a very good article for CPA firms that do not have an in-house professional. However, as an IS specialist with a CPA firm, I would like to add a few points:
- If someone is interested in an office product that is compatible with MS Office and will run on many different platforms, including OS/2, Linux, Windows, Java and more, he or she should look into Star Division's Star Office 5.0 ( www.stardivision.com ). It brings a common interface to the word processor, spreadsheet, database, address book, e-mail and calendar functions. Star Division offers a free personal edition for home use, and the business edition is a cost-effective solution.
- Corel is working hard to bring the WordPerfect Suite to the Linux platform and Linux, as well, to the desktop. Right now, Linux has a lot of momentum and appears to be the only true competitor to the Microsoft juggernaut for the next few years. Although Linux is not for the faint of heart today, many large companies are working to change that in the near future.
Robert D. Britton
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