Management accounting

  After rising significantly at the end of 2011 and the beginning of 2012, CPA business leaders’ optimism about the U.S. economy has faded substantially in recent months, according to the latest AICPA Business and Industry Economic Outlook Survey. With an uncertain political environment in the run-up to the Nov. 6 election, CPA executives participating in the survey have soured on the economy. The percentage of respondents who reported optimism about the U.S. economy dropped 12 percentage points from the previous quarter to 22% in the third-quarter survey.

That is far higher than the 9% who identified themselves as optimistic a year ago, when 61% said a double-dip recession was somewhat or very likely. But it is also down significantly from the first quarter this year, when 43% of respondents were optimistic about the economy.

“People are very cautious about what’s going to happen in the next 12 months,” said Jim Morrison, CFO of Pawtucket, R.I.-based materials science company Teknor Apex and chairman of the AICPA’s Business & Industry Executive Committee.

Declines in optimism from the second quarter of 2012 were observed in virtually every measure. The CPA Outlook Index, a broad indicator that is the composite of nine individual economic measures, dipped to 63, down from 67 in the previous quarter and 69 in the first quarter of 2012. Each of the individual indicators in the index, including expansion plans and forecasts for revenue, profits, and additional employment, also dropped.

Concerns were reflected in most every indicator measured in the survey:

- Those indicating that they have too few employees and are planning to hire fell three percentage points from the previous quarter to 9%. The average percentage by which respondents expect their number of employees to increase in the next 12 months was 0.8%, the lowest number since the fourth quarter of 2010.

- The average expected changes for the next 12 months in revenue (up 2.6%) and profits (up 2.2%) dropped to their lowest marks since the third quarter of 2011.

To read more about the survey, visit

  In an environment where risks are growing—and growing in complexity—few companies are fully considering risk in their business strategies.

The percentage of companies adopting enterprisewide risk oversight has almost tripled in three years but remains small; implementation has yet to take place in more than three out of four organizations, a recent survey done for the AICPA shows.

Fewer companies still have integrated enterprise risk management (ERM) into their overall business strategy. Just 15% of CFOs and senior executives surveyed believe “mostly” or “extensively” that their organization’s risk management process is a proprietary strategic tool that provides a unique competitive advantage.

Almost half (49%) of the organizations in the survey fail to meaningfully consider existing risk exposures when evaluating new strategic initiatives. And just 35% have “mostly” or “extensively” articulated the organization’s appetite or tolerance for risks in their strategic planning. The survey of 618 U.S. executives was conducted for the AICPA’s Business, Industry and Government team by North Carolina State University’s ERM Initiative. The full survey is available at

Mark Beasley, CPA, Ph.D., a professor of enterprise risk management who directs the ERM Initiative at the university, said that, at many organizations, the paths of risk management and strategy seldom cross.

“What they’ve forgotten is the fundamental relationship of risk and return,” he said. “They’re hand in glove.”

Beasley recommends that businesses implementing an ERM process start from a strategic perspective. He said a senior executive team should begin risk management by listing the “crown jewels” of their organization—the products or services that generate the most revenue. Then they must determine the biggest risks to those crown jewels, and adjust their strategy accordingly.


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