A&A Focus recap: AICPA CEO, revenue recognition step 5, and quality management

The AICPA A&A Focus webcast on May 7 featured timely updates and strategic insights on key accounting and auditing topics. Hosted by Bob Durak, CPA, CMGA, director of A&A Technical Services at the AICPA, and Andrew Merryman, CPA, senior manager–A&A Technical Services, the program welcomed three expert guests: AICPA President and CEO Mark Koziel; frequent guest Angela Newell; and Renee Rampulla, who joined the panel for the first time. The webcast provided a lively discussion of Koziel’s leadership vision, a look at the final step of the revenue recognition process, and the practical realities of implementing the new quality management standards.

AICPA & CIMA update

Reflecting on a career that began in audit and evolved through firm leadership and global association management, Koziel reaffirmed that audit remains the foundation of trust that underpins all other services the AICPA’s members offer. “Trust equals audit,” he emphasized, noting that despite years of predictions about the demise of audit due to technological disruption — from the advent of the personal computer and spreadsheet software to blockchain and now AI — each wave has ultimately enhanced, not diminished, the profession’s value.

Koziel highlighted how expectations have shifted for new entrants to the profession, who are now asked to perform complex analyses, apply data analytics, and leverage AI tools from the start. In contrast, previous generations were measured by procedural tasks like sending confirmations. These higher demands underscore the need to upskill the profession at large, not only in public practice but also across business and industry roles.

Drawing from more than 1,200 responses to his recent member outreach (provide your questions or thoughts via email at AskMark@aicpa-cima.com), Koziel outlined six of the top challenges being raised in the responses: support for small firms, improving audit solutions for local governments, expanding client advisory services (CAS), maintaining the talent pipeline, enhancing CPA branding, and fostering member communities. On small firm support, he revisited tools like FRF for SMEs and encouraged more flexibility in how financial reporting obligations are approached. Koziel also pointed to community-building and scalable technology as strategic imperatives, especially around implementing the quality management standards. He concluded with a strong case for deeper connectivity among practitioners — digitally and in person — as the best path forward for a resilient, thriving profession.

Revenue recognition — Step 5: Recognize revenue when or as the performance obligation is satisfied

Newell deputy managing director at BDO and former chair of the AICPA Financial Reporting Executive Committee, returned to complete her multimonth discussion of FASB ASC Topic 606, Revenue From Contracts With Customers, by focusing on the final step in the revenue recognition model: Step 5, “Recognize Revenue When (or as) the Entity Satisfies a Performance Obligation.” While this may seem like the most straightforward part of the model, Newell explained that step 5 serves as a critical validation point. If the outcome doesn’t align with the economic substance of the transaction, firms should revisit earlier steps, particularly step 2 (discussed during the November 2024 A&A Focus webcast), where performance obligations are identified.

Newell noted that step 5 hinges on determining whether the transfer of control occurs over time or at a point in time. This determination is not elective, and firms will assess whether one of three criteria for over-time recognition applies.

Newell identified the three criteria. First, Newell highlighted the situation where the customer simultaneously receives and consumes the benefit of the service (e.g., payroll processing). Newell described a two-year payroll processing contract. If the customer switches providers after one year, the new provider does not reprocess past payroll — those services have already been consumed. This demonstrates that the customer receives and consumes the benefit as the service is performed, satisfying the first criterion.

The second criterion occurs when the customer obtains control of an asset as it is created (e.g., construction on client-owned land or government contracts governed by FAR regulations). Newell referenced traditional construction contracts where the customer owns the land. Because the asset (the building) is constructed on the customer’s property, the customer gains control as the work progresses, satisfying the second criterion.

Lastly, recognizing revenue where the asset being created has no alternative use to the entity, and the entity has an enforceable right to payment for work completed to date. Newell gave the example of an auto supplier producing parts tailored to a specific car brand, where the contract prohibits resale and requires the customer to pay for any work-in-process if the contract is terminated. Because the parts are customer-specific and the manufacturer has a right to payment, the third criterion is met.

For over-time recognition, firms must determine a “reasonable” measure of progress, such as cost-to-cost or time-based inputs. Newell cautioned that firms must apply GAAP-consistent inputs and not rely on incomplete or cash-basis figures when calculating revenue.

Newell further explained that if none of the three criteria for over-time revenue recognition are met, entities must recognize revenue at a point in time — the moment when control of the good or service transfers to the customer.

Newell concluded by urging firms to apply step 5 as a final reasonableness check. If the result defies business logic, it’s a signal that earlier steps should be revisited and refined.

Quality management: Hot topics during implementation

Making her debut on the A&A Focus webcast, Renee Rampulla, CPA, managing member of Rampulla Advisory Services and a member of the AICPA Auditing Standards Board (ASB), provided a practical and encouraging discussion on how firms can effectively implement the new AICPA quality management standards, which become effective Dec. 15, 2025. She made it clear that this deadline is not a starting point, it is the date by which firms must have their full system of quality management (QM) designed, implemented, and operating. Rampulla reiterated that there is no expectation that the ASB will delay the implementation deadline for the standards.

Rampulla addressed a common fear among practitioners: “Do I have to start from scratch?” Her response was a firm “no.” Firms should begin with their existing quality control (QC) documentation under the extant standards and evaluate how well it aligns with the new eight-component structure under QM. The goal is to identify gaps, not reinvent the wheel. For most firms, the bigger challenge will be documentation, not the concepts themselves, as firms have been informally assessing risks and managing quality for years.

Rampulla emphasized that good firms already manage risk on a daily basis, for example, by declining high-risk clients or avoiding unfamiliar industries. The QM standards formalize these practices into a documented system that includes quality objectives, identified risks, and responses. Rampulla stressed that firms will have at least one response for each identified risk and that this assessment of risks is revisited annually, regardless of a firm’s peer review or peer review cycle. Firms should also reassess if their circumstances change, such as by entering a new practice area or acquiring another firm.

Rampulla also highlighted the importance of scaling the application of the standard, noting that sole practitioners and large firms alike can implement QM in a way that reflects their specific level of complexity.

Rampulla also addressed the expanded resources component of the standard, noting the individual identification of human, technological, intellectual, and financial resources, and recognizing that these resources have always existed, but that the new standard requires firms to explicitly analyze and document how they support the achievement of quality objectives.

Lastly, Rampulla mentioned the AICPA’s nonauthoritative practice aids, particularly the “risk library,” but reminded viewers that these are resources, not checklists, and must be tailored to the firm’s own system.

Her closing message: “Don’t be intimidated — this is an opportunity to strengthen your firm.”

Resources:

• AICPA Quality Management hub.
• AICPA Practice Aid, Establishing and Maintaining a System of Quality Management for Sole Practitioners.
• AICPA Practice Aid, Establishing and Maintaining a System of Quality Management for Small- and Medium-Sized Firms.
• AICPA “At a Glance” documents and executive summaries of the QM standards.
• JofA article, “Resources to Implement the QM Standard.”
• AICPA webcast, “New Quality Management Standards Webinar Series.”

Looking ahead

The June 4 A&A Focus webcast will feature Halie Creps, CPA, the incoming chair of the ASB, discussing the ASB’s activities and the expected fraud exposure draft. Also joining are Lucia Wind, CPA, executive director of COSO, to present on COSO’s corporate governance framework, and Jeff Trent, CPA, of PwC, who will discuss developments related to stablecoin controls and the new AICPA control criteria.

AICPA members are encouraged to attend these monthly events and review the accompanying newsletters for more in-depth coverage of these critical topics. Members can access archives of past sessions at the A&A Focus Series webpage.

— Dave Arman, CPA, MBA, is senior manager–Audit Quality at the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.