2008 Professional Issues Update
106
Professional Issues Update Spring 2008 Edition Tom Hood, CPA.CITP CEO & Executive Director Maryland Association of CPAs
description
Professional Issues Update of trends and issues facing the CPA Profession
Transcript of 2008 Professional Issues Update
Professional Issues UpdateSpring 2008 Edition
Tom Hood, CPA.CITPCEO & Executive Director
Maryland Association of CPAs
Enduring• to have or gain continued or lasting
acknowledgment or recognition, as of worth, merit or greatness
Great Hall, Oxford UniversityBuilt 1386
So…How do we endure and prosper in the face of continuous market, economic, and environmental change?
Did you know?
The Big Three Trends
• Globalization
• Technology – Web 2.0
• Workforce Issues
Top 6 Issues facing business
1. Financing and credit crunch
2. Keeping up with Technology
3. Workforce and People Shortage
4. Rising Health Care Costs
5. Rising Energy Costs
6. Rising Taxes
Change is the only constant…
“As it relates to science and technology, the rate of change in the next decade, is likely
to be 4 to7 times faster than in the last decade. If it is 4x faster it would be like
planning for 2006 in 1890, if it is 7x faster it would be like planning for 2006 in 1670.”
-Expert on Education Panel, The Aspen Institute, 2007
So you can see farther…
Understanding these trends and issues will allow you to better position yourself and
your organization to succeed in the rapidly changing marketplace.
ProfessionalStandards,
Legislation & Regulation
ProfessionalStandards,
Legislation & Regulation
2008
ISSUE
IRS
OIG
Regulatory Structure of CPA Profession
Treasury Advisory Committee on the Auditing Profession
Treasury Treasury Advisory Advisory Committee Committee focuses on focuses on encouraging a encouraging a sustainable sustainable auditing auditing professionprofession
GAO Report on Audit Market Concentration• Audit market for large public companies
remains highly concentrated, while smaller public company market has become significantly less concentrated
• Market concentration doesn’t appear to have significant negative impact
• Large public company audit concentration is unlikely to be reduced in the near term
• No consensus for addressing market concentration
GAO Analysis of Audit Analytics Data
2002 2006 2002 2006 2002 2006 2002 2006--------------------------- ----------------- ------------------ ----------------- -----------------Total companies 3,617 3,643 1,329 1,272 522 561 1,241 1,544--------------------------- ----------------- ------------------ ----------------- ----------------- Company revenue <$100 million $100 - $500 $.5 - $1 billion >$1 billion-------------------------- ----------------- ___million__ ------------------ -----------------
HUD IPA Roster Proposal
• Would create an Independent Public Accountant (IPA) roster of auditors allowed to perform HUD audits – Firms register with HUD and agree to adhere
to eligibility requirements– HUD could remove auditors for various
reasons including failing to maintain compliance with eligibility requirements
– Once removed, a firm would no longer be allowed to perform HUD audits
• Comments due in early April
Federal & State Legislative
Issues
Federal & State Legislative
Issues
2008
ISSUE
Tax Strategy Patents
• Comprehensive patent reform bill, including ban on tax strategy patents, passed House– Led by Boucher (D-VA), Goodlatte (R-VA)
• Baucus (D-MT) and Grassley (R-IA) introduced companion legislation in Senate
• The IRS opposes tax strategy patents
Say what? MLTN legislation passed in Iraq funding bill!
More Likely Than Not
• Congressmen Crowley (D-NY) and Ramstad (R-MN) have legislation (H.R. 4318) to equalize the taxpayer and tax preparer standards at “substantial authority,” the current taxpayer standard
• A bill is expected to be introduced in the Senate shortly
• In Notice 2008-13, the IRS provided interim guidance
Multi State Income Tax Legislation
• Congressmen Hank Johnson (D-GA) and Chris Cannon (R-NV) introduced legislation to create uniform national standards for state income tax withholding for employees who work in a state other than their residence for more than 60 days per year
• AICPA submitted testimony at a hearing in the House Judiciary Committee
• AICPA engaged in legislative campaigns and may be reaching out to state societies
•The current licensing of P.A.s results in a second tier professional that is not functionally different than a CPA• The public would benefit from the licensing of a second tier of accounting professional who has proven ability through education, examination, ethics and experience, but is more limited in their scope of practice than a CPA.• The second tier of licensing would be more meaningful to the public and give them a true choice in the matter of choosing a professional.
Tax Preparer Licensing – version 2.0
Oklahoma – HB 1752
Tax Preparer Licensing – Risk to CPAs?
Unlicensed Accountants
Unlicensed accountants are using tax preparer legislation as step to second-tier accounting license.
AccreditedBusiness
Accountant
Alert to State CPA Society Executives:
CPAVS
WA
OR
CA
NV
ID
MT ND
SDWY
UTCO
AZ
NM
AK
HI
TX
OK
KS
NE
MN
IA
MO
AR
LA
MS AL GA
FL
WI
IL
MI
IN
KY
TNSC
NC
VAWV
OH
PA
NY
VTME
NH
MA
RI
NJ
DE
MD
CT
Do you file taxes in multi-states?
Mobility at the end of 2007
DC
Legislative ActionMobility Board Support
NH
Mobility First StepsTargets for 2008
Safe States: MO, OH, WI, VA, TX, LA, TN, IL, RI, MN, IN
WA2008
OR
CA
NV
ID2008
MT ND
SDWY
UT2008 CO
AZ
NM2008
AK
HI
TX
OK
KS
NE
MN
IA
MO
AR
LA2007
MS2008
AL GA
FL
WI
IL
MI
IN
KY2008
TNSC
NC
VAWV2008
OHPA
NY
VTME
NH
MA
RINJ
DE
MD
CT
States with Mobility Enacted or Legislation Introduced
43 States are moving toward uniform mobility for CPAs!
DC
State Board SupportLegislation PendingMobility Enacted
Mobility Enacted 24Legislation Pending 12
AICPA –NASBA March 27, 2008
2007
2007
2007
2007
2007
2007
1961
2002
1999
2006
Eleven (11) States have
passed this in 2008!
PR
PA Passed Senate on Mar 12th, 2008
MOBILITYScore Card for 2008
• 24 States with mobility in place• 12 States have 2008 Bills introduced• 36 States have legislation passed or
introduced• 7 State BOAs have voted to support
mobility• 43 States in place, introducing Bills, or
voting to support
FASB and FAF Changes
• Changes to the oversight, structure, and operations of the FAF, FASB, and GASB:– FASB board reduced from 7 to 5– Provides FASB chair more authority– Secures stable mandatory funding source for
GASB– Provides the GASB chair more authority to
set the agenda
• FAF appointments• AICPA comment letter
U.S. GAAP Codification
• Jan. 15—FASB released Codification for one-year verification period
• Codification – Organizes thousands of pronouncements into
roughly 90 topics– Doesn’t change GAAP– More user-friendly set of standards
• Use the Codification in your daily work and provide feedback to FASB
• Register at http://asc.fasb.org
Audit Quality Centers
975 Firm Members
1,528 Firm Members
AICPA Center for AuditQuality Audit Committee Survey
5% Fair
17%Good
53%Very Good
25%Excellent
Q9: Based on your experience as an audit committee member, how would you rate the overall quality of audits publicly traded companies being conducted today?
Peer Review Facilitated State Board Access Pilot
• Ohio, Oklahoma, North Carolina, Texas, Tennessee, and South Dakota piloted the program
• Assessment of feedback is underway• Implementation will be phased in over the
next 12 to 18 months
Preliminary Findings – Enrollment• Accounting enrollments up
Preliminary Findings – Graduates
• Graduates increased 20% from 2004 to 2007
53,760
64,221
40,420
47,662
13,340
16,559
Overall Undergrad Masters
2004
2007
InternationalFinancial Reporting Standards
InternationalFinancial Reporting Standards
ISSUE
2008
IFRS – International Financial Reporting Standards
Not if but when…Goodbye GAAP?
Think about this – If SEC timeline is 2013 – what year do you have to convert to show three years of comparable f/s?
Slide 35
IFRS: The Globalization of Financial Reporting
A simpler set of accounting principles
About IFRS
IFRS:• Standards
- IFRS: 8- IAS: 29
• Interpretations- IFRIC: 8- SIC: 11
• Framework
US GAAP:• Standards:
- SFAS: 106- APB: 16- ARB: 4
• Interpretations - FSP: 49- EITF: 108- FIN: 27
• Concepts Statements: 6• Other
- FTB: 32- AICPA Interpretations: 6- SOP: 51, - AICPA Industry Audit and
Accounting Guides, SABs, DIGs…
2,000 pages vs 25,000 pages
SEC Chairman Cox
IFRS - Top 10 considerations for transition preparation?
1. Investigate differences between IFRS and U.S. GAAP– Revenue recognition, taxes, hedge accounting– Establish project teams to address top issues– Review IASB agenda for critical projects
relevant to you
2. Be prepared with large expense– Larger EU co. spent .05 % of revenues Year 1– Upgrade IT systems and applications
Top 10 Considerations continued….
3. Expect more disclosures during transition– This may close the gap or more subjectivity
4. Identify contracts, grants, agreements, etc. with requirements to provide U.S. GAAP F/S
• Garner support from those charged with governance and stakeholders early in the process
6. Don’t train and educate too early (but do so)
Top 10 Considerations continued….
7. Outline governance and risk management processes that will be used during the transition
8. Make IFRS the basis for internal reporting, budgets, etc.
9. Be open and transparent about pros & cons of switch and
10.Ensure communications are clear and consistent
CPAs in Business,
Industry, Gov’t & NFP
CPAs in Business,
Industry, Gov’t & NFP
2008
ISSUE
What’s keeping you up at night?
Maryland CFOs Top Issues
What stuck out for you?
After the gathering and categorizing of major issues, we asked the group for their reactions. One insight was that “systems” as an issue has dropped off the list. The other “ahha” was the issues are very much the same for all levels and types of organizations.
Emerging Issues from AICPA
Tom Foard discussed some of the leading issues he has seen from AICPA Business & industry Executive Committee and CFO magazine. The group noted that these are the same globally as well…
Source: 2007 Private Company Index Report by Entrex
Private Company Trends per CEOs
LeanOperations
Workforce
Source: 2007 Private Company Index Report by Entrex
Private Company Trends per CEOs
Workforce
Emerging Trends / Issues
• Enterprise Risk Management• LEAN Accounting• Supply Chain Management• GREEN / Sustainability• XBRL• Enhanced Business Reporting / SEC
Simplification
Value creation & CFO
CFO Competencies Needed
• Change Management (C)
• Strategic Ability (S)• Critical Thinking (S)• Business
Perspective (C)• Organizational
Agility (C)• Dealing with
Ambiguity (S)
• Communication & Leadership
• Strategic & Critical Thinking
• Focus on the Customer, Client, and Market
• Interpretation of Converging Information
• Technologically adept
C – CatalystS - Strategist
CPAs inPracticeCPAs inPractice
2008
ISSUE
52
PCPS MAP Survey
53
• Human Capital, Technical Training (standards) and Succession related issues top the lists
• Retention moves up by firm size• Firms with 5 CPAs and under are less
focused on Succession, yet the most vulnerable
• Firms 21+ are all Human Capital Issues
PCPS Top MAP Issues Bottom Line
54
Top 10 Reasons to Join a Firm
0 20 40 60 80 100
Career Growth
PTO
Salary
Respect for Company Mission
Challenging Work
Healthcare
Atmosphere
Management Style
401k
Flexible Work
Top Talent Partner
55
Finding Qualified Staff
• Your unique value proposition• Incorporating newer team members in
Business Development• A function of marketing• Social functions• Websites• Team Recruitment Action Plan
Top 10 Reasons to Stay
0 20 40 60 80 100
Respect for Mission Statement
Career Growth
Salary
Management Style
Challenging Work
Flexible Work
PTO
Atmosphere
Equity Incentives
Training(tie)
401k(tie)
Top Talent Partner
Advancement – Partner Track
Top Talent Partners
Firm Has a Ptr Track
31% 41%
Firm Does Not 37% 55%
Do Not Know 32% 4%
Who Thought Their Firm Had a Partner Track?
Advancement – Partner Level
Top Talent Responses
55%
23%
22% Firm EncouragesThem to Pursue PtrStatus
Firm Does NotEncouragePursuing Ptr Status
Don't Know if FirmEncourages
Alternate Career Paths
• Many young professionals may not want the partner track
• Most of the survey respondents agreed that not pursuing a partner track does not have to hurt your career
Top Talent Partners
Will not Hinder Young CPA’s Career
65% 83%
Alternate Career Paths are Available
50% 76%
Identify & Develop New Partners
• Competency assessment• Technical knowledge• Client service development• People development• Leadership development• Business Development• Succession plan and communication
Don’t Miss the Emerging Partner Program at the MDBIZEXPO!
Identify & Develop New Partners
• Give power and responsibility for all to do their jobs autonomously
• Chart your firm’s skill sets (see PCPS Human Capital Center for Firm Needs and Competency assessment tools)
• Identify future potential• Understand the difference between a top-notch
manager and a leader• Mentor promising staff• Get partners actively involved in mentoring and
client contact• Include junior staff in decision making
Identify & Develop New Partners
• Set the firm requirements for new owners
• Provide formal leadership training for appropriate members
• Set a timetable for new leadership• Don’t underestimate the amount of time
it can take to groom a new partner• Choose a managing partner that you see
as “the face of the firm”• Create a compensation planSource: PREPARING FOR TRANSITION: The State of Succession
Planning and How to Handle the Process in Your Firm A White Paper from the AICPA Private Companies Practice Section (PCPS)
Why do I need a succession plan?
• Consider these facts:– In 1993, 47% of AICPA membership was over 40
years of age, in 2006, 74% of AICPA members was over 40 years of age.
– The 2004 PCPS Succession Survey found that of the nearly 500 firms surveyed, only 25% had a documented succession plan in place, yet over 60% of the firms had owners in the 55-62 age bracket.
– In 2008, PCPS updated the Succession Survey and found that of the nearly 500 firms surveyed, 35% had a documented succession plan. A marked improvement over 2004.
Why do I need a succession plan?
• Based on current statistics, there will be more sellers than buyers in the next 5-10 years.
• Succession is about MAP and client transition, not multiples.
• Many practitioners feel the next generation is not ready to lead the firm.
• The next generation is not sure they want to.• Successful succession planning for a partner
takes about five years of preparation.• Niche practices will have even greater
struggles.
Types of Succession Strategies
• Position the firm for sale so the owner(s) can retire.
• Position the firm for merger with an eventual buyout of the original owner(s).
• Position the firm for internal transition to future leaders.
• Practice continuation with other firms.• Turn out the lights at the end of the day.
General Succession Steps
1) Have the difficult conversations
2) Multiple partner firms, bring in a consultant to facilitate
3) Determine the best succession strategy, internal or external
4) Build the plan
4 Generations in the Workplace
4 Generations in the Workplace
2008
ISSUE
The Differences are Real!
Tom’s Top 5 Workplace Tips
1. Be the right person – versus the right organization
2. Be specific and don’t assume anything
3. Define roles and career path (in easy increments and steps)
4. Invest in training – it has high ROI, and is a retention tool
5. Offer challenging work and reward even small steps
Talkin’ bout my generation
The Maryland Perspective
The Maryland Perspective
2008
ISSUE
SUPPORTSCHALLENGES
VALUES
B O L D S T E P S
2. Legislative / PAC
1. Talent Mgmt/Human Capital Development
3. New / Young Professionals
4. Financial Literacy
5. Regulation
• Competence• Objectivity & Integrity
• Openness & member Involvement• Professional Foresight
The MACPA is a progressive, professional association dedicated
to serving CPAs in the Maryland region, enabling them to grow, prosper and remain viable in a
dynamic, rapidly changing environment.
TechnologyStrategicAlliances
GovernmentRelations
IMAGE
Organizational
Structure
ProfessionalDevelopment
• Protect the Public Interest• Responsiveness
2008 Priorities
Promoting the CPA License!Filling the pipeline…
1. Student members
2. CPA Candidates 3. New/Young Professionals 4. Leadership Academy
1.
Recruit
Students
2.
Promote
CPA
License
4.
Fast
Track
Career
3.
Build
CPA
Skills
Issues addressed:
•Retention
•Recruitment
•Succession Planning
•Leadership
•Staffing
•Generational Issues
Legislative Success!
Pass Mobility Opposed by DLLR Opposed by Maryland Society of Accountants
Stop / Amend Maryland Individual Tax Preparer Act
Amend Corporate reporting requirements Repeal “Tech Tax” Sales Tax on Computer
Services Prevent Sales Tax on Accounting & Tax Services Stop trial lawyers efforts at repealing contributory
fault doctrine
Mobility passes SenateApril 7th @ 10:44 pm
Maryland Individual Tax Preparers Act• Requires registration and examination of all tax
preparers• Registered Tax Preparers (cannot use terms
licensed or certified)• CPAs and staff are exempt (along with other
Circ 230 Practitioners• Out-of-state CPAs exempt• Independent Regulatory Exam required• Safe Harbor disclosure required
– “I am not a CPA”
• MACPA seat on State Board
Legislative Success!
Corporate Income Tax Reporting (amendments to SB 2)
Repeal Tech TaxPrevent Sales Tax on
ServicesStop Comparative Fault
Over 500 Visits, e-mails, calls by our CPA members!
MD Rate 11.5%
What would happen if we weren’t there?"There's no strong voice of landscaping, computer services and arcade owners. …that's one of the reasons they got picked.” - former Senator Barbara Hoffman (commenting on the special session where they passed the sales tax on computer services)
"An old adage among politicians is that if you don't holler at tax-raising time, you'll get hurt." –
Lou Panos
Audits of Employee Benefit Plans
Ian Dingwall, CPAChief AccountantUS DOL
• Maryland Plan Assets $127.2 Billion• Error Rate of 30% over 37 Firms• Error is failing 1 or more of 10 GAAS• MACPA Board oversight• Sessions at EXPO• DOL workshop
So what are we doing about this?• DOL Workshop• SBA Strategic Alliance• Intuit Partnership Workshops & Resources• iTunes – Podcasts on breaking issues• Blogs – CPA Success, New CPAs,
Legislative Insider, CPA Island• Webcasts on breaking topics• Learn, Connect, Grow at the
MDBIZEXPO!
SBA Strategic Alliance• Sessions at the EXPO• Workshops & Resources for CPAs• Maryland Statistics
– 536,200 small businesses– 141,700 employer firms– Employ 53.3% of labor force– Employing 1.1 million people
Intuit – Future of Small Business Report
• Two sessions at the EXPO– Future of Small Business– What CPAs need to know about the future of
small business
• Workshop for CPAs to faciitate strategy sessions with clients and prospects
Phase One –The Changing Faces of Entrepreneurs
Phase Two –The Connected World of Entrepreneurs
Phase Three –The New Entrepreneurial Economy
“Web 2.0 generally refers to a second generation of services available on the WWW that lets people collaborate and share information online.” - Wikipedia.com
Shared Pictures =
Shared Knowledge =
Shared Bookmarks =
Shared News =
Shared Videos =
Shared Everything =
Web 2.0 & You
Web 2.0 continues to grow
Try this professional networking site
www.CPALEARNING2.comwww.CPALEARNING2.com
www.linkedin.com
MACPA has a Second Life…CPA Island
Promoting the CPA License!Filling the pipeline…
1. Student members
2. CPA Candidates 3. New/Young Professionals 4. Leadership Academy
1.
Recruit
Students
2.
Promote
CPA
License
4.
Fast
Track
Career
3.
Build
CPA
Skills
Issues addressed:
•Retention
•Recruitment
•Succession Planning
•Leadership
•Staffing
•Generational Issues
2. Promote the CPA license
• 150 Hours of Education• Group I – 27 semester hours in
accounting subjects– Auditing (3 hours)– Managerial Accounting (3 hours) – US Federal Income Tax (3 hours)– Financial Accounting (9 hours)– Accounting Electives (9 hours)
Maryland Educational requirement
Uniform &
Flexible
2. Promote the CPA license
• Group II - 21 semester hours in business subjects (at least five of the following subjects:– Economics
– Statistics
– Corporation or business finance
– Management
– US Business Law
– Marketing
– Business Communication
• Ethics – Business, accounting, philosophy of ethics or a course that examines a framework for ethical decision making
Uniform &
Flexible
Maryland Educational requirement
What are the four parts of the “new” CPA Exam?1. Auditing & Attestation
2. Business Environment Concepts
3. Financial Accounting & Reporting
4. Regulation
The “New” CPA exam
update
CPA Exam changes
• Paper-based• 2 x year May &
November• 5 sections
• Computerized• Anytime• 2 months per quarter• Pass all sections in 18
months (to keep passed sections)
• 4 sections• 70% new content!
Then: Now:
update
2. Promote the CPA license
Next date : June 17, 2008At the Maryland Business & Accounting Expo
Maryland DLLR Swearing-in of new CPAs
What you can do to promote the CPA?
• Understand the “new” CPA Exam• Encourage MACPA candidate
membership• Use CPA Exam tracking tool to track
employees progress• Support the swearing-in ceremony• Create / reinforce firm/company culture
that celebrates CPAs
3. New / Young Professionals
NYPN All member holiday partyMaryland Zoo (in Baltimore)
TBA“CPE - Certified Penguin Extravaganza”
Protect your license &Differentiating the CPA
• BBJ Supplement• Smart CEO• Articles & PR• Managing our Brand
Achieve! Top CPE in Nation
• Public Seminars, Chapters & Committees
• In-house Training• Business Learning Institute• MACPA1040 Fast Track “it’s better than Gear-Up!”
• Self-study – AICPA CPE Express
Achieve! Member resourcesMACPA’s Trusted Partners
• Provident Banking• RJP Insurance• AON• Purchasing Power of the profession
– Savings of up to 70% off!
Maryland Business and Accounting Expo• 90+ sessions• $250 for two days of CPE• 100+ sponsors and providers• National Thought Leaders on every topic
What is a Profession?
Professions enjoy a high social status, regard and esteem conferred upon them by society. This high esteem arises primarily from the
higher social function of their work, which is regarded as vital to society as a whole and thus
of having a special and valuable nature.
Source: Wikipedia
What is a Profession?
All professions involve technical, specialized and highly skilled work. Training for this work involves obtaining degrees and professional
qualifications without which entry to the profession is barred. Training also requires
regular updating of skills.
Maryland CPAs are required to achieve the 4 E’s to qualify for licensure
1. Education – bachelor’s degree + 30 hours2. Examination – Pass the Uniform CPA Exam3. Ethics – Maryland requires a separate ethics exam4. Experience – 1 year of experience working with a CPA
Thereafter, they are required to complete 80 hours of continuing education every two years, including four hours of ethics training.
Source: Wikipedia
“CPAs ARE the DISCIPLINE in business!”
Jim Collins
Conclusion
“Greatness is not an unblemished record. It's the ability to right yourself, to go through the 'valley of the shadow of death' and come out even stronger. To be built to last, you have to be built to change. You can't possibly be static — it is a dynamic world. You have to
change what you do to preserve what you are.”
Jim Collins – author of Good to Great
Enduring -
What STuck out for you?
Questions & Discussion
Learning QuestionsFeedback Form
Tom Hood, CPA.CITPCEO
Maryland Association of CPAsBusiness Learning Institute
(443) 632-2301E-mail [email protected]
