Notes From AICPA Spring Council: Agenda Includes International Standards, Cost Of SOX Compliance

Look for more convergence of standards worldwide, says Graham N. C. Ward, president of International Federation of Accountants. "Convergence is vital to economic development. Differing standards contributes to fraud, makes fraud easier, and costs much more." SEC Chief Accountant Donald T. Nicolaisen

Expect more flak about the costs of complying with SOX. Only 3,000 of the 15,000 public companies have had section 404 work, according to Barry Melancon, president and CEO of the AICPA. Lots of smaller companies are just starting the process, and the PCAOB cannot deviate from the checklists or make the process easier for smaller companies - the checklists are a part of the Sarbanes-Oxley Act. (In a related move: Section 404 relief is on the way in the form of new guidance on the PCAOB's standard on internal controls. PCAOB leaders said in May that the new technical guidance should help curb unnecessary work by overzealous auditors, which should cut the cost of implementing the board's Auditing Standard No. 2.)

The move for uniformity, mobility and transportability of your CPA license moves inexorably forward. The AICPA thoroughly supports this move and is working with NASBA to achieve this goal. Expect a July vote on a revised Uniform Accounting Act. The agreement will help make the CPA designation portable by establishing a system for determining substantial equivalency on a state-by-state basis, as well as for individuals who personally meet Uniform Accountancy Act standards but live in states that do not.

CPA2Biz is approaching profitability, says Erik Asgeirsson, CEO. The for-profit exclusive marketing agent for AICPA products and services expects to close its July 31 fiscal year with a loss of $375,000. The previous year's loss was $3.144 million, and the company has posted a loss every year since inception in 2001. CPA2Biz again revamped its Web site this year and invested $1.5 million in a complete overhaul. Revenue to the AICPA from CPA2Biz sales remained flat. The financial improvement resulted from growth of the Business Solutions product line - primarily payroll and banking services offered to referred clients of CPA firms. The payroll services were expanded in May to include 401(k) services. The Business Solutions products have come under fire from some practitioners who believe CPA2Biz is competing with them.

You soon may be learning a new set of GAAP standards for your private, for-profit clients' financial reports. Council overwhelmingly approved recommendations from the Private Company Financial Reporting Task Force to direct the AICPA to work with the Financial Accounting Foundation and FASB to evaluate potential changes to GAAP for privately held, for-profit companies.

"GAAP standards for private companies should be developed that are appropriate for the distinctly different needs of constituents of that financial reporting," said James G. Castellano, chairman of the task force and chairman of Rubin Brown Gornstein & Co. of St. Louis. "This is not big-GAAP little-GAAP as some have called it. This is equal but different, to meet the different needs."

Independent research commissioned by the task force confirmed that owners, practitioners and third-party users of general-purpose financial statements highly value the consistency and comparability afforded by GAAP. However, the same people believe that many GAAP-specific requirements lack relevance or decision usefulness when it comes to private companies.

"We all know that private companies are distinctly different from public companies," Castellano said. "Owners more often are active in management, not passive. Capital formation is different. Ownership transition is different. Stewardship may be more important than valuation.

"A significant majority of external stakeholders already accept financial statements prepared on a basis different from GAAP or with exceptions to GAAP. However, if we increase the reliance on exceptions, there's a risk of eroding the trust in GAAP. Instead, fundamental changes should be made in the current GAAP standard setting process to ensure the needs of constituents of private companies are met." To see the task force's complete report, go to www.aicpa.org/members/div/acctstd/pvtco_fincl_reprt/download/ Report_Draft_Final.pdf.

The image of the CPA profession continues to improve as the aftermath of accounting scandals and the conviction of Arthur Andersen normalizes, according to new research. The data show a particular strengthening of CPA "heritage" attributes since 2003. When asked whether CPAs and the accounting profession have taken steps to fix the problems that led to past accounting scandals, 80% of business decisionmakers, 70% of executives and 52% of investors said "yes." Says Melancon, "We took hits and recovered. We are better positioned than in 1999. This is an incredible outcome for a difficult time."

Lewis, Hooper & Dick received the 2004 AICPA Public Service Award, the first year such an award has been available for a firm. Located in Garden City, Kan., LH&D has three offices and 38 people. The firm celebrated its 50th anniversary this year, and community involvement has been a cornerstone of the firm since its inception. In addition to its leadership role in raising money for charitable causes, LH&D has been a Partner in Education for Victor Ornelas Elementary School since 1987. The firm encourages active participation by staff and backs its philosophy with money - it reimburses staff members for membership dues in several local organizations. Managing member-owner Gary A. Schlappe, accepting the award, said, "Giving of ourselves is a statement of gratitude."

The AICPA awarded its 2004 Public Service Award to Kathryn A. Forbes, the national chair of volunteers of the American Red Cross. Forbes also served as vice chair and audit committee chair of the National Board of Governors. She developed the Audit Committee Guide used at the chapter level. Her leadership contributed to the organization receiving an unqualified audit after managing the unprecedented inflow of more than $1 billion in donations following the September 11 terrorist attacks. Forbes also is executive vice president and CFO of eTec, an engineering firm in Phoenix specializing in alternative fuel vehicles, infrastructure and battery research.

Charles H. Smith is the 2005 recipient of the AICPA Distinguished Achievement in Accounting Education Award. Smith is the KPMG Professor of Accounting at Perm State University.