AICPA 'Strategic Thrusts for the Future.' (report on the accounting profession's long-term objectives and plans)

To cope with what the future holds, the American Institute of CPAs engages in a continuing strategic planning process. The AICPA board of directors and governing council have approved the most recent report of the strategic planning committee, Strategic Thrusts for the Future (Second Edition), which contains the results of the second strategic planning cycle conducted during the 1989-1990 committee year.

A VIEW OF THE FUTURE

As a starting point, the committee reconsidered assumptions about the future developed in the first planning cycle. The assumptions that resulted from this effort were then grouped into five driving forces that will shape our future: globalization, technology, competition, complexity and human resources. The assumptions described here represent the committee's view of what is likely to happen in the future without any action by the Institute to take advantage of opportunities or to turn potential threats into opportunities. Thus, they do not represent the committee's view of what should happen in the future. The strategic thrusts discussed later in the article, however, are designed specifically to help the Institute meet the challenges facing CPAs.

Globalization. Since a growing number of entities will be involved with international operations, CPAs will need to expand their expertise to cover this arena.

Globalization of capital markets will lead to harmonization of accounting and auditing standards. More accountants in the United States and their counterparts in other countries will demand reciprocity.

Technology. We are increasingly becoming an information-based economy. Computers have already changed quite dramatically access to, and the nature and timing of, available information. Computing power is significantly expanding capability and reducing cost. The next main change in technology will be the use of expert systems and artificial intelligence to solve great varities of problems in all areas of CPAs' expertise.

Technology will have a growing impact on the knowledge and skills of personnel needed by CPAs and on the nature of work undertaken by accountants. Organizations will still face an increasing need for capital to make the necessary investments in technology and related training. As an alternative to heavy capital investment, some accounting firms will choose to specialize and practice in narrow areas, depending on their size and background, training and inclinations of their personnel. Professional networking will increase.

Technology also affects organization and personnel needs. As firms seek more seasoned personnel (and fewer lower-level accountants), there is a move away from the pyramid-shaped accounting firm. Moreover, the specialized skills necessary to deal with technological developments will create greater opportunities for non-CPAs in CPA firms. For CPA firms, a higher percentage of the total work force will be in long-term career positons. Finally, major changes in the education process will be required to prepare accountants adequately for entry into the profession.

Technology will affect business and government entites and all areas of CPA firms, but it will likely have it greatest impact on how, when and where attest engagements are performed. Auditors will be able to test more extensively and apply analytical procedures more effectively. Moreover, expert systems will offer all auditors access to experts' knowledge and their experience on a daily basis.

Technology also will open up opportunities for accountants to become more involved in providing training programs--for staff, clients and others--and the scope of service will further expand.

Competition. Accountants are operating in an evermore competitive environment that will put continuing pressure on accounting firm profitability. With the recent changes in contingent fee and commission rules, firms will be more likely to charge for some services on a basis other than time.

The trend toward firms providing a greater range of nonaccounting and nonauditing services will continue. The expanding scope of service will bring accounting firms into competition with other entites providing services that overlap and compete with what CPAs do. In an effort to compete, for example, non-CPA organizations could seek to associate with one or more accounting firms or vice versa. Coupled with changes in technology, competition will fuel the trend toward greater differentiation among firms in terms of size and nature of practice. Firm mergers will continue. There will be an increasing number of start-up CPA firms. Seasonality will remain a challenge and opportunity for CPA firms and small businesses. Specialization will accelerate. Accounting firms will keep developing or acquiring separate groups within their structures for different functions.

Government will be another expanding market for the services of CPAs. CPAs also will have increasing opportunities and responsibilities resulting from environmental issues.

There will be continued pressure on the image of accounting firms. Offering a greater range of services, particularly when their delivery involves aggressive marketing, could adversely affect the public's perception of CPA's integrity and objectivity. However, members will continue to observe fundamental behavioral standards, such as integrity and objectivity. Given the potential perception that certain services pose a conflict of interest, it will be more difficult for firms to capitalize on their reputations for objectivity when offering new types of services. A relatively smaller number of firms will provide audit and attest services.

Practice quality will remain difficult to maintain. Greater pressure will be placed on CPA integrity and we will continue to be challenged, but in the final analysis, the profession will be judged by the quality of its work.

Complexity. Frequent tax law changes will have an ongoing effect on CPAs' work, and maintaining the quality of tax work will remain a problem.

The complexity of business transactions and financing methods will make the auditor's job more difficult, since it will be difficult to keep up with marketplace inventiveness.

The profession will still encounter both difficulties and opportunities from increasing amounts of data due to the move to an information-based economy and as the attest function covers an even wider range of information.

Accountants will experience continued pressure to take on watchdog roles in professional activities, as well as greater responsibility for fraud detection and reporting on internal controls and on legal and regulatory compliance. The gap will remain, however, between public expectations and the profession's ability to meet them as the public continues to demand a higher level of performance from CPAs. Providing professional performance standards and monitoring compliance will continue to be one of the Institute's most important roles.

Government will, nevertheless, continue to challenge the profession's ability to regulate itself and to administer its disciplinary functions. While it is unlikely government will take over accounting and auditing standard-setting functions, government will look to CPAs to help meet regulatory needs. State regulation will become increasingly important to CPAs. Moreover, there will be demands for greater regulation of specific services provided by CPAs and others. State boards will face growing pressure to regulate effectively. Practice monitoring, continuing professional education and compliance with professional standards will help ward of unnecessary government regulation. The sanctioning process will still draw criticism.

Although practice quality will continue to improve, legal liability will remain a major issue for the profession. Concern about this issue will lead to changes in firms' legal structure.

Firms and CPAs will provide more foreard-looking services and, as the relative value of future-oriented financial and non-financial information grows, the usefulness of historical cost financial statements will decline. As the complexity of financial reporting increases, professional standards will become even more difficult and costly to apply.

There will be heightened pressure for uniform licensing standards. The Uniform CPA Examination will expand to accommodate the growing complexities of the business world, and the cost of getting and maintaining a license will increase.

Human resources. The pool of accounting graduates will be relatively constant, but the demographics will change and demand for qualified graduates may exceed supply. A greater proportion of entry-level personnel and CPAs will be women. The profession will still face difficulty recruiting minorities. Changing social values and two-income families will put quality-of-life considerations ahead of career desires in many cases. Thus, employers will face a growing challenge to motivate entrants into the profession to dedicate themselves, as they did in the past, to career and employer.

More rigorous employee screening and hiring efforts will be necessary; moreover, a greater effort will be needed to recruit and retain minorities as well as to improve the upward mobility of minorities and women.

Fewer entrants to the profession will come from among the best and brightest college students. There will be increased emphasis on additional education and greater use of paraprofessionals, and life-style considerations will give rise to more part-time practitioners and more turnover. Benefits will change in response to family and personal needs.

Impact on the Institute. CPAs not in public practice will be a growing proportion of AICPA membership. There will be relatively fewer CPAs in public practice from large firms and more from small firms. The Institute will continue to be confronted with increasingly diverse interests on the part of its various membership constitutencies. At the same time that this is occurring, the skills of CPAs as a group will be more diverse.

AICPA membership will represent an even greater designation of distinction. There will continue to be an organizational overlap between the Institue and the state CPA societies. For the short term, the AICPA will still have more stringent membership requirements than most state societies. However, cooperation between the Institute and state societies will continue to grow.

There also will be increased availability from other sources of professional programs, products and services traditionally provided by the AICPA. As a result, the AICPA will experience increased competition for members and for its services from existing and future organizations. Other groups will provide specialty designations for aspects of accounting or accounting practice.

Efforts to increase membership in the AICPA or state societies will be more of a challenge and members will be less likely to participate in the work of professional societies. It will be increasingly difficult to keep those with leadership roles in both the Institute and the profession adequately informed of Institute positions on issues affecting them.

There will be an expanding need to accelerate the issurance of timely guidance on technical issues. Furthermore, the need to build consensus and to follow due process will remain time-consuming but a critical factor for success.

STRATEGIC THRUSTS AND DIRECTIONS

Given these new and evolving challenges, a new set of strategies for the future was developed.

The strategic thrusts were divided into two groups. The first group of 7 was viewed as more critical to the Institute and the profession than those in the other group, based on the immediacy of the issues that generated the thrusts, the importance of the issues and the resources required to implement the thrusts. The second group of 13 was viewed as important and of high priority but not as critical in nature as the first 7 thrusts.

CRITICAL THRUSTS

The thrusts in this section and the next were developed by the AICPA strategic planning committee. Each is followed by a brief discussion of its importance to the Institute and the profession.

* WORK AGGRESSIVELY TO ATTRACT

QUALIFIED PEOPLE INTO THE PROFESSION

AND THE INSTITUTE.

The demongraphics of the accounting graduate pool are changing (for example, more female, older and minority graduates) and more people from nontraditional paths (such as a liberal arts background) are becoming CPAs. In addition, an increasing number of the best and the brightest students are attracted to other fields for a variety of reasons. These and other factors call for the Institute to initiative a veriety of different efforts to recruit students and others into the profession and the Institute.

* WORK TO PROVIDE UNIFORM, RECIPROCAL 

CERTIFICATION REQUIREMENTS.

An increasing number of entites are becoming involved with international operations as the global economy grows. Multi-state companies continue to develop and the scope of services provided by CPAs is still expanding. These and other forces are leading to increased pressure for uniform licensing among states, harmonization of international accounting and auditing standards and reciprocity for services among different countries.

* EMPHASIZE THE NEED TO CONTINUALLY 

IMPROVE QUALITY IN THE PERFORMANCE

OF PROFESSIONAL SERVICES.

The profession will continue to be criticized as activities expand and competition increases. Although the expectation gap can be narrowed, there will continue to be demands from the public and government alike for an even higher level of quality performance.

* UNDERTAKE GREATER EFFORTS TO EMPHASIZE

THE NEED FOR MEMBERS' ADHERENCE 

TO THE ETHICAL STANDARDS OF

INTEGRITYF AND OBJECTIVITY.

It is generally recognized that CPAs' reputation for integrity and objectivity makes CPA services more valuable. However, challenges to their integrity and objectivity continue to increase. There is greater pressure on business ethics stemming from efforts to achieve economic savings and keep up with heightened marketplace competitiveness. Coupled with the expanding scope of CPA services, there may be an even greater need to emphasize that services can be provided only within the limits of integrity and objectivity.

* REDESIGN FINANCIAL REPORTING TO

MAKE IT MORE RELEVANT, UNDERSTANDABLE

AND BENEFICIAL TO USERS.

Given the divergent forces now facing the profession, it is critical that financial reporting remain relevant, reliable and cost-effective. The Institute must take an active role in ensuring financial reporting is responsive to users' changing needs. Recognition also should be given to the fact that financial reporting should cover the marketplace needs of users from all sectors (owners, managers, lenders and other third-party users). Alternatives to current financial reporting design should be considered and value-based, future-oriented information introduced into the process. Should appropriate and worthwhile alternatives not be considered, financial reporting could lose its significance and accountants their relevance.

* WORK TO ELIMINATE MEMBERS'

UNREASONABLE LIABILITY

Legal liability will remain a major issue for accountants. This is a natural consequence of the increasingly litigious nature of our society.

* DEVELOP A QUALITY PROGRAM

FOR THE AICPA.

There is growing pressure for improved quality throughout our society. The Institute should take an active role to develop, maintain and promote a quality program in its operations. This will constantly improve its activities, programs and services and thus more effectively serve the needs of its members.

HIGH-PRIORITY THRUSTS

* ACTIVELY WORK TO RECRUIT MINORITIES

INTO THE PROFESSION AND ENHANCE

THEIR UPWARD MOBILITY.

Minority participation in the accounting profession is increasing and is likely to continue to grow as the percentage of minorities in the labor force expands. There remains, however, an expanding need to attract a larger number of minorities into the profession. The Institute should, therefore, undertake a major effort not only to recruit minorities into the accounting profession but also to enhance their upward mobility once they enter into a creer in accounting.

* ACTIVELY SEEK TO IMPROVE THE

QUALITY OF ACCOUNTING EDUCATION

AND PROMOTE THE AVAILABILITY OF

QUALITY ACCOUNTING PROGRAMS.

The Institute must ensure that precertification education for CPAs is of the highest possible quality. The Institute can be a driving force in enouraging universities to offer accounting programs to prepare new CPAs through up-to-date curriculums and emphasis on high-quality teaching.

* ACTIVELY WORK TO ENHANCE THE

UPWARD MOBILITY OF WOMEN IN THE

PROFESSION.

The number of women entering the profession will continue to increase significantly in the near future. This points to many opportunities for women as well as for firms and employers of CPAs. Once women enter the profession, however, they often confront challenges to their upward mobility. As a result, the Institute should initiate major efforts to enhance women's upward mobility in the profession.

* ASSIST MEMBERS AS THEY CONTINUE TO

BE IMPACTED BY ACTIVITIES IN THE

INTERNATIONAL ARENA.

Given the increasing internationalization of economic activities, there will be a growing number of CPAs and their clients and employers involved in the international arena. The Institute should assist members in expanding relevant expertise. Programs and services that address issues such as international reciprocity, harmonization of financial statement content and international accounting and auditing standards will be necessary as CPAs face the greater responsibilities of a global economy.

* ASSIST MEMBERS AS THEY EXPAND

THE SCOPE OF THEIR ACTIVITIES IN

SPECIALIZED AREAS.

Members will be increasingly engaged in new types of activities. As the scope of these activities expands, new areas of specialization will appear and there will be a greater need to develop programs to assist members. Adequate training and education to meet member needs will be of paramount importance.

* DEVELOP A MAJOR FOCUS ON

THE IMPACT OF TECHNOLOGY ON

THE PROFESSION.

Given technological developments and our increasingly information-based society, CPAs will become more involved with information technology. To remain competitive in such an environment, firms will have to have access to technological developments, such as expert systems. The demands for information management must be met to ensure the profession's continued relevance.

* ASSIST MEMBERS IN EXPANDING THE

ATTEST FUNCTION TO NEW TYPES OF

INFORMATION AND INCREASING THE

VALUE OF ATTEST SERVICES.

The types of information likely to require attestation and the number of nonfinancial data users are expanding as technology produces an increasing amount and variety of new types of information. As a result, the attest function should expand. However, greater liability exposure and the cost to maintain quality contribute to lesser firm involvement in the attest area. As a result, greater efforts will be needed to promote and increase the value of attest services.

* EXPAND EFFORTS TO ASSIST MEMBERS

IN PROVIDING SERVICES IN THE ENVIRONMENTAL

AREA.

In recent years, environmental concerns have grown significantly. These concerns have been accompanied by a growing consensus that the private sector has drawn on public resources without adequately accounting for the costs to society or the benefits derived. Such concerns may change public expectations of financial reporting and the auditor's role. For instance, those who read financial statements expect an adequate reflection of environmental costs, benefits and risks. The public also may expect the accounting profession to provide services in the environmental area. The Institute must, therefore, undertake efforts to assist members as they address the environmental concerns of their clients, employers and the public.

* CONTINUE TO SEEK WAYS TO DETECT

MATERIAL FRAUD.

Sound financial reporting is a major objective the profession can help encourage by strengthening the audit process. Greater effort is necessary to find ways to prevent and detect material fraud.

In part, the profession can be diligent in ensuring this public obligation is fulfilled by working with other organizations to reduce the incidence of fraudulent financial reporting. Consequently, the level of public confidence in financial reporting will be enhanced.

* HELP ACCOUNTING FIRMS TO MEET

THE MANAGERIAL CHALLENGES OF A

CHANGING ECONOMIC AND DEMOGRAPHIC

ENVIRONMENT.

The structure and operations of accounting firms are likely to change. Advances in communications, technology and the international arena are likely to create a variety of new managerial challenges for accounting firms. Capital needs and pressure on profitability are causing firms to seek new ways to provide services, such as through networking or mergers.

A higher number of experienced personnel and more non-CPAs require new management approaches and more diverse staff training. Moreover, the anticipated increase in small start-up firms and in CPAs practicing with small firms creates a need for the Institute to provide more help to firms to enable them to offer high-quality services in the public interest.

* ENHANCE PROGRAMS THAT GIVE THE

INSTITUTE MORE POLITICAL STRENGTH.

Congress and other government bodies will continue to scrutinize the profession's ability to improve the quality of its work and to self-regulate. The profession, at the same time, will face increased pressure to assume greater responsibilities. As a consequence, federal and state regulation and legislation will becomemore important to CPAs.

* ENHANCE COMMUNICATIONS WITH

MEMBERS.

CPAs operate in an increasingly complex economic, business and regulatory environment. To perform successfully, CPAs must be kept informed about how changes in these areas affect them. Additionally, the proliferation of new standards and regulations requires the Institute to enhance its communications efforts to members. Consequently, the value of AICPA membership will be affected by the Institute's ability to meet members' increased information needs.

* ENHANCE COMMUNICATIONS WITH THE

PUBLIC REGARDING THE PROFESSIONALISM 

AND COMPETENCY OF MEMBERS.

As scrutiny of the profession intensifies, it is important the public be made aware of the professionalism and competency of all AICPA members--whether in public practice, industry, government or education. Additionally, as CPAs expand their scope of services, the public needs to better understand the nature of those services and CPA's qualifications to perform them.

USE OF THE PLAN

The Institute already has embarked on a process to consider the foregoing recommendations. As a first step, AICPA committees and staff have been asked to provide thoughtful feedback on how the recommendations can best be implemented. The strategic planning committee will monitor implementation efforts and report periodically to the board of directors on progress.

The report of the strategic planning committee, although originally developed for the AICPA, may prove useful to CPAs in addressing their future. Indeed, as we move into the 21st century, all in the profession must develop long-term objectives and establish plans to meet the challenges of the future.

PHILIP B. CHENOK, CPA, is a president of the American Institute of CPAs and chairman of its strategic planning committee.