Special feature: the year in review: a year of renewal.

The past year has brought extraordinary change and renewed vitality to the AICPA. Challenges of recent years have culminated in a wide range of initiatives that reinforce CPAs' professionalism and expand opportunities for members. We built innovative programs based upon AICPA and independent research showing that the profession's positive reputation had been virtually restored and, even more compelling, that the trust people, business leaders and investors had in their own CPAs never wavered. Capitalizing on this solid footing, the AICPA embarked on a four-pronged approach that would further shore up confidence in the profession: image enhancement, small business issues, emphasis on quality, and relations with legislators and regulators.

To provide members with a perspective on those important initiatives, as well as highlight other developments and the ways in which the AICPA supports its members, The CPA Letter is pleased to present this report.

Keeping the Momentum Going for CPAs

* Putting CPAs at the forefront of educating Americans about personal finance, the AICPA's financial literacy initiative, "360 Degrees of Financial Literacy," provides information and direction to help consumers make sound tax and financial planning decisions. Programs include introducing students and educators to the issue of personal finance and to the profession; offering technical review of the book Prudent Investment Practices, a handbook for CPAs and other financial managers; funding and distributing a handbook about recovering financially from a disaster; and sponsoring a multitude of efforts to help consumers understand their finances, including online chats, a dedicated Web site for both consumers and CPAs, and sponsorship toward a national public service advertising campaign (www.aicpa.org/financialliteracy).

* Working with the state CPA societies, the Institute launched the CPA Ambassador program to tap the strength of individual CPAs to help communicate a message of pride and value about the profession. The program trains CPAs to speak out on several important areas (financial literacy, small business success, recruitment and restoring confidence in the profession) to highlight the CPA's expertise, integrity and contributions to clients, employers and their communities. For more information and a list of CPAs who have participated, visit www.cpaambassador.org.

* The Institute was involved in numerous collaborative efforts with state CPA societies to create innovative programs and forge new partnerships that maximize the visibility of CPAs. Initiatives included promoting awareness of financial literacy issues; providing states that suffered disasters with the AICPA-sponsored publication Disaster Recovery: A Guide to Financial Issues; working with states to highlight issues such as the importance of prudent investment management and the significant role of CPAs on audit committees; developing two articles on CPA services for a regional business supplement; co-sponsoring a colorful, glossy calendar featuring real-life CPAs; and producing a tax-themed public service announcement.

Extending the Profession's Message

* More than 500,000 students have responded to the CPA student recruitment campaign, "Start here. Go places." Over 150,000 students registered on the campaign's Web site, and nearly 116,000 of them asked to receive further communications. The Institute also received more than 50,000 high school leads and nearly 66,000 college leads.

* The Institute has continued to engage in proactive media outreach that highlights the professionalism of CPAs and the efforts or accomplishments of exemplary members.

* "America Counts on CPAs" is the theme of two 60-second radio spots and three print ads promoting CPAs' objectivity and trustworthiness. The ads were placed locally by state CPA societies.

* Projects that the AICPA Foundation helped fund during the past year include two new television programs that teach middle and high school students about personal finance and the accounting profession; "Financial Smarts for Teachers," which helps instructors understand their own finances; a disaster recovery guide, which was produced in conjunction with the National Endowment for Financial Education and the AICPA; and the Audit Committee Effectiveness Toolkit, a broad sampling of checklists, questions, reports and guidelines that help audit committees achieve best practices. The Foundation also has committed funds toward the establishment of an Institute for Fraud Studies. In addition, the Foundation awarded more than $600,000 in scholarships to minority students to enter the profession and the professoriate.

Spearheading Small Firm/Small Business Initiatives

* James Metzler, a partner of a local CPA firm in N.Y. for 32 years, became the Institute's Vice President--Small CPA Firm Interests. In this newly created position, Metzler supervises the Institute's firm practice management initiatives and serves as an advocate for small firms. As part of his ongoing "Listening Tour," Metzler typically visits two to three cities a week to solicit the opinions and concerns of small firm practitioners so the Institute can better address their needs.

* The second annual PCPS/TSCPA National MAP Survey far surpassed last year's participation with nearly 3,300 firms responding. This invaluable tool, a cornerstone of PCPS's many resources and offerings for small and medium-sized firms, enables firms to benchmark management policies and financial results against other firms while gaining strategic guidance to build a more profitable practice. In addition to the presentation-quality PDF reports, participants received exclusive access to an online reporting tool that allowed them to create customized benchmarks and filter the data to see segmentations beyond the ones created for them. Moreover, the recent merger of the PCPS Executive Committee and the Management of an Accounting Practice Committee will allow PCPS to further improve the group's targeted support of 40,000 local and regional CPA firms through brochures, conferences, advocacy and other activities.

* The first online poll of the AICPA Virtual Grassroots Panel surveyed CPAs to gather information about the small business environment, an important area of the economy for the profession. Questions focused on priority economic issues for this group; how CPAs' skills benefit small businesses; the organizations serving small businesses; and top state or national legislative or regulatory bodies that affect this market segment.

Tailoring Services for Private Companies

* The Private Company Financial Reporting Task Force was formed to study whether or not GAAP financial reporting is meeting the needs of all constituents of for-profit, private company reporting. A related topic is the cost-benefit of complying with all aspects of GAAP requirements. The study is confined to what GAAP can convey and thus not the broader information needs of constituents. To gather input on the issue, a survey is being released to AICPA members who can also seek responses from lenders, investors, sureties, business owners, preparers, practitioners and others.

* The Auditing Standards Board was restructured to better address the needs of non-public companies in light of the creation of the Public Company Accounting Oversight Board, which sets standards for auditors of public companies. The board now has representatives that include users, regulators and the public.

* A coordinating forum was formed among the ASB, the PCAOB and the General Accounting Office to make sure agendas are coordinated and to work towards minimizing differences in standards. The forum will help ensure that differences occur only where appropriate because of different circumstances between public and private companies.

* The AICPA provided guidelines to audit firm managing partners on how to apply PCAOB standards in audits of private companies, not-for-profits and governmental entities. To obtain the guidelines, which include reminders on the applicability of the Code of Professional Conduct and AICPA auditing standards, go to www.aicpa.org/download/ethics/audreportltr.pdf.

* To help small businesses better understand their responsibilities regarding retirement and pension plans, the AICPA partnered with the U.S. Department of Labor to provide a series of seminars that will educate small business plan sponsors and other fiduciaries about their obligations under the Employee Retirement Income Security Act. Through seminars and other educational materials, the campaign is intended to improve workers' and retirees' financial security.

Working in the Name of Quality for the Public and CPAs

* Three new specialized audit quality centers were created to develop communities of CPAs committed to enhancing the quality of audits and to serve as comprehensive resource providers to member firms. The Center for Public Company Audit Firms, which replaces the SEC Practice Section, will develop technical and educational guidance, serve as a member forum and administer a peer review program for audits of nonpublic companies. The Employee Benefit Plan Audit Quality Center and the Government Audit Quality Center will enable members to demonstrate their commitment to quality audit practices and will provide resources and opportunities for member interaction. (The Government Audit Quality Center will launch this summer.)

* The Professional Ethics Executive Committee revised independence rules for members who provide nonattest services to attest clients. The revisions reflect the committee's longstanding position prohibiting members from performing management functions or making management decisions on behalf of attest clients. Some existing rules were clarified while others were tightened.

* New bylaw amendments have strengthened and enhanced the AICPA's ethics enforcement process. The Institute has greater ability to "automatically" sanction an AICPA member if a regulatory authority recognized by the AICPA Board of Directors has taken action against the member. Another amendment enhances the transparency of the disciplinary process.

* A new Audit Committee Effectiveness Center was created to improve audit committee performance for the benefit of an organization's many stakeholders (www.aicpa.org/audcommctr). The center houses information for audit committees of all sizes and types of organizations--publicly held, private, not-for-profit or other public interest entities--to provide best practices for corporate management and boards of directors and offer training recommendations for audit committees, along with resources for those who interact with audit committees. Offerings include the AICPA Audit Committee Toolkit, e-Alert subscriptions and an audit committee matching system that enables qualified CPAs and organizations seeking audit committee members to find each other.

* The Institute teamed with the Federal Bureau of Investigation on a number of initiatives designed to help CPAs detect and prevent corporate financial fraud. They included a free, interactive Webcast, "Arresting Financial Fraud: The Inside Story from the FBI," which featured lessons learned from real-life cases and was watched by some 20,000 accountants nationwide. Articles on the topic appeared in AICPA publications as well. In this ongoing, wide-ranging partnership, FBI agents and AICPA members are expected to share the latest fraud detection and deterrence techniques and auditing "tricks and traps," and learn more from each other about the roles and responsibilities of CPAs and law enforcement officials. The FBI also is actively recruiting CPAs to help fight white-collar crime.

* The computerized Uniform CPA Examination was launched in Apr. The computerized version reflects real-world requirements of entry-level CPAs and makes it possible to better evaluate a candidate's research, analytical, judgment and communications skills. Besides providing tools and information to help CPA candidates understand the new computerized exam, the AICPA hosted a series of free Webcasts, which are archived at www.cpaexam.org.

AICPA as Advocate in Legislation and Regulation

* The Special Committee on State Regulation continues to study and recommend responses to the "cascade effect," in which state legislators, regulators and executive branch officials pursue accounting reform measures as a result of the Sarbanes-Oxley Act, a development with potentially negative consequences for smaller firms and their clients. The committee's compendium of white papers and issue briefs, A Reasoned Approach to Reform, now in its third edition, has been used extensively across the country to help educate our members, the business community and state elected officials.

* The Institute pressed Congress to adopt a sound policy to curtail abusive tax shelters. The Senate heard AICPA arguments about codifying the economic substance doctrine and raising the tax return standards (for both taxpayers and preparers) to "more likely than not" for all tax return positions and left both proposals out of its tax shelter measure.

* With strong AICPA support, the House of Representatives voted to delete a section in H.R. 1375 that would have authorized the federal banking agencies to take administrative action, including imposing civil money penalties, on third-party providers of services (including accountants, attorneys and appraisers) to insured financial institutions for negligent action by the provider. If enacted, this change would have placed third-party independent contractors on the same footing as financial institution insiders with respect to the banking agencies' administrative authority.

* The AICPA supported the "Small Business Tax Flexibility Act," introduced by Rep. Clay Shaw (R-Fla.), which is designed to offer most start-up small businesses operating as partnerships or S corporations the chance to adopt any fiscal year-end from Apr. through Dec. Such flexibility would permit the new businesses to retain additional operating resources, use a more natural business cycle and ease their record-keeping burdens.

* The AICPA urged members of Congress to oppose the Stock Option Accounting Reform Act, which would insert Congress into the accounting standards-setting process. The AICPA has long argued that the setting of accounting standards must remain in the private sector with the Financial Accounting Standards Board.

Providing Professional Resources and Guidance

* AICPA Council voted to enhance the profession's three specialty credentials--Personal Financial Specialist, Certified Information Technology Professional and Accredited in Business Valuation. The Institute plans a revitalized Web presence for each credential as well as new promotional and direct marketing efforts to help credential holders demonstrate their competence and market their credentials. In addition, through a variety of publications, resources and discounts, the corresponding membership sections stepped up their efforts to help CPAs improve their professionalism within each specialty area and maximize their career opportunities.

* The AICPA Tax Executive Committee issued Interpretation No. 1-2, "Tax Planning," of Statement on Standards for Tax Services No. 1, Tax Return Positions. Helping members comply with their ethical tax considerations, the interpretation provides broader guidance on tax planning than has been available--including on tax shelter transactions--and offers members a five-step process to use when offering tax planning opinions or reviewing a third-party's opinions. An explanatory article appeared in the Dec. 2003 issue of the Journal of Accountancy.

* In response to member inquiries, a paper posted on the AICPA Web site discussed the three key outsourcing issues: AICPA ethical standards, the Gramm-Leach-Bliley Act privacy provisions and relevant Internal Revenue Code provisions. (It can be found at www.aicpa.org/download/ ethics/outsourcing.pdf.) In addition, the AICPA Professional Ethics Executive Committee formed a task force to consider outsourcing issues and make recommendations that would enable members to uphold the hallmarks of the CPA profession. The task force has reached conceptual agreement and will be discussing its views with PEEC this summer. If approved, PEEC will issue an exposure draft on the topic shortly thereafter.

* The AICPA and the Canadian Institute of Chartered Accountants issued the AICPA/CICA Trust Services Privacy Framework, which includes the AICPA/CICA Trust Services Privacy Principle and Criteria. The framework, which is meant to serve as a tool for CPAs in providing guidance on privacy programs, incorporates concepts from important domestic and international privacy laws, regulations and guidelines. More information can be found at www.aicpa.org/innovation/baas/ewp/privacy _framework. asp.

* The Committee of Sponsoring Organizations, of which the AICPA is a member, has developed an Enterprise Risk Management framework. The ERM framework will be supplemented with application guidance upon issuance. The ERM framework and guidance will provide organizations with the tools and information necessary to identify risk management issues and methods to manage such risks. COSO expects to release the framework and guidance later this summer.

* The AICPA's governing Council approved the recommendation of the Federal Accounting Standards Advisory Board Rule 203 Panel authorizing FASAB to continue to set generally accepted accounting principles for the federal government under Rule 203 of the AICPA Code of Conduct.

* The Auditing Standards Board issued an interpretation to SSAE No. 10 on providing attestation services for XBRL instance documents, which provide business report information in a machine-readable format. In addition, the AICPA co-hosted the 8th XBRL International Conference last Nov. In conjunction with the XBRL-US consortium, the AICPA continued its work on the development and release of XBRL industry taxonomies for financial reporting.

Taking Member Services to a New Level

* To promote the success of women CPAs, the AICPA Career Center partnered with Catalyst, the leading research and advisory organization working to advance women in business, to enhance the focus on professional women's career development needs. Catalyst will work with the AICPA Career Center to create tips and action steps to help companies recruit, retain and advance top financial talent and provide professional women with tools to reach their full potential. Members can visit the AICPA Career Center at www.cpa2biz.com/careers.

* Working with a group of state societies and new/young CPAs, the AICPA put together a two-day forum where members under the age of 40 or with less than seven years' experience could express their opinions and discuss what they need from a professional organization. The findings from this forum, which took place last month in Orlando, will be used to create new programs and initiatives of value to this segment of the membership.

* The Institute set in motion the development of the Member Solutions Partnership, which will create and upgrade business systems (both technology and process driven) to better serve AICPA and state society members. A collaborative effort between the AICPA and the state societies, the first phase of the MSP was launched last Dec.

Benefits of AICPA Membership

As a professional organization, the AICPA offers its members many services and benefits they are encouraged to take advantage of to save money or enhance their careers. From valuable information resources to discounts on products to special rates on myriad insurance offerings, AICPA member services help CPAs succeed and expand their professional horizons. For a comprehensive list of member benefits, see the June issue of The CPA Letter (accessible at www.aicpa.org/pubs/cpaltr/index.htm).