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CPAs and AICPA Grapple With XYZ and the Future of C-P-A

THE AICPA'S NEW XYZ INITIATIVE proposes to do nothing less than create an entirely new profession, one open to CPAs and nonCPAs alike. CPAs who see a conflict of interest in the initiative are asking: Why can't you love me the way I am?

By establishing global ethics and competency standards, XYZ's creators (the AICPA and seven other accounting associations worldwide) intend for this new designation to professionalize and standardize the now rather amorphous constellation of disciplines that CPAs and other business professionals use to operate in the international business arena. (For more information on currently available XYZ specifics, see the sidebar on Page 18.)


The way some CPAs see it, by proposing the new credential, the AICPA is telling them that their own professional credential is doomed--or if it isn't headed that way already, XYZ will certainly kill it.

"It totally denigrates the CPA designation," says AICPA Council member and past chair Robert Israeloff, a partner with Israeloff, Trattner & Co. in New York. "It gives stature to the people I compete with. I'm out every day trying o do the right thing and to be recognized as much more than just a financial CPA, but we run into competition now from nonCPAs trying to sell the same services. Why should we now have o run against nonCPAs who have bee given the XYZ designation?"

Others think XYZ, a credential for which AICPA members who have five years of work experience will be eligible, could be a boon to CPAs already operating in the global marketplace.

"A specialist credential appeals to buyers of services," says CaICPA Vice President David George, a partner with Riverside-based Soren, McAdam, George Investment Advisory Services LLP, CPAs. "If you had a medical problem, and let's say it was cancer, you're no going to go to a orthopedist, even though that person is an MD. You're going to want to go to the specialist. So hen you're a buyer of services you're going to look for a specialist."

If the new credential plays out the way its designers hope it will, there will come a time in the not-too-distant future when "global specialist" will be synonymous with XYZ.

The AICPA Council will vote in October on whether or not to bring the XYZ credential up for a membership vote, which would take place in the spring. Only if the member ship approves the credential will the AICPA pursue it; as yet it's unclear exactly how much information members will have bout XYZ for the spring vote.

In the interim, one thing is certain: If the council approves a membership vote, you'll hear a lot about XYZ. Between those two votes, the AICPA plans a major communications blitz to educate its members on the plan--but it may not be an easy sell.


To understand the rancor XYZ is generating in some quarters, it helps to appreciate just how much the proposed credential threatens to throw the CPA profession into an identity crisis. What, in fact, does it mean to be a CPA in It today's complex world economy--one by the e-revolution--where financial professionals who are smart bout their choices can make boatloads of money--fast?

"There's a fundamental question in the profession today, about the role of reed," says business journalist Rick Telberg, editorial director of Pro2Net and former editor-in-chief of Accounting Today. "How do accountants balance their public responsibility to be independent and objective with their personal responsibility to make a living? The same question goes to the AICPA. What responsibility do they have to steward vs. heir responsibility to heed their membership? The institutes are facing a do or die conflict. The majority of their members want them to go down the path that the leadership believes will be certain doom. There's a large question of balancing greed and public service."

Westlake Village CPA Tom Tone, a partner with Tone, Walling & Kissenger speaks for many when he says there's no question in his mind. "The profession stands for integrity," he says. "We had a choice. We became CPAs not to be rich, but to protect our clients and help them get rich."

Why would the AICPA take up the reigns when the stakes are so high? Some, as Telberg suggests, say it's self-preservation: XYZ holders will be required to join the AICPA, or whatever organization ultimately administers it.

Says Israeloff: "They're afraid that with the shrinking number of CPAs, they'll have a smaller organization time." But AICPA President and CEO Barry Melancon says the AICPA is only doing its job.

"We have a leadership responsibility," Melancon says. "Our responsibility is to look at the long-run of the profession, the changing dynamics of the world, and the rapidity with which that changing occurs. We have an obligation to look at the changing profession and have a stewardship perspective of the future."

To some, this might sound a lot like the rationale for another AICPA program, the CPA Vision Project.


The AICPA introduced the CPA Vision Project with the tag line "Helping the CPA profession stay on top of the change curve." Its Web site notes that the vision process has led to a "comprehensive an integrated vision of the profession's future."

The Vision Project defined CPAs as trusted professionals capable of: communicating the total picture with clarity and objectivity; translating complex information into critical knowledge; anticipating and creating opportunities; and, designing pathways that transform vision into reality.

An outgrowth of the CPA Visio Project has been assurance services and AICPA certification areas such as personal financial planning, information technology and business valuation. These specialized designations are enjoying, if not blazing success, at least a general attitude of support among the membership.

Many CPAs want to know why more energy isn't being put into making specializations more recognizable to the public. "I thought that's where we were headed," says Karen Bramer, a Los Angeles-based sole practitioner who is a member of the AICPA PFP section. "Why not put the effort into making [the specialties] really important? They're coming up with all these specialties. Then they tell us we need a much broader thing [XYZ]. They jumped ship. Why can't we do what we were doing-take that same vision and expand? I never see any advertising that tells us what CPAs do."

Melancon says the ALCPA will continue to spend branding dollars on CPA. "We will continue to do R&D work, to find broader-based assurance services work that just CPAs will be able to provide. Those things will continue to be focused upon and enhanced: [XYZ] is not about abandoning the CPA."


Some think the regulatory environment simply has gotten too hot, and efforts like XYZ have their roots in a desire to remove the profession from the regulatory reach of state boards and the U.S. Securities and Exchange Commission.

To the strong support of many CPAs--and the ire of others--the SEC is holding hearings on a proposed rule that renews auditor independence. Among other things, the proposed SEC rule would "identify certain non-audit services that, if provided o an audit client, would impair an auditor's independence." Under the proposed rule, CPAs who audit public companies would be prevented from rendering services other than tax.

"It's a profound initiative of the SEC," says CPA and University of Southern California Ernst & Young accounting professor William Holder. "It illustrates well how we don't control our own destiny."

And while the proposed SEC rule would not affect the lives of those performing traditional accounting work, many feel it would restrict CPAs from leveraging the knowledge that an audit provides and turning it into sound consulting advice. "It's the knowledge that's gained in the process of an audit that makes someone a good consultant in other services," maintains Holder.

In other words, say some, the current regulatory environment might indeed spell doom for the profession's flourishing consulting branch. "In the view of many, these are extraordinarily adverse events affecting the viability of the profession," says Holder.

Others strongly support the SEC measure and cast a jaundiced eye toward any move that appears to avoid its reach. One outspoken XYZ critic is Eli Mason, senior partner of New York based Mason & Co. LLP, himself a past vice president of the AICPA. "The accounting profession in the U.S. is under tremendous stress because of recent revelations that thousands o PricewaterhouseCoopers partners breached the fundamental rules of auditor's independence," he says. Mason is referring to the January 1999 SEC report in which a group of PricewaterhouseCoopers managers and partners were brought to task for independence rules violations. "Perhaps [XYZ] is an attempt to divert attention from the current crisis."

Melancon is adamant that XYZ, which began to take shape nearly two years ago, is in no way a response to the SEC's current focus on audit independence rules. However, he does allow that depending on how the ruling comes out, it might add another reason to proceed.

Mostly, Melancon says XYZ is about CPAs providing what the market is demanding. "The profession has to be able to prosper in the marketplace," he says. "Regulation in general is typically reactive and typically behind the scenes. Certainly the impact of regulation worldwide has an impact on some of our thinking, but it is not solely for this reason that we're doing this."


Another issue concerns the findings of marketing experts hire by the AICPA who discovered that the CPA profession, highly respected though it is, will never be viewed by the public as any thing other than narrowly focused on audit, tax and financial statements. "We've done research over and over again of business decision makers," says Melancon. "People have a hard time giving our brand 'CPA,' permission in broader-spaced areas."

Melancon cites the fact that decades ago, the Big Five accounting firms dropped the appellation "CPA" from their titles as one reason the public simply won't allow CPAs to b the multifaceted, global business experts that many of them, in fact, are.

"As these firms began to position themselves as broad-base business professional services, they continually position them selves not as CPAs," Melancon explains. "So as a result, from marketplace perspective--forget the regulatory side--the CPA brand got cordoned off into traditional image perspectives. When the firms that had the biggest brand impact quit using the CPA brand, the distance continued to grow. The profession didn't react to that."

Notes Holder, "CPAs have branded one area of the market extra ordinarily well, but it's an area diminishing in its attractiveness."


To a large degree, CPAs, even many in single-person practices, are doing work that falls well outside of accounting, auditing and tax. Many perform information services consulting, strategic planning, even human resources functions for their clients because that's what their clients want.

These CPAs say that their wide-ranging business knowledge gained first from their accounting education and then from their 500-hour audit work makes them better consultants, no matter what kind of work they end up doing.

"Being a CPA adds to how people think of me as being able to perform," says Kendall Wheeler, an information systems partner with Fresno-based Moore, Grider & Co. "I come across accounting questions all the time. I can go in an install accounting systems, I can enter my clients' beginning balances, train them, show what it mean to make a depreciation entry. It's a great asset to the client. Audit hours help because they force you to look at a company and see what they're doing."

But it's just that: the audit hours, training and exam that takes to acquire the CPA credential, which the AICPA leaders are saying hurts interest in the profession. In the context of XYZ discussions, the term "eye of the needle," comes up a lot to describe the tiny space people must squeeze through to become CPAs--even if they don't want to do CPA work.

Many predict that the broad-based professionals of the future simply will not go to the trouble of earning a CPA credential. Another bad sign for the CPA designation.

"What we communicate through our regulatory structures and through the process of becoming a CPA is that one must become an accounting and auditing specialist," says Melancon. "Yet CPAs in the latter third of their careers are high up in corporations, they're leading firms or working in firms that are doing a lot of work not related to the traditional area of accounting and auditing. Arid while CPAs are now doing this broad-based work, the next generation of leading professionals will not be CPAs, because they are not going to come through the GAAP GAAS eye of the needle that is now demanded of them under state laws."

Holder says it's time to face hard realities. "You can't just stand and rail at the world," he says. "The Internet has change everything. The guys and IPOs have done much to diminish the appeal of the CPA profession."


Add it all up, and, according to many, you need an entirely new credential, one not subject to the controls of government agencies, one that addresses the needs of the global marketplace, but one that nonetheless stands for integrity and high ethical standards.

Melancon says AICPA research finds that the marketplace will demand a professional with three attributes: global expertise; something that will clearly brand CPAs as broad-base business advisers; and something that will attract the brightest business minds, who will never be willing to do what it take to become a CPA.

On the other hand, Melancon says there will always be a need for auditors and he is in full support of maintaining auditing standards. "It is appropriate for people to have expertise in auditing to do better audits," he says. "The idea would be to have a process with XYZ that is truly flexible and sensitive to the changes that would occur on a go-forward basis."


Why would an organization, whose raison d'etre is to serve CPAs, want to come up with a nonCPA credential? "We have been very careful to say the XYZ is a global brand," says Melancon. "It is not the U.S. brand. We didn't go out to say, 'We're going to create a new brand here in the U.S. marketplace.' We have been very careful to not create a competitive environment."

Further, Melancon says he wants CPAs to be first to market with a credential many feel is going to happen with or without the support of American CPAs. "CPAs own this space to a large degree, but cannot get to the full breadth of what the market-place is demanding and will likely be demanding in the future," says Melancon. "And so by branding it as a CPA profession, we are giving members a huge headstart in this process, and we will be able to have huge influence globally on exactly the ethics and standards and everything that comes about from this broad based XYZ professional. We feel that our members are best equipped to seize the space, and therefore it's strategically important for us to take it."

Israeloff sees a contradiction. "How can it not compete wit CPAs?" he asks. "It's going to be me, CPA, vs. John Jones, XYZ. It have to go against somebody who previously was a nobody an who now is an XYZ. It still gets them a foot in the door."

Israeloff and others do support exploring new options, evercreating new designations. "I'm not against change or solving the problems," he says. "But the AICPA has come up with one solution, and we either accept that solution or nothing. Let's have a discussion on how to solve the problem. They're ramming down one choice--their choice."

Laurie Mason is a San Francisco-based freelance writer


Given its uncertain future, specifics on the XYZ designation won't be ironed out until after the AICPA Council and membership votes. What is known is that the XYZ Task Force envisions XYZs offering multidisciplinary expertise in such areas as information technology, management consulting, financial and nonfinancial measurement, business law, modeling, systems design, quantitative analysis and change management techniques. Additionally, to obtain a credential, professionals must:

* Demonstrate, by examination or other means, the requisite knowledge and experience of professional development, learning and competencies;

* Hold an undergraduate degree and be a member of one of the sponsoring institutes;

* Understand and agree to abide by the ethical standards of the global and national institute awarding the credential; and

* Participate in continuing learning and competency development, and comply with periodic assessment procedures.
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Title Annotation:accounting associations propose new accounting credentials
Publication:California CPA
Geographic Code:1USA
Date:Sep 1, 2000
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