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American Institute of CPAs
State of the ProfessionMark J. Koziel, CPA, CGMAVice President, Firm Services & Global Alliances
10/9/2012
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International
Technology
Value proposition
People
Succession
Landscape
Clients
Copyright © 2011 American Institute of CPAs
Global Recovery
Organization for Economic Co-operation and Development
• Uneven recovery• U.S. and Japan expected to see
recovery• Euro countries continue to suffer• Emerging markets have varying
degrees of recovery• Inflation could impact some growth
• Is the crisis over?
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Copyright © 2011 American Institute of CPAs
BRICS’ GDP to Exceed G7’s by 2035
$0
$20
$40
$60
$80
$100
$120
$140
2015 2020 2025 2030 2035 2040 2045 2050
G7BRICSin
trilli
ons
Source: BRICS & Beyond, Goldman Sachs, 11/23/07
Copyright © 2011 American Institute of CPAs
Emerging Markets 2013 GDP Predicted Growth
0
1
2
3
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2012 GDP Growth
G7BRICsCIVETS
Sources: CGMA Magazine 1/31/12 and businesswithoughtborders.com
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Potential Services & Opportunities
Integrated Reporting• Sustainability
EBRC
Attestation opportunities• SOC reports
Risk Management
Taxes• SALT & compliance
XBRL
Business process outsourcing• Cloud Computing
Specialization and credentials
Key XBRL DevelopmentsXBRL International released XBRL International Foundation Certificate (covers general, high-level knowledge of XBRL and the XBRL Specification)• http://www.xbrl.org/xbrl-foundation-certificate
AICPA and XBRL US to release a new XBRL US GAAP Certificate Program in Spring 2013• http://www.cpa2biz.com/xbrlcertificate
New SEC rule requires use of XBRL format for Form SD reporting of Extractive Industries Payments To Governments• http://www.sec.gov/rules/final/2012/34-67717.pdf
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Key XBRL Assurance Developments
AICPA Assurance Services Executive Committee (ASEC) XBRL Assurance Task Force launched internationally relevant Principles and Criteria for XBRL-Formatted Information for preparers and auditors• http://www.aicpa.org/interestareas/frc/accountingfinancialreporting/xbrl/
pages/principlesandcriteriaforxbrl.aspx
AICPA ASEC XBRL Assurance Task Force is in the process of updating SOP 09-1: Performing Agreed-Upon Procedures Engagements that Address the Completeness, Accuracy, or Consistency of XBRL-Tagged Data based on the new Principles and Criteria
New Developments in Sustainability Reporting
GRI (Global Reporting Initiative) G4 Guidelines are out for exposure, AICPA to comment primarily on assurability aspects
• https://www.globalreporting.org/reporting/latest-guidelines/g4-developments/Pages/G4-Public-Comment-Periods.aspx#G4ED
IIRC (International Integrated Reporting Council) to publish a prototype integrated reporting framework in the December 2012/January 2013 timeframe
• http://www.theiirc.org/
CDSB (Climate Disclosure Standards Board ) released Climate Change Reporting Taxonomy exposure draft (in XBRL)
• https://www.cdproject.net/en-US/News/Pages/xbrl-consultation.aspx
New SEC rule requires reporting and independent audit for Conflict Minerals• http://www.sec.gov/rules/final/2012/34-67716.pdf
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Market-led issues in U.S.
Integrated Reporting
Discussion paper
AICPA providing leadership in U.S.
International council
PepsiCo Annual Report
19% financial
81% non-financial
New Developments in Sustainability Assurance
AICPA Auditing Standards Board (ASB) Sustainability Task Force to develop guidance for practitioners performing review level attestation engagements that address greenhouse gas (GHG) statements
AICPA Assurance Services Executive Committee (ASEC) launching a new task force to develop assurance and/or advisory application guidance addressing emerging market demand for supply chain-related and/or certification-related sustainability reporting and assurance requirements
IRBA in South Africa will be drafting a paper on assurance considerations for integrated reporting
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“[Cyber Security] is one of the most serious economic and national security threats our nation faces.”
- President Barack Obama
Cyber Security a Growing Concern
AICPA educating members on best practices
Big Data, Big Potential
Convert data sources into actionable business insights
“Analytics arms race”
Not enough to increase data availability
Capacity to evaluate data & apply good judgment
CFO/adviser’s strategic role
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Complexity: Challenge & Opportunity
Health care
Federal taxes
State/local taxes
Technology
International
Dodd-Frank
Heightened rules and scrutiny
COMPLEXITY
Growing the Brand
Healthy, strong roots are needed to support growth.
Reporting
AuditTax
Strategicplanning
Financialplanning
Businessvaluation
ITauditing
Forensicaccounting
Managementaccounting
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U.S. Legislative & Tax
DC Issues
Dodd-Frank•Broker-Dealers•Aiding and abetting•Financial planners – SEC/SRO
PCAOB Activities•Auditor’s report•Mandatory firm rotation/Europe
Hearing on Accounting & Auditing Oversight
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On ramp for companies
On ramp
AICPA successes
Firms’ opportunities
JOBS Act
Tax Issues
Tax Preparer Registration
Mulcahy, Pauritsch, Salvador & Co.
Sound tax policy
IRS Preparer Compliance Visits
FBAR and FATCA
Tax Provisions of Supreme Court Health Care Decision
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Lame Duck Session
Super committee automatic cuts
2% withholding expiration
New debt ceiling
Estate tax
Expiring tax cuts and more (AMT patch)
Audit Rotation
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Copyright © 2011 American Institute of CPAs
Global Perspective on Audit Policy• 7/21 - Dodd-Frank gives PCAOB broader powers • 10/13 – EC issues audit policy consultation
• 8/16 – PCAOB issues concept release • 11/30 – EC Proposal includes 6-year rotation
• PCAOB holds public panel discussions (2012 – 2013)• JURI recommends 25-year rotation (Vote on 12/18)
• PCAOB continues public meetings• 2/27 – European Parliament plenary vote
Copyright © 2011 American Institute of CPAs
Mandatory Firm Rotation (MFR)
More than 27 countries have some form of MFR, including:
• Brazil, China, Italy, Portugal and Saudi Arabia
Already 11 countries have repealed MFR, in whole or in part, including:
• Austria, Canada, Singapore, Spain, South Korea and Turkey
Source: http://pcaobus.org/Rules/Rulemaking/Docket037/ps_Echevarria.pdf
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Copyright © 2011 American Institute of CPAs
Proposals since the EU Green Paper (Oct. 2010)?
May 2011 South Africa
(Audit-only firms)
Feb 2012 Netherlands
(8-year rotation)
Dec 2011India
(5-year rotation)
March 2012Russia
(5-year rotation)
April 2012-ProposedSeptember 2012-
PassedUK (10-year man.
Tender)Comply or Explain
October 2012-ProposedCanada
(3 audit proposals)
International
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Exploring other expansion opportunities
CPA Exam Abroad
9,300 Sections
JapanBahrainKuwaitLebanonUAEBrazil
ThisWaytoCPA.com now accepts international students
Copyright © 2011 American Institute of CPAs
Hong Kong Mutual Recognition Agreement
Five-year MRABasis for reciprocity between U.S. and Hong Kong accounting professionsSixth agreement with non-U.S. professional bodies (Australia, Canada, Ireland, Mexico, New Zealand, Hong Kong)
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Market Forces Causing Change
International
Associations
Capacity
Geographic Regions
Market Forces
Copyright © 2011 American Institute of CPAs
Key Global Network Issues
Firm Growth Global Networks
Brand Success New Frontiers
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Copyright © 2011 American Institute of CPAs
Changing Landscape for Firm Growth
Single Firm
Vertical
Larger, with Competitor Evolution
Network, Association
Acquire smaller firms
HorizontalSame size combine/
merge
Organic Growth from within
Copyright © 2011 American Institute of CPAs
Trends and Developments
Consolidation of CPA firms
Recession reduced revenue
Regulatory impediments
Global expansion Specialization
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Copyright © 2011 American Institute of CPAs
What to Consider
Professional judgment vs. rule-based reporting
Systemic biases (e.g., firm size)
Liability, U.S. legal system
Human capital challenges
Newer associations lack long history
Newer associations evolving in time of increased regulation
Shorter timeline to success
Copyright © 2011 American Institute of CPAs
Maintaining Brand for Success
Back up assoc. name with
quality, service, global reach
Know strategy for
crisis management
Firms to have their own crisis strategy in
place
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Copyright © 2011 American Institute of CPAs
New Frontiers
Need to be in Brazil, China, Asia and India
• Challenges may exist in specific regions
Firm management needs to think across borders – needs to be intrinsic/systemic
Grow leadership with global insights for the future
Supporting CPAs
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CGMA
World-Class Resources
Global Employer Outreach
35,000+ CGMAs so far
2011 PCPS CPA Firm Top Issues
21+ Professionals
1 – Partner accountability/unity2 – Bringing in new clients3 – Retention of current clients4 – Fee pressure/pricing of services5 – Developing a succession plan
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Private Companies Practice Section
% of firms with increase in net fees
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012 2010 2008
Private Companies Practice Section
Decrease in net fees
0%
5%
10%
15%
20%
25%
30%
35%
40%
2012 2010 2008
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Resources for Firms’ Issues
CPA Horizons 2025
10 Key Insights emerged
Core Purpose standing the test of time
Core Values substantially unchanged
Core Competencies evolved
Core Services no longer limited
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CPAs … making sense of a changing and complex world
Core Purpose
Core Values
Integrity
Competence
Lifelong learning
Objectivity
Commitment to excellence
Relevance in global marketplace
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Core Competencies
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Communications skills
Leadership skills
Critical thinking and problem-solving skills
Anticipating and meeting needs
Synthesizing intelligence to insight
Integration and collaboration
American Institute of CPAs®
Key Insights• Technology• Pre-Certification & Lifelong Learning• Worldwide Profession• Market Permission• Trusted Attester• Pride in the Profession• Demographic Shifts• Trusted Advisor• Marketplace• Value Proposition
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Financial Reporting
Private Company Financial Reporting – Recent Key Events
Private Company Financial Reporting Task Force Report,AICPA (“CastellanoReport”)
AICPA to work with FAF and FASBto explore GAAP for private companies
Enhancing the Financial Accounting and Reporting Standard-Setting Process for Private Companies, FASB
AICPA and FASB start Private Company Financial Reporting Committee
AICPA supports for GAAP differences for private companies
AICPA Council, FAFand NASBA announce formation of Blue-Ribbon Panel
AICPA supports the work of Blue-Ribbon Panel
Panel releases final report
FAF decision May 23
AICPA supports FAF’s new PCC
AICPA announces financial reporting framework for SMEs
2005 20122011201020092006 2007 2008
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Privately held small & medium enterprises
Less complicated, less costly
US GAAP financial statements not needed
FAF supports as “important and complementary”
Framework to undergo due diligence
Financial Reporting Framework for SMEs
Expected release first half 2013
SEC Final Staff Report on IFRS
No recommendation on incorporation
Concerns with wholesale adoption
Active role for FASB
US stakeholder support for one set of standards
AICPA: Commended SEC staff for its thorough reviewUrged commissioners to consider reportContinued call for adoption option
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Revenue recognition
Leases
Financial instruments
G20 eyes 2013
FASB/IASB Convergence Projects
Final standard expected 1Q 2013
Re-exposure 4Q 2012
Final expected in 2013Various aspects re-exposed throughout 2012, 2013
Final in 2013In April, G20 affirmeddesire for convergence projects to be completed by mid-2013
A&A Roundup
GASBStandards
Single AuditCOSO
• Internal Control-Integrated Framework
•Final Framework expected early 2013
•aicpa.org/COSO
• OMB Advance Notice re: proposed single audit revisions
• AICPA issues comment letter
•June 25 – GASBapproves two new standards
•Net pension liability
•AICPA will develop guidance for auditors
$
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Developing CPAs
CPA Among Best Jobs for Growth
22% 10200K200,000 news jobs will be created during this time
Yahoo! Finance ranked accounting among the Top 10 happiest jobs
The accounting profession is expected to grow by 22% over the next 10 years
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Filling the Pipeline of the Future
199020002012
Human Capital
Women
Diversity
Leadership
Quality Career
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Gen Y Changing Office Structure
Source: TIME 12/21/11
90% of employers enable work flexibility
1/3 of grads say access to social media & ability to choose their devices is more
important than salary
56% of grads would ignore/turn down a job
offer without social media access
2/3 of grads will ask about social media policy
during job interviews
37% of employees would take a pay cut
for more flexibility
125th Anniversary
aicpa.org/anniversary
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Professional Issues & InitiativesAdvocacy• Fed/State Legislation & Regulation• Regulatory Restructuring• Tax• Uniformity & Mobility• Public Policy IssuesPeople• CPA Exam• Young CPAs• Student Recruitment• Minority Initiatives• PhD Creation & Support• 150 hourInternational• IFRS• ISAs• CGMA
International CPA ExamFinancial LiteracyProf. Excellence & Public Interest• Tax Preparer Registration• Enhanced Business Reporting• SOC Reports• Private Company Financial Rep• Sustainability• Audit Quality • Clarity Project• Peer Review & Ethics • Private Companies Practice Section • Specialized Communities & Credentials• CPA Horizons 2025• Business, Industry & GovernmentCPA ReputationCompetition & RiskOperational Excellence
Copyright © 2012 American Institute of CPAs
State of the Profession
Thank You!!!!
[email protected]@cpa.com