Takeaways from the 2023 AICPA & CIMA Conference (Part 2)

As we noted in last week’s post, GAAP Dynamics attended the AICPA & CIMA Conference on Current SEC and PCAOB Developments in Washington D.C. on December 4-6, 2023. In that post Bob Laffler and Chris Brundrett shared their key accounting takeaways, focusing on the statement of cash flows and segment reporting. In this post, Vicky Hale and Mike Walworth each share a key auditing takeaway from the conference.

PCAOB is Stepping Up its Game in BIG ways (Vicky Hale)

Does anyone else feel like there is a new Sheriff in town? Erica Williams, the new chairwoman of the PCAOB certainly seems to be taking control in a big way! Most notably, there appears to be two big areas of focus happening right now within the PCAOB:

1. Modernizing the existing standards
2. Enhancing inspections and strengthening enforcements

This makes sense considering the four-year strategic plan outlined by the PCAOB is also focused on these two areas (along with improving the PCAOB’s organizational effectiveness). Specifically, here are some of the items for each of these areas that Chair Williams spoke about during her speech:

Modernizing the existing standards

The PCAOB has been around for 20 years at this point (and by the way, 20 years ago was 2003 and not 1983! Where have the years gone?). Chair Williams was quick to point out that the world has changed dramatically in those 20 years. Many of the standards the PCAOB is considering updating were first adopted in 2003 based on standards set by the profession on what was intended to be a temporary basis. The issued and proposed standards cover topics like:

• Strengthening the requirements for audits involving multiple audit firms,
• Quality control standards,
• The confirmation process,
• Core audit principles, like reasonable assurance, professional judgment, and professional skepticism, and
• The now infamous proposed standard on noncompliance with laws and regulations (NOCLAR).

It is also worth noting that the PCAOB isn’t the only auditing standard setter that has been busy. The AICPA has also been working hard the last few years putting out many updated standards, whether those are Statements of Auditing Standards (SASs), Statements on Standards of Attestation Engagements (SSAEs), or Statements on Quality Control Standards (SQCSs).

Are you looking to get up to speed on the latest auditing standards under PCAOB standards, U.S. GAAS standards or ISAs? Make sure you check out our newest eLearning Library – the Audit Library! Subscribe today and have access to all our existing audit courses and every new course as soon as it is released!

Enhancing inspections and strengthening enforcements

While the progress the PCAOB has made in modernizing standards in just 2 short years is impressive, what stands out the most to me is the drastic shift in intensity around the PCAOB inspections and enforcement process. Chair Williams is on a mission to restore the trust between public accounting and the investor and, boy, does it show! In fact, a real point of pride for Chair Williams is the fact that the PCAOB imposed the highest penalties in their history last year! Chair Williams has also noted that inspection trends are headed in the wrong direction. What are some of the key themes of recent inspection findings?

• Auditing internal control over financial reporting
• Evaluating audit results
• Responding to the risks of material misstatement
• Obtaining sufficient appropriate audit evidence
• Auditing estimates, including fair value measurement
• Not sufficiently evaluating the appropriateness of the issuer’s accounting method

What can you learn from the findings of the PCAOB? A lot! Even if you’re not an auditor of public companies, we just saw above that the PCAOB and U.S. GAAS are becoming more converged, which means the potential shortcomings of public company auditors are also the potential shortcomings of private company auditors! Make sure you’re prepared for your next peer review or inspection. Download our FREE PCAOB eBook now and learn from recent PCAOB inspection report findings and trends.

New Endangered Species Alert – CPAs (Mike Walworth)

I remember it like it was yesterday. Coming home after finishing my freshman year at the University of Florida, I told my dad I hadn’t decided upon a major. My dad pulled out the classified section of the newspaper (for reference there were still actual printed newspapers in 1990) and, after scanning the “Help Wanted” section, he stated “You’re going to major in either nursing or accounting because that’s where the jobs are!” And since Gaylord “Greg” Focker (aka Ben Stiller in “Meet the Parents”) had yet to put male nurses on the map, I chose accounting.

Less students are majoring in accounting

Well, evidently, today’s graduates do not have Bill Walworth for a dad, because less and less students are receiving degrees in accounting. According to a recent Wall Street Journal article, approximately 47,000 student’s earned a bachelor’s degree in accounting in the 2021 to 2022 academic year, down 7.8% from the prior year. A similar decline can be seen with students receiving a master’s degree in accounting. At the AICPA Conference, one of the speakers noted that there has been a 17% decline in employed accountants and auditors over the past two years.

Reasons for decline

What’s going on? Some of the reasons cited for these declines include:

• Low salaries compared with investment banking, consulting, or technology;
• Long hours and high stress resulting in burnout; and
• Requirements for CPA certification

It’s that last bullet, specifically the 150-hour rule, that has garnered a lot of attention in recent months. Specifically, why would students, who are already loaded with college loan debt, chose to incur the costs for an additional year in college when other professions only requiring a bachelor’s degree (120 hours) pay more. Fair point. If you want to learn more about this rule and our opinions on it, check out this episode of our GAAP Chats podcast.

Possible solutions

Many speakers made a direct correlation between audit quality and the importance of attracting and retaining talent. AICPA Chair Okorie Ramsey noted several initiatives to increase interest in the profession, including apprenticeship programs and advocating for accounting to be recognized as a STEM career (so it will now be “STEAM?”) to garner outside funding. As an aside, Chair Ramsey also mentioned that the decline in audit quality, which was mentioned A LOT at the conference, could be a result of the lack of training for new auditors hired during the pandemic. Uh, hello? GAAP Dynamics is here to help!

Removing the 150-hour rule, increasing pay, and providing a better work/life balance are all, in my opinion, temporary fixes to a larger problem. I believe the profession has a PR problem. Frankly, accounting isn’t sexy, or at least it is not portrayed as such. The SEC Chief Accountant, Paul Munter, seems to agree (well, not really the “sexy” part). At the conference, he talked about accounting as a profession, noting CPAs have a public interest calling and a lifelong commitment to learning. Furthermore, he recommended that we better explain the profession’s value by focusing on how it supports the broader economy and wealth accumulated, not just capital markets, and that such communication is imperative to address the declining pipeline of accountants.

According to the National Association of State Boards of Accountancy, as of September 1, 2023, there are 672,587 actively licensed CPAs. If each CPA had at least one child and “gently persuaded” them to enter the profession, along with a PR blitz to high schools and colleges to promote the profession, I think we can prevent our profession from being extinct. It’s basic biology!

Closing thoughts

Well, I’m doing my part to repopulate the CPA pool. My son is majoring in accounting at James Madison University and recently accepted an internship for summer 2025 with my alma mater, KPMG in Richmond, VA. He’s certainly heard the story of his grandpa pushing me into the profession, but when asked why he chose accounting, he replied “I looked at you. You’re a CPA and you seem to have a pretty good life.”

Indeed son, I do have a good life. I am blessed in many ways, including being part of a noble profession which helps me provide for my family. And through my work with GAAP Dynamics, I am doing my best to make sure future accountants are equipped with the knowledge they need to succeed.

We wish you and your family Happy Holidays and a safe, peaceful, and bountiful new year!

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Disclaimer
This post is for informational purposes only and should not be relied upon as official accounting guidance. While we’ve ensured accuracy as of the publishing date, standards evolve. Please consult a professional for specific advice.