AccountingWEB is more than just a UK team of journalists and financial and technology experts. Our US colleagues at AccountingWEB.com share their ideas and insights.
2010: Backing into the future?
The year 2010 will mark the start of a breathtaking trip into the future for accountants and auditors, but are they just 'backing into the future'?, asks our US colleague Larry Perry.
Accounting standards are returning to a 'principles based' set of rules, the way it was before we had the rules! Practitioners and standards-setters are recognising that risk drives the performance of all levels of accounting and auditing services, the common sense rule some of us 'ancients' used back in the dark ages. Could it be we have come full circle and once again we're using our common sense to guide our work? If this is so, we need to make some changes to the ways we do things. Read on.
In the mid-1980s when the expectation-gap pronouncements nearly consumed us, common sense was covered up with all kinds of empirical studies, frameworks and formula approaches to their application. It took us a while to wade through the mire but most of us were able to recover our ability to think and reason. Then along came the flood tide of risk assessment standards in 2006, the beginning of accounting and auditing convergence projects and globalization of everything dear to us. I can still hear the sounds of CPA practiitioners gasping for air as they struggle not to go down for the third time!
You've probably heard the story of the man than went to the doctor with pain in his shoulder. As he extended his arm in a semi-circle over his head he complained, "This really makes my shoulder hurt." The doctor replied, "Well, don't do that anymore!" We've got to follow that doctor's advice and find ways to stop doing the things that are hurting our accounting and auditing practices! Here are some things that are causing CPA firms pain:
- Accounting standards overload--We are responsible for complying with accounting rules that no one wants, not our clients nor the users of their financial statements!
- Practice aids and forms dependency--Some CPA firms' staff personnel have been caught in the tsunami of auditing standards of the latter years and have grabbed the nearest practice aid to stay affloat. There is no time to understand, only paddle!
- Fear of peer review--Intended as a way to help CPA firms improve the quality of their practices, in some states it has become adversarial and punitive in its purpose. Afraid of the power of a peer reviewer, we may protest but meekly but crawl back into our cage when the lion roars.
The doctor said, "Don't do that anymore!" We need to begin planning ways to avoid the application of cumbersome GAAP rules. We've got to train our staff personnel to know when, and when not, to use standard practice aids from major publishers. We must train our people to know the requirements of auditing standards so they can do the minimum amount of work in each engagement's circumstances. Once again, firms of all sizes must begin to create proprietary auditing practice aids that meet the needs of their client engagements and challenge the peer reviewer to prove them wrong!
It's time to stick our heads out the window and shout: "We're mad as hell and we're not going to take it anymore!" I mean right now! Post your "shout" on this blog and tell the standard-setters why you are fed up!