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by
Robert Burke
Virginia
Business
November,
2003
It’s
an interesting time to be a CPA, to say the least. In
the aftermath of corporate accounting scandals at Enron
and WorldCom, the demise of accounting giant Arthur
Andersen and new federal laws restricting what accountants
can and can’t do, CPAs find themselves on very
new terrain.
The
Sarbanes-Oxley Act, signed into law in July 2002, brings
potentially good and bad effects. In general it applies
to publicly traded companies and their audit firms and
brings new oversight and restrictions to those relationships.
Which is not a bad thing, says Alan S. Witt of Witt
Mares Eggleston Smith. “Accounting as a profession
... may have gotten a little bit away from its roots
in the past 10 years,” he says.
In
forcing firms back to their roots the new law should
help restore confidence in the accuracy of audit results.
It may also create some opportunities for the multi-office
regional accounting firms. Under the new law, says Witt,
Big Four firms aren’t allowed to do everything
they used to for their clients. “This creates an
opportunity for the middle firms like ours to do some
work for the larger companies.”
The new law also increases the incentive for mergers.
The lead audit partner and audit review partner working
with publicly traded companies must be rotated every
five years, under Sarbanes-Oxley, so firms need enough
partners. “That’s causing many smaller firms
to know they’re going to have to give up their
(publicly traded) clients or merge in order to continue
their relationship,” Witt says.
Some
worry that state legislators might apply rules in the
federal law to privately held companies or nonprofit
groups. That’s happened in some states, says Thomas
M. Berry Jr., president and CEO of the 8,000-member
Virginia Society of Certified Public Accountants. “There’s
a huge divergence between government mandating it and
voluntarily adopting it,” he says. “It would
add another layer of cost and that cost is always paid
for by somebody.”
There
have been changes at the state level in Virginia. The
state’s five-member Board of Accountancy, which
oversees the public accounting industry, raised the
maximum fine for CPAs in enforcement cases from $2,500
to $100,000. The larger fine gives the board a bigger
weapon for dealing with the Big Four firms, says Richard
Pontynen, a partner with Richmond-based Goodman &
Company and chairman of the state society. “To
penalize a national firm $2,500 does nothing, whereas
$100,000 hits them in the pocketbook and gets their
attention more.” The state board also plans to
add two hours of ethics training a year to the three-year
continuing profession education requirements CPAs must
complete.
Of
course, that extra ethics training only helps if there
are CPAs to take it. Recruiting people to the accounting
field has long been a challenge. The number of college
graduates in accounting in the United States has been
dropping steadily for more than a decade. There were
57,360 accounting degrees in 1990, but just 47,895 in
1999, according to one study. Surprisingly, though,
Virginia has lately seen an increase: the number of
candidates taking the CPA exam last year rose 16 percent
over the previous year to 1,794 people.
Pontynen
thinks the appeal of making a fast fortune with a dot-com
or in investment banking in the 1990s cost accounting
programs, he says. “We lost a lot of people. And
I think now that the bubble has burst people are recognizing
that the accounting profession is one of stability,
and they’re coming back.”
There’s
an industrywide effort to recruit candidates among high
school and college students and to show them what the
career is about. “It’s not the old green eyeshades
that it used to be” he says. Goodman & Company,
for example held its first “Goodman Accounting
Challenge” contest last year for accounting students
from colleges in Virginia and Maryland. The contest
was won by a team from James Madison University.
The
industry is also trying to repair its image and according
to one poll is having success. In a Gallup poll last
year, accounting received an equal number of negative
and positive ratings. This year the margin was 31 percent
higher for positive ratings. Pontynen says despite the
high-profile misconduct of a few, most CPAs have kept
the trust of the companies they work with. “We
have not lost credibility with our clients,” he
says.
Credibility
is evident among the people included in this year’s
Super CPA contest. Virginia Business, along with the
Virginia Society of Certified Public Accountants, sent
ballots to 5,685 CPAs and tallied their responses. This
year we’ve profiled winners in 10 categories —
more evidence of how widespread the need is for accounting
expertise.
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