WORTH REPEATING

The CPA "brand" will differentiate us from the competition.

Who Are We As aProfession—and What Must

We Become?B Y R O B E R T K . E L L I O T T

lection to chairman of the board of the AICPA is a great honor: Itcomes by vote of my peers, which means a great deal, and it puts me in

the company of past chairs. Election to such a post is a rare privilege, provid-ing a unique opportunity to serve the profession. That's a high obligation, butknowitig every one of you feels the same way about yotirposition, and that we arc all in tliis together makes it easier.

Turning to the great business of our Itistitute, 1 will sharesome thoughts about our challenges and opportunities.

First, I'll ask you to summon up a mental image: that ofa human being with no nervous system. You are probablyenvisaging an inert blob of protoplasm, entirely powerlessto perceive its environment or to act with purpose. Thenervous system is what converts that protoplastn to an ef-fective human being.

Well, an accounting system is the nervous system of theenterprise that permits it to perceive and act. It converts aninert bundle of assets to a working enterprise.

We accountants have been the people who designed andoperated these enterprise nervous systems—systems that atthe tnicro level pertiiitted the achievement of enterprise-objectives and at the macro level permitted the mercantile,industrial and post-industrial revolutions.

Our technology for doing so was at once brilliant, efTec-tive and efficient. The system involved a double entry foreach exchange with the outside world, representing the

The CPA. Never underestir

In his first address as chairman of the AICPA board ofdirectors, Robert K. Elliott told the AICPA council hesees CPAs of the future as the people who help indi-viduals and organizations through the strategic use ofinformation systems.

AICPA Board Chairman Robert K. Elliott envisions a professionthat will leverage its vast array of skills to take a premier place inan information-driven society.

! - fb ruary 2II11U JOURNAL ,1/ ACCOUNTANCY 8 1

WORTH REPEATING

benefit and the sacrifice to the enter-prise. That information was labori-ously and expensively captured, andonce we obtained it we collected nofurther information—only analyzedand reanalyzed that information intobalance sheets, income statements atidother reports.

Now, collection of fresh informa-tion is cheap, but we still adhere to theold accounting model which implicit-ly assumes information is costly. As aresult, we have lost control of the en-terprise nervous system to other infor-mation professiotials who do not sharethat assumption.

We CPAs need to converge withthese other information professiotials,just as information technology' is caus-ing computing, communications andcontent to converge. As informationtechnology permits enterprises to bet-ter create and use information andknowledge, the competitive market-place demands it. In the future, thewinners and losers among our clientsand employers will be determinedprincipally by their capacities to createand use knowledge—that is, by the"bandwidth" of their nervous systems.

Our challenge—and our opportu-nity—is to be the principal agents bywhich this is accomplished. This is nota new role—it's what we've alwaysdone. But technology alters the toolsand competencies, speeds the processand magnifies the efforts. Tlie ques-tion is whether we can transform ourprofession to realize this opportunity.

What I've described is captured inour Vision. And it was captured bythousands of our members, who spoketheir minds in future forums allaround the country.

So I want to explore. Where will theVision take us? Who are we becoming?

I want to remind you first thatpractical people created the Visionfor practical reasons. We should

always keep in mind what drove themto set us on a path that could meantremendous change.

Software threatens to diminish someof our traditional services. It makescompliance work in tax and auditingless labor-intensive, but eventually

"I foresee that CPAs willunderstand the risks and

opportunities of theglobal economy and

profit from theinternational services."

might replace work dotie by CPAs.Over the long term, businesspeopleand others are not going to pay a CPAto run software they can run them-selves. Already, business accounting isdone by software to a far greater degreethan in the past. It reduces the need formanagerial accountants and makes in-roads on the need for compilations.Competition from nonCPAs has be-come more intense and promises togrow. If banks can apply credit scoring,as some now do, they can also turn tosome form of automated auditing tosatisfy themselves about the financialcapabilities of aspiring borrowers.

Services can be rated by their po-tential remuneration, and the futuredoes not look promising for many ac-counting and tax services as futurerevenue producers. The marketplaceseems to place less value on comph-ance work and data gathering than onadvisory assistance. Every branch ofthe profession must consider probabledemand for its services in the world 10and 20 years from now. What willcorporations need most from theirmanagerial and outside accountantsand, therefore, value highly? What willgovernments and other not-for-profitorganizations prize most from theiraccountants or other information ex-perts? What will governments need tolearn from accounting professors?

The message is clear that the pro-fession needs to reinvigorate its serviceofferings. Even in the current re-

markable business cycle, with CPAsmaking good money, we cannot ig-nore the long-term risks the professionfaces. But the potential revenues fromnew services are even stronger incen-tives than the risks. The professioncouldn't have fashioned a marketplaceany richer if it had free rein to do allthe fashioning itself.

We must take the steps needed torealize the Vision. Five are imperative:

1. We must contitiue to developnew services.

2. We must reform pre-entry andcontinuing education to preparemembers to take advantage of the op-portunities in the marketplace.

3. We must create a Web-based In-stitute, one that becomes a knowledgehub for the profession.

4. We must market in order to in-crease demand for the profession's ser-vices and to make the professionconsistently preferred to its competitors.

5. We must strengthen our feed-back loops from the marketplace to as-sure that we continually adapt ourservice offerings and quality to clientand employer needs.

We have made progress on each ofthese imperatives—more in some in-stances than in others but, in everycase, the largest portion of the taskhes ahead.

Where will the Vision transforma-tion take us?

I t will take us to a new relationshipbetween the AICPA and its mem-bers. Actively developing services

and helping members adopt them is anew role for the AICPA. The AICPAonce controlled accounting standardsand still controls auditing standards. Ithas defined standards for compilations,reviews and nonaudit attestations. Ithas provided guidance on practicemanagement and courses to upgradeskills and knowledge through CPE.But ongoing new-service develop-ment is a new role. And since theAICPA is a voluntary organization, itis a role members, as well as AICPAstaff, must take on. Stronger bondswill be forged within the profession asmembers contributing their time andexpertise develop new services and the

8 2 J D U H N A L , ] / A C C O U N T A N C Y F -ch rua ry 21)1)11

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guidance to help other CPAs bringthem successfijlly to market.

I foresee the whole process taken toa new level when we create a fullyWeb-based profession. The Institutehas done some wonderful things withits Web site. The Center for Excellencein Financial Management providesmembers with knowledge, contacts.Institute products and other resources.But a fully Web-based profession willgo much ftirther. Ideally, each memberwill be able to provide the resources ofthe whole profession to meet anyclient's or employer's needs anytime,anywhere—there will be rivers offeedback loops. Response times for de-veloping services and service tools willmake what we do today (in terms ofspeed) seem glacial by comparison.The Web site will be user friendly, andit will be a constant resource, never forlong relinquished during a CPA'swork. The Web-based profession willbe more tightly bound by sharing andcommunicating than it is today.

I foresee CPAs' being fully able toidentify the needs of their customersand potential customers. It doesn't mat-ter whether the customers are clients,employers or students. Customer needs,more than anything else, will determinethe value of what we ofter. Individualfirms can then tailor existing services ordetermine the costs and benefits ofdeveloping new ones; they must knowwhen to gear up to provide a servicedeveloped by the AICPA. There maybe markets for every AICPA-devel-oped service across the profession as awhole, but no service is right for everyfirm in every local market.

I also foresee that CPAs will under-stand the risks and opportunities of theglobal economy and profit from newinternational services. The days of agrowing American economy substan-tially insulated from the rest of theworld are long gone. Economic con-nections abroad are multiplying. It'swidely accepted that interdependencyamong nations must be ongoing ifworld economic growth is to bestrong. Some money markets are glob-al, and equity prices on different na-tional exchanges affect one another.The economic dislocations in Asia and

Russia, which are still playing them-selves out, increase pressure for what iscalled transparency. Governments andinternational organizations-—includingthe IMF and the World Bank—com-plain about the quality of accountingand auditing. Meanwhile, some peo-ple ask whether national differences inaccounting standards are nontaritftrade barriers. Like it or not, accoun-tants have made it into the globaleconomy by having, at least, a recog-nized role. Now is the time to make itin added revenues.

New and improved services re-sulting from changes in in-ternational economies already

have precedents. The multinational au-dit and the accounting problems ofcross-border transactions each go backsome time. Some CPAs specialize inexpatriate taxes; others have helpedbuild transoceanic corporate computernetworks. Accountants help foreign na-tionals set up businesses in the UnitedStates and help U.S. businesses set upbranches abroad. These precedentsshould be prototypes for tiiture services.

I foresee a CPA "brand" that differ-entiates our members from the com-petition in information services andconsistently attracts business. Our ad-vertising campaign has already helpedimprove the image of our members inthe marketplace, but branding is a sub-tle and complex game—one where

"CPAs will identify anddeploy knowledge neededfor strategic planning and

investments, formarketing decisions, for

measuring effectiveness—all this and more."

hard questions regularly must be asked.Everyone in the profession knows theCPA credential originated in licensingprimarily intended to protect the pub-lic from faulty audits. Yet the profes-sion—our membership—stands for somuch more—from tax to systemswork and from WebTrust to financialplanning and strategic consulting. Inother words, there's a discrepancy be-tween the brand we advertise and itsformal meaning. With the projectedgrowth of services, the discrepancymay grow. It makes no sense to adver-tise our brand without intensely scru-tinizing what it means, how themeaning is changing and how we canmake it more powertlil.

What will emerge is a brand thatunites and distinguishes our membersas never before, a brand that calls tomind distinctive expertise, profession-alism, trustworthiness and unbreachableintegrity. Nothing less would be con-sistent with our Vision statement, andnothing less in the way of ethics andprofessionalism would be consistentwith the traditions we have built andtake pride in. We have no choice if wewish to succeed; if we stray from ourpublic-interest traditions, we will notrealize the Vision. That is why the Vi-sion states our core values of integrityand objectivity without equivocation.

I foresee a time when CPAs will beexperts in all phases of leveraging in-formation. To my mind, this is ageneric idea. It means using informa-tion as a tool to solve problems andotherwise achieve objectives. Tradi-tional accounting does this by enablingbetter investment and managerial deci-sions to be made. But I am talkingabout a much wider range of informa-tion leveraging. The basic ingredientswould be broad business knowledge,analytical power and expertise in whatI'll call "knowledge science."

You may well say that all decisionmakers use information to solve prob-lems, even if they don't use fancyterms like "knowledge leveraging" todescribe it. That's true. What 1 foreseeis that C PAs will be able to leverageknowledge so much better than othersand will add so much expertise ininformation skills that decision makers

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will greatly demand those CPA ser-vices. The combination of skills anddegree of expertise will be unique.

Knowledge leveraging will shape awide range of CPA services. Cl'As willbe able to identify relevant informa-tion and its sources, perform mod-eling, devise and apply performancemeasurements of all kinds, design sys-tems to obtain needed information,advise on controls and security andotherwise ensure information's rele-vance and reliability'. CPAs will identi-fy and deploy knowledge needed forstrategic planning and investments, formarketing decisions, for monitoringinternal and external conditions, forconducting daily operations, for maxi-mizing the productivity of employeebehavior and for measuring the effec-tiveness of operations, personnel andprocesses. All this and more.

What I've sketched will re-quire new skills and edu-cational reform, but it will

also build on skills CPAs now have inhand. Just consider the array of skillsCPAs have. They go way beyond tra-ditional accounting and auditing andtaxation, way beyond what is requiredto pass the CPA exam. The plain factis that C'PAs, in adapting to the worldin which they find themselves, haveacquired many information technolo-gy, measurement and advisory skills—-none of which are officially recognizedas uniquely owned by them. The skillsare by no means uniformly spreadthroughout the profession. And theyare not all being taught consistently inaccounting programs. But some blendof those skills, with others, will makethe future C'PA ready to meet marketdemand for knowledge leveraging.

I foresee that CPAs' efforts, togetherwith the work of our members in theacademic world, will redefine the bodyof knowledge that is the de facto stampof an accounting professional. Everyprofession is defined by the body ofknowledge that differentiates it fromnonprofessionals and from other pro-fessions. There has always been somejostling at the boundaries betweenprofessions. Where does medicine endand pharmacy or nursing begin?

•v 2 0 1 1 0

Where are the boundaries betweenpsychiatry, psychology and therapeuticsocial work? Closer to home, where isthe boundary between law and aCPA's tax work? Where does attesta-tion end and product testing begin?

So a little ftizziness at the boundariesof a profession's body of knowledge isin no way troubling. What is importantis that the body of knowledge success-fully establish a claim to expertisedeserving recognition as a profession.Changes in a profession's body ofknowledge are to be expected. Makingnecessary changes takes thought, imagi-nation, a mindfulness of traditions,good sense about what is possible andawareness ofthe public interest. Wehave those qualities now just as theforerunners in this profession had them.

A definition of accounting thatcaptures more of what accountants ac-tually do, and can do, goes like this:Accounting is the information infra-structure necessary for an organizationto achieve its objectives. Obviously,that has some breadth, it embraceswhat I call knowledge leveraging andincludes our tradition;il work. I see theCPA ofthe future as a person skilledin information leveraging, someonewho helps individuals and organiza-tions achieve their objectives throughthe strategic use of information andinformation systems.

What I have foreseen implies muchchange-—^indeed, tidal changes thatmay rip apart many of our traditionalbelief and structures.

Some will point to our traditionalethical precepts and ask whether weshould resist change to protect profes-sionalism from commercialism.

Our ethical roles, however, arenot ends—they are means. The endwe seek as a profession is to equipdecision makers with high-qualityinformation.

Major decisions are based on tlieinformation we provide or audit, andthe influence of our work is enor-mous. To provide irrelevant or unreli-able information is to cause baddecisions and, therefore, bad out-comes. We are always mindful oftheenormous responsibility in all that wedo as accountants and auditors.

WORTH REPEATING

The necessity of avoiding adverseconsequences provides us with moralimperatives: We must do nothing thatobstructs our obligation to providehigh-quahty information—that is, in-formation that is relevant, reliable andtimely. To repeat: Our ethical roles areonly means to achieve that end and arenot sacrosanct on their own account.

A cautionary tale may be in or-der. The medical profession,faced with forces of technolo-

gy, changing social needs and valuesand a potential rearrangement ofthehealth care paradigm, preferred tocling to its old values. The AmericanMedical Association tried to hold backthe hands on the clock. But it couldnot resist those forces. Change came.But it did not come on the AMA'sterms, and the AMA lost influenceand membership. Today's doctors areno longer independent professionals—many are hourly workers in healthcare conglomerates.

We CPAs are fortunate to have astrong and representative AICPA. Ourmembers, acting alone, cannot reshapetheir environment. They can do soonly by acting together, and the AICPAis their—our—only effective veliicle.

For our profession to realize thegreat opportunities within its reach,we must have a clear goal, sufficientresources and effective leadership. Letme restate that more precisely: Wemust have vision, power and courage.

We certainly have the vision: Ourmembers have provided a powerful,forward-looking Vision.

And. as a profession we have thepower, because the half-million CPAsin America produce tiearly one per-cent ofthe total value added in oureconomy.

So the vision and the power em-anate from our colleagues. But muchofthe courage must come from theleadership. I believe we have it. I be-lieve we'll succeed. And I look for-ward to working with you to achievethat success.

For a report on the proceedings ofthefall meeting ofthe AICPA council, seeInside AICPA, page 101. •

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