Special Interest Groups

• WHAT IS ITS MISSION?
• HOW IS IT STRUCTURED?
• PRIMARY FUNCTIONS
• PROGRAMS
• BUDGET INFORMATION
• HISTORY
• CURRENT POLITICAL ISSUES
• FUTURE DIRECTIONS
• GROUP RESOURCES
• FAST FACTS
• GROUP PUBLICATIONS
• BIBLIOGRAPHY

ESTABLISHED: September 20, 1887
EMPLOYEES: 750
MEMBERS: 332,335
PAC: American Insitutes of Certified Public Accountants Effective Legislation Committee

Contact Information:
ADDRESS: 1211 Avenue of the Americas New York, NY 10036
PHONE: (212) 596-6200
TOLL FREE: (888) 777-7077
FAX: (212) 596-6213
E-MAIL: Memsat@aicpa.org
URL: http://www.aicpa.org
CHAIRMAN: Stuart Kessler
PRESIDENT; CEO: Barry C. Melancon

WHAT IS ITS MISSION?

The American Institute of Certified Public Accountants (AICPA) is the national professional organization for all Certified Public Accountants, commonly known as CPAs. The institute's own mission statement claims a single fundamental purpose: "to provide members with the resources, information, and leadership that enable them to provide valuable services in the highest professional manner to benefit the public as well as employers and clients."

To achieve this purpose the AICPA pursues a number of major objectives. To protect and promote its members' interests, it represents all CPAs before government and regulatory bodies. It establishes uniform standards for the certification and licensing of CPAs, in order to protect the "CPA" designation and keep it meaningful. Similarly it establishes professional standards for the work of all CPAs, and monitors the performance of its members. Through its public awareness campaigns, the institute also endeavors to promote confidence in the integrity and professionalism of CPAs.

HOW IS IT STRUCTURED?

The AICPA is a private, nonprofit professional association. Its top leadership is divided into three significant bodies: the Governing Council, the Board of Directors, and the Joint Trial Board. The Governing Council is the policy-making body of the institute, and meets only twice a year to determine programs and policies. It includes 260 members with representatives from every U.S. state and territory. The Board of Directors, the acting executive committee of the Council, directs the institute's activities between council meetings. The board consists of a chair, vice-chair, immediate past chair, and president; three representatives of the public; and 16 directors. The chair has ultimate authority in board proceedings, while the president is the chief administrative officer of the AICPA staff. The Joint Trial Board enforces professional standards by settling disciplinary charges against state societies and AICPA members.

The work of the AICPA is divided among approximately 135 boards, committees, subcommittees, and teams, which consist mostly of volunteers and which are rounded out by members of the AICPA staff. Some of these are designated "senior" committees by the institute's bylaws because of their importance. Senior committees include the Board of Examiners, which administrates the Uniform CPA Examination, the Information Technology Executive Committee; the Tax Executive Committee, and ten other boards or committees.

Some senior committees are further distinguished as "senior technical" committees and boards, a designation that means they are authorized to make public statements on matters relating to their expertise—without prior clearance from the council or the board of directors. These eight committees include the AICPA Peer Review Board, which aims to improve the quality of services offered by professional accountants, the Professional Ethics Executive Committee, and the Management Consulting Services Executive Committee, which provides guidance to CPAs engaged in consulting work.

The additional committees and teams in the AICPA are divided among five basic functional categories. Technical teams such as the Personal Financial Planning Team develop standards and integrate new technologies; member interest teams such as the Publications Division provide members with resources; self-regulation teams such as the Professional Ethics Team help to maintain professional standards; external relations teams such as Academic and Career Development reach out to members of Congress, the public, and potential CPA candidates. Administrative teams such as the Planning and Research Team help to carry out the programs and policies of the AICPA staff.

PRIMARY FUNCTIONS

One of the AICPA's most important functions is to promote uniform certification and licensing standards for professional accountants. In fact the institute has absolute authority over whether an accountant should be called a CPA. It designs, publishes, administers, and grades the Uniform CPA Examination, which must be passed before an accountant can be granted a CPA license.

In its exclusive authority to develop accounting and auditing standards for every member of its profession, the AICPA enjoys an unusual degree of power for a private organization. The institute's two standard-setting boards, the Financial Accounting Standards Board (FASB) and Governmental Accounting Standards Board (GASB), develop these standards subject to the approval of the Securities and Exchange Commission (SEC), a federal regulatory agency. The SEC's interest in accounting arises from the fact that a company's financial statements are often a primary factor in determining the worth of its stock on the open market.

Once FASB or GASB standards are approved by the SEC, they virtually have the authority of law. In addition to the power of the federal government to enforce these rules, the AICPA has its own Standards Committee, Ethics Committee, Peer Review Board, and Joint Trial Board, which serve to hold its members to the highest standard of ethics and professionalism. The AICPA also provides technical assistance to government and private-sector rulemaking organizations in the areas of taxation, banking, and examination of financial resources.

Besides serving as a watchdog for its members, the AICPA serves a number of functions meant to protect and strengthen the ranks of CPAs in the United States. It recruits highly qualified candidates for the CPA profession, supports the development of academic programs, and provides a vast array of resources—from publications to national conferences and seminars—to help CPAs in their professional development. The Institute also serves as an advocate for its members, representing them before the government and other regulatory bodies. The AICPA's lobbyists in Washington monitor legislation that has a potential impact on accounting or auditing practices, or the business practices of CPAs. Once the AICPA decides where it stands on such legislation, it mounts a strong campaign for passage, amendment, or rejection of pending bills.

PROGRAMS

Among the AICPA's many programs are educational projects and services for the academic community. Because the AICPA believes the future of the profession depends on how accounting students are educated, these programs promote good curriculum development and instruction, and encourage professional interaction. One example is the Industry Field Visit Program, run by the AICPA to give educators the opportunity to get first-hand exposure to current practices and issues occurring in the corporate sector. Educators can visit corporations, hear presentations on new practices, and actually observe operations in progress. The hope is that these visits will foster a better understanding of the types of skills necessary for accountants to succeed in industry.

The AICPA also conducts a number of conferences and seminars designed to help CPAs in specialized fields. Examples from 1998 include the National Real Estate Conference in Beverly Hills, California, where accountants met to receive an overview of the industry, critical technical updates, and an understanding of the industry's accounting, auditing taxation and technology; and the National Conference on Credit Unions, held in New Orleans. The AICPA also holds one-week training schools, for hands-on, interactive, classroom-style training. Accountants at the schools participate in exercises and simulations that give members a wealth of information and new ideas.

The CPA WebTrust is an AICPA certification program that ensures that the on-line transactions of companies—including accountants or accounting firms—are sound, secure, and encrypted. Authentic WebTrust sites are marked with the CPA WebTrust insignia, and can be verified by viewing a registered digital identification code. By ensuring safe and effective electronic commerce, the institute hopes to preserve and strengthen a growing sector of activity for its members.

BUDGET INFORMATION

The AICPA is a nonprofit organization whose operating revenues are accumulated from a number of income sources. Some 40 percent of the AICPA's money comes from membership dues, and an additional 27 percent is collected from the sale of publications and software authored by the institute. Fees collected for professional development and service conferences, along with the administration of professional examinations, account for about 24 percent of the institute's revenue. About nine percent of AICPA's annual income is interest earned on investments. According to the Institute's 1997–1998 annual report, these revenues amounted to about $143.5 million.

The AICPA's expenses during this period surpassed income, totaling $145.6 million. Major categories of expense included those related to producing publications and software (21 percent); professional development and service conferences (17 percent); general management (12 percent); and technology and technical assistance (13 percent). Other expense categories are regulation and legislation; organizational development, and communications/public relations.

According to the Almanac of Federal PACS 1996–1997, the AICPA's Effective Legislation Committee contributed slightly more than $1.7 million to the campaigns of political candidates during the 1993–1994 election cycle: an amount distributed nearly equally among Democratic and Republican candidates.

HISTORY

When the American Association of Public Accountants (AAPA), the AICPA's predecessor, was founded in 1887, the biggest obstacle facing accountants in America was a lack of formal legal recognition of their public practice. Among the first goals of the organization was to establish a professional examination and a distinctive title. However it took a while for many Americans to become interested in the organization. It had been founded and led by a group of British-born New Yorkers and interest was so low that by the turn of the century the association only had about 100 members.

In 1913 as the passage of a significant tax law created tax brackets, and income rather than wealth became the measure of the nation's well-being, the market for accounting services expanded exponentially. The effect on the accounting profession was mixed; while the new law provided security for many practitioners, the demand also attracted unqualified people who had no qualms about calling themselves accountants and tax experts.

The AAPA continued to have trouble influencing state legislation to follow its recommended certification standards, and in the early twentieth century it refused to recognize CPA certificates from several states whose standards did not meet its own. By 1915 the situation had deteriorated to where the AAPA would recognize certificates from only 30 of the 39 states that had CPA certification laws. The AAPA was at a crisis point. In some states, it considered legislation to be inadequate. But when appeals were made for the establishment of one single, national standard, the federal government started to make noise about taking control of the certification process itself. To make matters worse, charges that the association was elitist and exclusionary were hard to disprove. In 1916 only three of 156 candidates were issued CPA certificates in New York.

It was clear that if the association was to survive, the AAPA would have to reorganize. The new AAPA, called the American Institute of Public Accountants after 1917, would have the authority to admit new members on an individual basis, rather than approving the decisions of the separate states. The reorganization did quiet criticism and prevent federal intervention, but its abandonment of the CPA certificate also left the organization open to competition from a rival organization, the American Society of CPAs (ASCPA), a federation of state societies.

After the Securities Acts of 1933 and 1934

The Great Depression and the subsequent Securities Acts of 1933 and 1934, however, soon eliminated any desire for competition between the two rival professional accountancy groups. Establishing a new federal agency, the Securities and Exchange Commission, to regulate the financial reporting process for publicly traded companies, the 1934 act increased the demand for accounting services, conferred upon CPAs the responsibility to help create and uphold investor confidence in the public markets, and threatened the professional autonomy of accountants. The AIPA and ASCPA merged in 1937 and, in order to protect the status of the profession, limited the new institute's membership to certified public accountants. It was in 1957 that the institute finally adopted its present name, the American Institute of Certified Public Accountants (AICPA).

For the new AICPA, the most important priorities were the standardization of accounting standards among all professionals—a process begun in cooperation with the SEC in 1937—and the strengthening of academic training for CPA candidates. By the 1970s the AICPA had established the university as the setting for the education of most of the nation's CPAs. In 1973 the institute formed the Financial Accounting Standards Board (FASB), a policy-making body that remains one of the most powerful in the private sector.

In the 1980s and 1990s the AICPA faced new challenges. The tasks of accountants were growing increasingly complex, and frequently involved transactions outside the United States. The emergence of the global capital market, along with an expanding role for accountants themselves, led to the ongoing expansion into areas such as education, management consulting, and information technology. The AICPA has done its best to stay current with the rapidly changing profession and accordingly, to develop standards of practice that will ensure professionalism in these growing fields.

CURRENT POLITICAL ISSUES

During the 1990s the AICPA's power to determine accounting rules for all CPAs created controversy among some business owners. While the SEC has had the authority to establish accounting rules and procedures for public companies since 1934, it has since relegated this authority to the AICPA's Financial Accounting Standards Board (FASB). Many members of the business community are uncomfortable with this degree of regulatory power in the hands of a privately-funded organization. Once approved by the SEC, the FASB's rules and standards carry the full force of SEC regulations.

In fact the FASB's power became the subject of federal legislation in early 1998, in the form of the Financial Accounting Fairness Act (FAFA). The primary purpose of FAFA, as it was introduced to the House of Representatives, was to allow companies who were unhappy with an FASB rule to file a grievance in the federal court system. The current system allowed for appeals to be made only to the SEC—the very body which had approved the rules. Some businesses thought this practice was unfair. The AICPA came out strongly against FAFA, stating that it was a push by a "special interest group," unhappy with the results of its appeals, to influence the way accounting rules were made in this country.

Case Study: The U.S. Film Industry

The American film industry may well have been the "special interest group" the AICPA was referring to in its public statement against the Financial Accounting Fairness Act. The bill was introduced on the floor of the House of Representatives less than one month after the FASB announced its intention to change the rules by which accountants in the film industry were operating.

For years many film companies had engaged in somewhat dubious accounting practices. In order to keep investors happy and to downplay films that were not economically successful, accountants would distribute high costs associated with a film project, such as advertising, a number of years into the future. Their justification for this was that even if a film did badly in the United States, it could still make money in the future through foreign releases, video, and sales to television networks. The advertising was an investment in those future profits. Often, after having spent hundreds of millions of dollars for advertising on a film, a company might record only a fraction of these expenses, delaying the remainder for a later time.

On the other hand these same film companies were doing exactly the opposite with their revenues. If the company did sign a contract for the foreign release of a film, for video release, or for television, the full amount of the contract—which could extend years into the future—could be recorded in one lump sum, though many of the profits would not be realized for years.

To the FASB these were deceptive practices, permitting film companies to present certain films to their investors as a success, when clearly they had been box office bombs. Such accounting procedures were not permitted in other businesses, and the FASB and the AICPA set out to level the playing field for film investors. They developed a number of rules that would keep companies from delaying the recording of expenses that had already been incurred, while requiring that profit statements be based on actual income, rather than hopeful projections. The FASB considered such rules to be the only way of ensuring that film companies weren't duping people into unwise investments. To many of the film companies, however, they were an unfair limitation on the financial picture the companies wanted to give to potential investors.

FUTURE DIRECTIONS

The CPA profession faces several crucial issues in the twenty-first century, including increased competition among its members, a growing concern over the different accounting practices used in international business transactions, and the expansion of the CPA's role into areas such as software consulting. Upon being named chair of the AICPA in October of 1998, Olivia Kirtley called on all CPAs to assume greater responsibility in helping to formulate and adopt international accounting and auditing standards. "It's impossible to have a path to the twenty-first century without reaching beyond our borders," she said.

The AICPA has been concerned enough about future professional implications to coordinate the CPA Vision Project, a grassroots effort to prepare the institute and its members for the future. According to the project's report, 2011 and Beyond, the CPA profession faces challenges beyond the expansion of the global marketplace and the growth of technology. It must confront increasing competition among its members and a demand for more skills and competencies. As a result, the report predicts, there will be increasing specialization among CPAs in the years to come.

GROUP RESOURCES

An excellent source of information about the AICPA is the institute's Web site at http://www.aicpa.org, which provides information on programs, events, and developments. A series of press releases about current issues and internal events is accessible from this site, along with a list of links to other accounting- and government-related sites. For further information about the AICPA, contact the Communications/Public Relations Team at (212) 596-6236.

GROUP PUBLICATIONS

Each member of the AICPA receives subscriptions to its magazines and newsletters. The Journal of Accountancy, a monthly magazine that focuses on the latest accounting-related news and developments, is written for CPAs and other accounting professionals. Other serial publications include the CPA Letter, The Practicing CPA, and The Tax Adviser. The AICPA's most widely distributed publications are its book-length information sources for accounting professionals: AICPA Professional Standards; AICPA Audit and Accounting Manual; Codification of Statements on Auditing Standards; and AICPA Technical Practice Aids.

AICPA publications are numerous; each board or committee issues its own publications, and nearly all are intended to be read by CPAs. The Professional Ethics Executive Committee, for example, publishes the institute's ethics code and bylaws; the Communications/Public Relations team publishes press releases; and the Accounting Standards Executive Committee publishes the proceeds of its meetings along with advisory publications such as Improving Business Reporting—A Customer Focus.

The Institute does publish a small number of brochures that are intended for public consumption, with titles such as "Understanding and Using CPA Services," "How to Choose a CPA," and "Questions and Answers for Business Owners and Individuals." Several of these brochures, along with many of the institute's publications, can be viewed or downloaded from the AICPA's Web site at http://www.aicpa.org.