The number 75 has various meanings around the world. It can sometimes denote a diamond anniversary. It’s the age limit for a juror in England and Wales. Science junkies know it as the atomic number for the chemical element Rhenium. And here in the ...


Bingo Balls, Atomic Elements and Passing the CPA Exam and more...

Bingo Balls, Atomic Elements and Passing the CPA Exam

Bingo ballsThe number 75 has various meanings around the world. It can sometimes denote a diamond anniversary. It’s the age limit for a juror in England and Wales. Science junkies know it as the atomic number for the chemical element Rhenium. And here in the U.S., it’s the number of balls in a standard game of Bingo; something which I’m sure fans of the game are quite aware of at their Friday night get-togethers.

But, the number 75 holds no greater significance in this world than for the 100,000-plus of you who sit for the Uniform CPA Examination each year. Achieve that number or higher on any of the four sections of the exam, and you’re one step closer to licensure.

A common misconception for those new to the CPA exam is that 75 is a percentage or number of questions answered correctly. No, you don’t get a “C” on the exam if you score a 75. It’s simply the passing mark that signifies you have demonstrated the minimum knowledge and skills necessary to protect the public interest as a CPA.

The passing score of 75 will remain in place even though an updated version of the exam debuted on April 1. How, you might ask, is it possible to have the same passing score with all the recent changes?

The scores reported for the CPA Exam are scaled scores, not score percentages or percentile scores. Section scores are reported on a scale that ranges from 0 to 99. The scale is set so that a passing score is equal to a scaled score of 75. The total score in the AUD, FAR, and REG sections is a weighted combination of scaled scores from multiple-choice questions (MCQs) and task-based simulations (TBSs) that you complete. For the BEC section, the weighted combination comes from MCQs, TBSs, and the written communication tasks.

Regardless of whether you pass a section with a 75, an 81, or a 91, what matters most to the AICPA is maintaining the exam’s validity, reliability, and scoring accuracy, and ensuring it remains legally defensible.

As is common practice within the world of high-stakes testing, a substantially updated exam must be fully analyzed, statistically validated, and have its passing score approved. The AICPA Board of Examiners (BOE) will begin this process, known as “standard setting,” following the close of the current testing window on May 31.

The standard setting process requires score holds for the Q2, Q3 and Q4 testing windows. The AICPA will release scores only once following the close of each window. Exact score release timelines may be found on the CPA Examination Scoring section of the AICPA website, while complete scoring details are explained in the white paper, How is the Exam Scored?

Whether you take the exam for the first time this quarter, or you have a couple of sections under your belt, it’s important to consider how the pending score holds may impact your 18-month exam completion timeframe. If you have a concern about the score hold, contact your state board of accountancy for guidance as soon as possible. All jurisdictions, as well as our partners at National Association of State Boards of Accountancy (NASBA), are aware of the score holds. 

As you wrap up your section and await your score in the coming months, thoughts of bingo balls and diamond anniversaries will be the furthest from your mind. The legendary 75 is first and foremost the top thought for those of you pursuing the CPA. And while it’s easy to zero in on the calculation of the score and what the number 75 represents, you are best served to dedicate your time and energy to the initial study and preparation that is essential to hitting that mark.

John Mattar, Ed.D., Director-Psychometrics & Research, Association of International Certified Professional Accountants

Bingo balls courtesy of Shutterstock


Thriving with Autism: One CPA's Story

Tom IlandAccording to the Center for Disease Control (CDC), one in every 68 American children is diagnosed with Autism Spectrum Disorder (ASD). A newer government survey boosts the prevalence of this condition to one in 45 children. Though the frequency of autism remains debatable, it’s undeniably among the fastest-growing developmental disorders in the U.S., with diagnoses having increased 119.4% since 2000.

Now, pivot to the inevitability of Generation Z post-millennial youths constituting 20% of the workforce by 2020. When you consider the staggering prevalence of autism in this particular age group and combine those occurrences with the even more daunting unemployment rate of people with autism, the implication for our economy’s future is alarming.

Enter: Tom Iland, who at 13 was diagnosed with autism. Affectionately called The Calculator by his junior high schoolmates, Tom discovered at a very young age that, despite certain shortcomings, he was a wiz with numbers. Among his many mathematical talents, he can – in no more than a second – provide the sum of a word by adding its letters’ corresponding numerical values:

If A=1, B=2…Z=26, then autism = 83.

Tom was also an unabashed Star Wars fanboy, so it seemed only logical to him that with his unique mathematical abilities, he could become George Lucas’s accountant. It was a dream that some mothers would have discouraged. Luckily, Tom’s mother was different. Rather than dissuade him, she helped him map out a plan to achieve his ambitious goal. He’d have to take certain courses, study for exams and amass experience interning in the field.

Ultimately, Tom exceled – but not without first reflecting on his limitations and developing a strategy to compensate for them. After securing an internship doing property tax for Disney, for example, he disclosed his disability within the first week on the job: he forewarned his manager he may ask the same question repeatedly until the answer finally stuck, and he requested written instructions for tasks, which he’d learned over time were easier for him to grasp than verbal directions.

The same level of self-awareness and planning was key when sitting for the CPA exam. “I clearly hadn’t done a single day of audit fieldwork,” Tom said, “so I went so far as to memorize the Standard Unqualified Audit Opinion word for word.”

Tom worked at Disney for three years and was promoted after the second year. He also earned his CPA. The story likely would have unfolded differently, however, had he not acknowledged how ASD uniquely affected him.

But the most extraordinary thing about Tom is not that he’s a licensed CPA thriving with autism; rather, it’s that he’s put a successful seven-year career in corporate accounting on the backburner to answer what he refers to as “a higher calling.”  His life’s work now involves building a bridge of understanding between those living with autism and their parents, their friends, their teachers and, above all, their potential employers. Tom’s all too familiar with the near-countless challenges people with autism face, not the least of which is the aforementioned unemployment rate for individuals with autism, estimated between 75-85%. In the rare cases in which people with autism are employed, they are far more likely to be underemployed than their non-spectrum counterparts. Tom wants to use his experiences to remedy that.

He recalls how his mother, an adjunct professor of special education and former president of the Los Angeles Autism Society, once had been approached by the Los Angeles Police Department to learn more about autism. She helped train thousands of officers, “but then she realized that people with autism need to know how to interact with the officers too.” He describes it as a two-way bridge. The same bridge should be built between business owners and people with autism. He acknowledges that many organizations have learned the benefits of hiring differently abled people (Walgreens, Boston Scientific and Freddie Mac to name a few), but the bulk of responsibility should lie with those who have the condition.

“You can train employers all day long about the benefits of hiring someone with a disability like autism, but it’s the young people who have to be educated about what they need to do, why they need to follow the rules and why they need to adapt to certain procedures,” Tom says. “People with autism are going into interviews and into jobs unprepared, not knowing how their condition affects them and not knowing what reasonable accommodations to ask for. As a result, it makes their job experience go south rather quickly.”

Among other things, he coaches people with autism on interviewing skills and maintaining high performance once hired. With a forthcoming book titled Come to Life: Navigating the Transition to Adulthood and with speaking engagements scheduled across the country, he’s helping to build that two-way bridge, one person with autism at a time.

When asked whether he’ll ever return to the profession to continue working toward his goal of becoming George Lucas’s accountant, without missing a beat, he mentions in an “indirect and retroactive way,” he already has, reminding me that he’d done accounting for Disney, which purchased LucasFilms in 2012.

Brock Faucette, Corporate Communications Manager, Association of International Certified Professional Accountants


Documentation: A Key Ingredient for Audit Success

Pound cakeYou’re trying out a pound cake recipe, but when you pull your pan out of the oven, you realize the cake didn’t rise. Instead of being fluffy and moist, it’s flat and dense. You double-check the recipe and stop short when you see baking powder on the ingredient list. You left that out because you didn’t have any and you figured it wouldn’t matter. You did everything else perfectly, so how could leaving out this one ingredient have such a big impact?

You may never have thought there could be a similarity between baking and auditing, but in both cases, leaving out one key ingredient can ruin the outcome. You’d be amazed how often it happens.

Why You Need to Document

Through its research, the AICPA Peer Review Program determined that a lack of proper audit documentation is the most common form of non-conformity with professional standards. So how do generally accepted auditing standards define sufficient audit documentation? Documentation should provide an experienced auditor who has no connection to the audit with an understanding of—among other things—the nature, timing and extent of the audit procedures performed. Auditors may be performing proper procedures, but they may incorrectly assume that being able to verbally explain what they’ve done is enough to meet the standards. However, documentation isn’t just icing on the cake. If an auditor hasn’t met the requirements of AU-C section 230, Audit Documentation, no amount of oral explanation can serve as a substitute. By leaving out the critical ingredient that is documentation, these auditors failed to obtain sufficient evidence to support their audit opinions.

To address this misconception, the AICPA has created a free documentation toolkit that helps firms improve their audit documentation and comply with the standards. It includes resources that can be used for a variety of audits and helps address three particular areas where audit documentation challenges are most common:

  1. Evaluating SOC 1 reports in employee benefit plan audits. The new AICPA Audit Documentation Resources include a tool that focuses on the auditor’s use of a Type 2 report and addresses some of the most common deficiencies that the AICPA has identified.
  2. Dual purpose testing in single audits. A template from the Governmental Audit Quality Center illustrates the necessary documentation steps when testing compliance requirements and internal controls over compliance.
  3. Detail testing. Another template offers a hypothetical test of short-term notes receivable, showing what information should be obtained and how it should be documented.

Turn to the Toolkit

The documentation toolkit is a component of the Private Companies Practice Section (PCPS) Invigorate the Focus on Quality Toolkit and contains resources beyond those I’ve mentioned. You’ll find presentations on audit documentation with a version for staff that includes speaker notes, a nano-learning presentation and an aid to support an effective internal inspection, so be sure to make the most of all the toolkit has to offer.

If you’re hoping to celebrate with cake after your next peer review, you’ll be in for an unpleasant surprise if all your hard work falls flat because of insufficient documentation. Fortunately, if you need to enhance your audit documentation, the AICPA toolkit has the ingredients you need.

Carl R. Mayes, Jr., CPA, Senior Manager, Special Projects — Public Accounting, Association of International Certified Professional Accountants

Pound cake courtesy of Shutterstock.


Top Issues for Not-for-Profits This Year

Shutterstock_81589264As auditors and management begin to prepare for June 30 year-end audits, it’s a good time to share some of the top concerns for not-for-profits this year. How can not-for-profits reassure donors that their contributions are in safe hands? What key implementation issues on new accounting standards updates are not-for-profits grappling with? Outlined below are four topics that should not be overlooked.

  1. Cybersecurity

In addition to common hacking risks, not-for-profits that accept electronic contributions are targets for credit card fraud. While retailers collect certain personal information to set up customer accounts and ship goods, not-for-profits often forgo requiring that level of detail to make donating simple. Unfortunately, this makes not-for-profits an easier testing ground for stolen credit card data. Not-for-profit entities with real-time credit card authorization and settlement are even more likely to fall victim because real-time verification makes the stolen data more valuable. These organizations then bear the burden of repaying fraudulent donations in addition to paying fees related to the refunds. Organizations that use electronic methods to accept contributions should consider adopting appropriate controls to ensure revenues are properly recognized and that cash receipts are safeguarded.

  1. FASB Not-for-Profit Financial Statement Presentation Standard

This past summer Financial Accounting Standards Board (FASB) issued a financial reporting standard for not-for-profits (ASU No. 2016-14), which constitutes the most significant change to not-for-profit financial statement presentation since the mid-1990s. The new standard will simplify and improve how not-for-profits classify net assets and present information about liquidity, financial performance and cash flows. In turn, the financial statements of these entities will provide more relevant information to donors, grantors, creditors and other users.

Given the significance of these changes, it is important for not-for-profit accounting and assurance professionals to familiarize themselves with the requirements of the new standard and consider how the financial statements, as well as the systems and processes used to produce them, will change. Early adoption of ASU No. 2016-14 is permitted and may reduce the complexity of financial statement preparation for not-for-profits whose contribution streams currently affect all three net asset categories and those whose endowment funds currently have material unappropriated earnings or are underwater. Not-for-profit auditors also will be called upon for assistance as their clients begin implementing this standard and must be careful not to impair their independence.

  1. Currently Effective ASUs

As I mentioned in my recent blog post, there are several significant Accounting Standards Updates (ASUs) effective for 2016 year-ends. Here’s a quick recap:

  • Under FASB’s new going concern standard (ASU No. 2014-15), management will now have to evaluate and disclose whether there is substantial doubt about an entity’s ability to continue as a going concern.
  • To clear up confusion among not-for-profits regarding the previously amended consolidation requirements, FASB issued ASU No. 2017-02 to clarify when a not-for-profit that is a general partner in a limited partnership (or similar entity) should consolidate a for-profit limited partnership.
  • FASB simplified the presentation of debt issuance costs via ASU No. 2015-03, which aligns the balance sheet presentation requirements for debt issuance costs with those of debt discounts.
  • Also simplified, and aligned with International Financial Reporting Standards (IFRS), are subsequent measures of inventory. Under ASU No. 2015-11, inventory should be measured at the lower of cost or net realizable value.
  • Fair value disclosure requirements have changed for investments measured using the net asset value per share practical expedient. ASU No. 2015-07 removes the requirement to categorize those investments within the fair value hierarchy.
  1. Data-Driven IRS Inquiries

Data-driven decision-making for the Internal Revenue Service Exempt Organizations (EO) division involves running over 200 data queries on Form 990-series returns to ascertain whether a return might warrant examination. The IRS has experienced return change rates over 90 percent since implementing the new EO audit selection methodology. Practitioners who prepare Form 990-series returns should focus upon accuracy and completeness.

For a deeper dive into these important issues, be sure to attend the webcast, Not-for-Profit Entities: 2017 Audit and Accounting Issues, hosted by the AICPA’s Not-for-Profit Section on May 5, 2017 from 3-5 pm ET.

Thank you to the AICPA Not-for-Profit Audit Risk Alert Task Force for their contributions to this blog post.

Christopher Cole, Associate Director- Product Management and Development. Association of International Certified Professional Accountants. 

Business people meeting courtesy of Shutterstock


A Call to Action for Young Leaders

Applying to the AICPA’s Leadership Academy Could be the Boost Your Career Needs

Leadership Academy group photoHey, you. You made it over the hurdle of getting your CPA license, and you’re eager to take the next step in your career development… But you’re not quite sure what that looks like. Professional development takes on many shapes and sizes. Some people like online learning and self-study, while others are drawn to a classroom setting. Many people focus on developing their soft skills, while other prefer to keep their knowledge base sharp with more technical sessions.

One often overlooked aspect of development is building a strong network of contacts in your chosen profession. If you’re interested in connecting with some of the best and brightest young CPAs in the country, look no further than the AICPA’s Leadership Academy.  This selective event exposes the next generation of CPAs to a strong ethic of leadership and service to their profession that CPAs are known for.

Now in its 9th year, the AICPA’s exclusive Leadership Academy has graduated more than 270 CPAs, many of whom have taken on expanded leadership roles in the profession.

It’s a four-day program where emerging CPAs – like you – can get in touch with their leadership skills and really drill down on what they want to do with their careers and how their unique set of talents will help take them there. CPAs will learn about issues facing the profession today and how to view these challenges as opportunities.

Being selected to attend Leadership Academy is an opportunity to learn about yourself and the profession while establishing connections with talented and motivated CPAs from across the country. I’ve had the pleasure of observing a few days of Leadership Academy over the years and the energy in a room of so many likeminded, enthusiastic CPAs is incredible. But don’t take my word for it, three Leadership Academy graduates share their experiences below.

“Leadership Academy greatly accelerated my leadership development. By fostering self-reflection and group discussions, Leadership Academy helped me recognize and appreciate my unique strengths and guided me in designing a personalized strategy to become the type of leader I aspire to be. The network of highly engaged young leaders who attended the Leadership Academy alongside me provided encouraging support and has continued to be invaluable to my growth in this profession. I left with greater confidence and an eagerness to learn, grow, and give back to the profession. Years later, I am still reaping the rewards of this program.” - Jessica Cormier, CPA, CFF, Manager, Fraud, Forensic & Litigation, Horne LLP, Leadership Academy class of 2014

“Leadership Academy helped me come to know myself better and understand how I could leverage that knowledge to make a bigger impact on the world around me.  The people that I met through Leadership Academy are truly exceptional. Although it has now been seven years since I participated, I still maintain relationships with many of my classmates. The Academy gives you access to an amazing network of talented, caring individuals.” – Dan Griffiths, CPA, Director of Strategy & Leadership – Tanner LLC, Leadership Academy class of 2010

“Being accepted to the AICPA Leadership Academy is an amazing accomplishment for any up-and-coming leader, and the training and skill development sessions are top-notch. But what makes this program a life-changing experience is the access to some of the best and brightest leaders in our profession – many of whom are your fellow classmates. Over the course of a few days, personal and professional relationships are formed, which will last forever. I call on those relationships time and again to help me solve professional and technical issues. You will likely see the people you meet here doing great things in the profession for years to come.” -  Bobby Schroeder, CPA, Tax Manager – Ericksen, Krentel & LaPorte, Leadership Academy class of 2011

Additional information that applicants need to know:

Q: Who should apply?

A: Are you a young CPA between the ages of 25-35? Do you have three or more years of experience in the profession? Are you a voting member of the AICPA and a member of your state accounting association? Then you are good to go.

Q: When and where will it take place?

A: October 1-5 at the picturesque Washington Duke Inn in Durham, NC

Q: What is the cost?

A: While the skills you’ll learn and connections you will make are priceless, there is a cost associated with the Leadership Academy. $925 will cover program facilities, learning materials, meals, social events, four nights’ accommodation and attendee CPE.

Q: Sign me up! How do I apply?

A: The application process includes uploading:

  1. Professional photo (press release style head-shot)
  2. Current resume or vita
  3. Two professional letters of reference (reference form)
  4. Two essays:
  • Essay #1 (500-700 words): What leadership competencies and characteristics will be essential to successfully lead the CPA profession in 2025?
  • Essay #2 (250-500 words): Why do you want to attend the AICPA Leadership Academy? 

The application deadline is May 31, 2017

Still have questions? Feel free to join the conversation on Twitter by using the hashtag #AICPA_LDR. We look forward to hearing from you! 

James A. Schiavone, Senior Manager – Public Relations, Association of International Certified Professional Accountants

Photo: AICPA Leadership Academy Class of 2016

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