Aspiring CPAs work diligently to attain the CPA designation and to maintain that designation through mandatory continuing professional education (CPE) courses. Several issues often arise that question whether that designation is adequate in today’s marketplace, sufficient to serve an ever-changing clientele, and capable of providing a leg up on competitors. These issues are, among other factors, the central focus in determining whether to pursue a CPA designation.
This article will focus on the above three questions and many more. In addition, the authors will describe instances where accreditations and designations can be helpful and other times when they can be a hindrance.
Today’s business environment is much different from that of the past. Companies operate globally, and the international finance system has transformed itself accordingly. CPAs and public accounting firms must embrace these dynamics and adapt to their changing client base. One way is to offer niches and specializations; accreditations are a natural means to demonstrate this ability.
Consider the Certified Fraud Examiner (CFE) accreditation. With an increase in cybercrime and other internet-related frauds occurring at unprecedented levels, CFEs are well positioned and trained to advise clients regarding these types of risks. Many frauds have had their underpinnings in cybercrime, and the authors therefore believe that firms can increase revenue and serve clients more effectively with the CFE designation. Conversely, one could argue that CPAs are naturally suited for such work and that the CFE designation is an immaterial factor for such high-demand services.
There is also the Certified Management Accountant (CMA) accreditation. CMAs are technically proficient in specific areas of cost accounting and other operations-related disciplines, but also possess the ability to accurately predict marketplace trends and strategize a firm’s financial position accordingly. As is the case with other accounting designations, CMAs enhance the value of their certification with years of experience in the field. Those with the right blend of industry experience and forecasting expertise distinguish themselves as highly valuable assets to a firm’s designation record. On the other hand, rising market regulation and increased levels of financial uncertainty affect a CMA’s ability to consistently produce reports of the same accuracy as was historically recognized. A continuation of this pattern could ultimately lessen the potency of the CMA designation.
Joe Tarasco, the CEO of Accountants Advisory Group LLC, encourages firms to obtain professional designations. He and other industry leaders believe that specializations and niche markets are the key elements for firm growth. In fact, given two candidates of equal experience and salary demand, a firm will hire the candidate with the designation as opposed to the candidate without one. He also believes, however, that while many firms desire diversified accreditations, they do not adequately advance their potential. He, along with many other veteran CPAs, has seen websites that proudly advertise designations such as the Accreditation in Business Valuation (ABV) and the Certified Business Valuation (CVA), but have seen little in revenue from these services.
Young CPAs seeking enhanced job opportunities often consider obtaining an accreditation. The dilemma then arises of whether a young CPA should obtain the desired designation and then market himself as such or secure a job first and then pursue the designation. Experienced CPAs strongly recommend finding a job first and then obtaining a designation consistent with the firm’s core specializations.
One of the authors has reviewed hundreds of professional liability applications over the last two decades and found two noteworthy trends. First, the areas of practice (AOP) section has changed from the traditional 70% tax, 10% audit, 5% review, 5% compilation, and 10% write-up, to 60% tax, 5% audit, 5% review and compilation, 10% write-up, and 20% other (e.g., consulting, litigation support, financial planning). The majority of “other” AOP typically has a designation associated with each type of service (e.g., CITP for consulting; CFE, ABV, CDFA, and CVA for litigation support; and CFP and PFS for financial planning). Second, the listing of other accreditations that the firm maintains has increased over the past five years. The response to this question was typically “not applicable,” which confirms the notion that clients are requiring more from CPAs than the traditional designations.
CPAs who perform business valuations and are also credentialed as CVAs are favorite clients of attorneys defending them in malpractice claims arising out of valuation services. According to Lyndon Sommer, an attorney who specializes in the defense of CPAs, a client who is also a CVA raises the bar for plaintiffs to prove their case and obtain a verdict because plaintiffs are required to meet their burden of proving that the defendant CPA breached an applicable standard of care. Given the additional professional standards attributable to CVAs, potential experts may be less likely to testify for plaintiffs unless the alleged breach is substantial. In addition, plaintiffs in this context would be wise to retain an expert qualified as both a CPA and a CVA.
In addition, a jury is likely to be more impressed with a defendant who has additional qualifications. Such qualifications enable the defense attorney to argue that her client not only satisfied the professional standard of care required of CPAs, but also satisfied the additional standards of care attributable to CVAs. On the other hand, if a CPA is not also a CVA, the jury might presume the CPA was not qualified to perform a given valuation.
Do designations help firms deal with rapid change or add to its challenges? It depends. The right designations need to be put in place and a focused marketing strategy needs to be utilized. One professional interviewed by the authors addresses continuation and succession issues in his practice early on to avoid transitional issues that may develop after the death or disability of a practitioner. The authors believe that obtaining the appropriate accreditations and designations can help firms serve a continually changing client base. That said, the authors also caution that firms should continue their emphasis on CPE and training, client selection, and peer networking.
With the proliferation of mergers, competition amongst accounting firms is fierce, both for existing and new clients and for talent. Firm brochures and firm websites should embrace the talents and specializations held by the staff of the firm. Ideally, these attributes will be helpful when firms are selling services. The authors note this practice can be a double-edged sword. Added credentials may bring in new clients, but the standard of care is typically higher for those who specialize in specific disciplines. In the event of litigation, greater expectations could increase the likelihood of an adverse ruling. Loss ratios (the ratio obtained by dividing the losses paid out by the premium received by insurance carriers) are generally higher for those firms that do not specialize. For example, say that a firm obtains a referral from an attorney to provide an analysis of a proposed divorce settlement to ensure that the attorney’s client is obtaining the maximum settlement. While the firm may be proficient in tax engagements, it may not have the necessary specialization in the particulars of divorce taxation. The author has seen several professional liability claims against CPAs in such scenarios resulting from the following:
The ever-changing demands of clients and need for expertise make accreditations essential.
- Qualified domestic relations orders
- Alimony recapture
- Tax benefits from tax loss carryovers.
Furthermore, claims occur at a higher frequency for a firm that provides a service less than 10% of the time. As an example, suppose a firm that serves small, privately owned businesses is asked to prepare a business valuation for its long-time client, which seeks to sell its business. The firm has historically checked “yes” on its professional liability application under the AOP section. In the engagement, however, the firm actually prepares a calculation engagement as opposed to a business valuation and subsequently determines that the sales price for the business was grossly understated. This scenario represents a frequent source of claims against CPA firms that stretch too far beyond their traditional boundaries of service. The better choice would have been to recommend that the client secure a professional with the proper credentials to perform this service.
As to competition for talent, professionals understand that the benchmark talent level for incoming professionals is steadily rising. Many also believe, however, that increasing firm mergers may narrow that gap. Résumés of prospective employees should point out any of their designations and how they can benefit the firm. Furthermore, candidates for employment should dovetail their résumés with the AOP listed on the firm’s website.
Ultimately, the authors advocate earning specialty accreditations and designations but advise firms to be up to date with the licensing, membership, and educational requirements for each. Furthermore, they encourage staff to obtain designations consistent with the firm’s AOP. The authors believe that the ever-changing demands of clients and need for expertise make accreditations essential for firms to grow and thrive.