American Institute Of Certified Public Accountants Research Articles

Are Madison and Jacob (Still) More Employable than Aaliyah and Xavier (in Public Accounting Firms)?

To embrace diversity, the American Institute of Certified Public Accountants (AICPA) has launched initiatives to enroll a more diverse population into the accounting profession. This study investigates if racial disparity currently exists despite these initiatives by conducting a blind study of callbacks for eight fictitious applicants of various races, genders, and resume quality. The study found that although no difference in callbacks existed in general between Blacks and Whites, when quality of resumes is considered Whites have the advantage. Further, the study offers practical solutions for CPA firms and higher education to consider in their efforts to achieve more diversity.

Getting on board with certified public accountant evolution: re-evaluating a financial statement analysis project in light of a changing profession

PurposeGiven the implementation of a new Certified Public Accountant (CPA) licensure exam and the CPA Evolution Model Curriculum, accounting educators must integrate more advanced skills in their coursework. We illustrate how a commonly-used project in accounting classes, which teaches technical accounting content, can address skills and competencies identified by the Pathways Commission and the American Institute of Certified Public Accountants (AICPA) and, as a result, enhance skills all business school graduates need in the workplace.Design/methodology/approachWe incorporate a financial statement analysis research project under a group work format in three levels of financial accounting classes. Using both quantitative and qualitative analysis, we evaluate changes in student perceptions of skills and competencies important for business graduates.FindingsWe find students perceive improvement in critical thinking, problem-solving, the ability to work with other people, their understanding of the course material, and data analysis abilities after completion of the project. We also find statistically significant increases pre-to post-project in student perceptions of their knowledge, confidence, competence, and enthusiasm with respect to accounting material.Originality/valueWe provide an example of how educators can align a commonly-used project with the CPA Evolution Model Curriculum, yet still meet the needs of non-accounting majors and prepare all students for future business careers. Group work has been studied and similar financial statement analysis projects have been implemented in the classroom for years. We contribute by not only extending and updating this research, but also by re-evaluating a project to determine whether it meets the shifting needs of a rapidly changing profession. By doing so, we answer recent researchers’ call for research in higher education that addresses employability and workplace skills.

Internal control opinion shopping: Does initial audit fee discounting matter?

Both regulators and researchers are concerned that the lowballing of initial year audit fees may impair auditor independence (U.S. Senate 1977, 2002; American Institute of Certified Public Accountants (AICPA), 1978; Securities and Exchange Commission [SEC], 2000; Huang et al. 2015). Using a full sample of 1373 U.S. firm-year observations for which the client’s predecessor auditor reports an adverse SOX Section 404 internal control opinion, we find that in the following year a successor auditor who lowballs audit fees is more likely to issue a clean internal control opinion. The results hold when the predecessor auditors are dismissed, but not when the predecessors resign. We also find that firms are no more likely to succeed in opinion shopping when the proportion of audit committee financial experts is high. In addition, we find internal control opinion shopping occurs with initial fee discounting only in competitive audit markets and the period of a few years following the adoption of SOX (since 2007).

Aligning artificial intelligence with ethical accountancy: A global perspective on emerging frameworks

This study meticulously examines the integration of artificial intelligence (AI) into the accounting sector, revealing transformative opportunities alongside emerging ethical challenges. Drawing inspiration from established principles of the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct (AICPA, 2016), an innovative Accounting Framework for AI Ethics (AFAIE) is introduced. This framework aims to provide a tailored approach that ensures that the adoption of AI technologies aligns with the fundamental professional values of trust and integrity. It aims to address the concerns and potential risks associated with the use of AI and establish guidelines that promote accountability and transparency in the development and deployment of AI systems. The essence of this research is underscored by the advocacy for resilient ethical paradigms that are instrumental in navigating the complexities introduced by AI in accounting. Emphasizing a global perspective, this study advocates universal ethical guidelines, ensuring adaptability to specific regional and professional contexts (Association of Chartered Certified Accountants [ACCA], 2016; Bertucci et al., 2021). This synthesis of technology and ethics aims to foster an environment in which innovation thrives alongside steadfast adherence to professional integrity and responsibility.

General Ledger Computer Auditing Practice: Implementing a Smart Auditing Approach

<p>This paper showcases how JCAATs, an AI audit Software, can facilitate a smart auditing approach using General Ledger data compliant with the Audit Data Standards introduced by the American Institute of Certified Public Accountants (AICPA). We begin with an overview of the Audit Data Standards by the AICPA, followed by an exploration of the necessity for a smart auditing approach. Utilizing JCAATs, we demonstrate a smart auditing process for General Ledger accuracy testing to verify the correctness of amounts in the general ledger accounts, ensuring alignment with description and source documents.</p>

Fraud from a CPA named Laws: missed red flags and conflict of interest

Research methodology The case uses primary source documents, such as the court cases brought forth by the SEC and US District Attorney, for the specifics about the fraud and secondary sources for further background information about the town and industry. The individuals in the case are not disguised. The authors have no connection to the case. Case overview/synopsis Thomas Laws was a CPA, a registered investment advisor and a real estate broker. Laws made a poor business investment. Instead of taking the financial hit, Laws orchestrated a complex Ponzi scheme using clients from his CPA practice and embezzling money from an employer, Santa Fe Gold Corporation. Laws’ scheme continued until his employer confronted him about missing funds. Frank Mueller, the CFO of Santa Fe, did not exercise the due diligence necessary until it was too late. Rest’s framework for ethical decision making is used to frame the ethical decisions Mueller can make. The case examines the conflict-of-interest guidance issued by the American Institute of Certified Public Accountants (AICPA) and allows students to examine the due diligence and controls needed by employers and prospective investors. Complexity academic level This case is designed for undergraduate accounting students taking Intermediate Accounting I, ACCT 0312 at the authors’ institution, typically junior-level students. It would be appropriate whenever you introduce the AICPA Code of Professional Conduct during an ethics discussion.

The Neglected Need for and the Effects of Sustainability in Accounting Curriculum

In 2013, the American Institute of Certified Public Accountants (AICPA) issued a paper that encouraged accountants to use their expertise and skills to “help an organization link sustainability activity to strategies using accounting measures, tools, theories, and techniques” AICPA (Oct. 2013 page 6). Later that same year, the Association to Advance Collegiate Schools of Business (AACSB) added “diversity, sustainable development, environmental sustainability, and other emerging corporate and social responsibility issues” to its accreditation standards for accounting programs AACSB (2013). All along sustainability, accounting continued to grow in importance, as evidenced by the percentage of S&P 500 companies that issue sustainability reports, having grown from 20% in 2011 to 92% in 2020, according to Hart (2018) and the Governance and Accountability Institute, Inc. (2021). Thus, accounting programs have been called upon to, and have real world evidence of the need to, add education in sustainability accounting and reporting to their curriculums. Yet, the research conducted for this article shows that less than 11% of AACSB accredited Accountancy programs are offering even a single course that includes the words ‘Sustainability’; ‘Environmental’; Corporate Responsibility, or ‘Social Responsibility’ in its title at either the undergraduate or graduate levels, as of the spring of 2022. This 11% was an improvement from the 2% noted by Pippin et al. (2016); however, it is still a very low level. This article goes on to describe, through an analysis of students’ responses to a pre and post-course survey, how the inclusion of a sustainability accounting and reporting course in a university’s accounting curriculum fostered changes in the students’ appreciation for the different dimensions of responsibilities and opportunities they will encounter as future accounting professionals and society’s future business leaders. This article encourages other higher education institutions (HEI) to add such courses to their accounting curriculum both by showing the benefits experienced by the students and by providing information for such a course’s structure, content, and grading.

Leave it in! Analyzing the responses to a proposal to remove governmental accounting from the certified public accountant examination

PurposeLeveraging lobbying theory, the authors analyze responses to the American Institute of Certified Public Accountants (AICPA) proposal suggesting the removal of state and local governmental accounting from the content tested on the uniform certified public accountant (CPA) examination. Furthermore, the authors compare the responses to a prior exam content review to place the uniqueness of the more recent response in perspective.Design/methodology/approachThe authors examine 181 comment letters obtained from the AICPA website. In addition, the relative concentration of governmental entities across the USA is studied for correlation with the response rate.FindingsConsistent with lobbying theory, the authors find that participating governmental entities overwhelmingly argued for the retention of governmental accounting. In contrast, most other groups of respondents (accounting firms, state societies, etc.) had at least one letter that agrees with the removal of the content.Originality/valueWhile the letter writers appear to be successful in retaining the governmental accounting content on the CPA exam, the majority of the detailed content has been placed within a specialized area on the new version of the CPA exam, expected to be deployed in 2024. This means that fewer CPA candidates will be exposed to governmental accounting than under the current regime. It has implications for governmental units seeking qualified candidates to fill their staffing needs especially as fewer universities offer governmental accounting courses.

Accounting Quality

Corporate scandals such as Enron, WorldCom, and others have increased the sensitivity of the public toward the ethical misconduct of firms. The Public Company Accounting Oversight Board (PCAOB) is independent of the accounting profession, and they are not considered a government entity. The PCAOB is a non-profit corporation given the mandate to oversee public company auditors. Two members of the five-member board must be Certified Public Accountants (CPAs), to make sure that PCAOB has the required level of expertise. Due to significant changes to audit engagement practices because of new regulatory pressures such Sarbanes-Oxley Act (SOX), studies have been done to determine if it has improved audit quality. The American Institute of Certified Public Accountants (AICPA), Securities and Exchange Commission (SEC), and PCAOB are a few of the regulatory and professional bodies that set independence rules and monitor compliance in the United States. The Committee of Sponsoring Organizations of the Treadway Commission (COSO), established a framework for designing, implementing, and assessing internal controls.

A Meta Analysis of Materiality Studies

The Supreme Court and the Public Company Accounting Oversite Board (PCAOB) has said that an amount is material if there is a substantial likelihood it will influence a reasonable investor’s judgment. The American Institute of Certified Public Accountants (AICPA) has said that an amount is material if there is a substantial likelihood it will influence a reasonable user’s judgment. The Financial Accounting Standards Board (FASB) has refused to define materiality. The Securities and Exchange Commission (SEC) has said that qualitative factors can make even small amounts material. Reasonable implies a consensus of opinion. This article is a meta-analysis of 31,155 materiality decisions made by 335 cohorts in 48 studies with the objective of defining what is reasonable. A cohort is a group of like individuals faced with a common materiality decision. Materiality in this study is measured as a percentage of net income. The mean threshold of materiality is 7.84% and the median is 6.81%. Both thresholds are substantially higher than the often-discussed threshold of 5.0%. A quarter of the participants in these studies set the threshold of materiality at 11.90% and the threshold for a statistically significant difference from the consensus is 17.51%. Ultimately, materiality will be decided through civil and criminal litigation. Finders of fact, usually jurors, will be asked to determine what a reasonable investor would conclude. Few jurors have the training and experience of investors, so without context, they can only guess what a reasonable investor would conclude. This study provides that context.

Talk too much? The Impact of Cybersecurity Disclosures on Investment Decisions

High-profile cybersecurity breaches have raised concerns regarding how organizations disclose security management information to the public. The American Institute of Certified Public Accountants (AICPA) developed a cybersecurity risk management (CSRM) reporting framework to better help organizations convey their cybersecurity programs to the public. In this article, we attempt to provide evidence of how cybersecurity disclosures, as developed by AICPA, affect investment decisions. Our findings suggest that nonprofessional investors are less likely to invest in breached firms with the disclosure of CSRM reports alone. Disclosing the risk management report with an independent assurance report does not result in the mitigation of the negative impact of security breach news. We discuss the corresponding implications.

Educating the Future Accounting Professional: Actively Shaping Professional Identities for a Rapidly Changing World

Educating the Future Accounting Professional: Actively Shaping Professional Identities for a Rapidly Changing World

Impression Management in Public Sector Audit Proposals: Language and Fees

We adapt impression management theory to investigate: (1) whether governmental audit proposals include the values of ‘professionalism’ (i.e. independence and competence) and ‘commercialism’ (i.e. client cooperation, auditor trustworthiness, client satisfaction, commercial interests), and, (2) the relations of audit proposal language and contextual influences on proposed audit fees and proposal success. The results suggest that proposals accord with audit firms’ market strategies. Compared to other firms, proposals from small, non-specialist firms use more commercial language, while proposals from governmental specialist firms use more competence language. The results also suggest that the market for US public sector audits includes many low cost, low quality firms; specifically, the modal proposal (41.2%) includes high use of commercialism language and low proposed audit fees. We also find that audit firms propose higher audit fees in US states with a weak governmental internal auditing office, and, that greater use of commercial language correlates with higher rates of proposal success, but only in US states with weak governmental internal auditing functions. The finding of inter-relations between proposal language, the strength of governmental internal audit functions, and proposed fees suggests the value of considering multiple influences on the quality of the public sector financial controls. Acronyms : American Institute of Certified Public Accountants (AICPA) ; Certified Public Accountant (CPA) ; Corporate social responsibility (CSR) ; European Court of Auditors (ECA) ; European Union (EU) ; fixed effects (FE) ; General Accountability Office (GAO) ; Governmental Financial Officers Association (GFOA) ; Independent Regulatory Board for Auditors (IRBA) ; Institute of Internal Auditors (IIA) ; International Accounting Education Standards Board (IAESB) ; International Federation of Accountants (IFAC) ; International Organization of Supreme Audit Institutions (INTOSAI) ; National Association of State Auditors ; Comptrollers and Treasurers (NASACT) ; not-for-profit (NFP) entities ; natural language processing (NLP) ; Office of Management and Budget (OMB) ; Request for proposal (RFP) ; Two-stage least squares (2SLS) ; United Kingdom (UK) ; United States (US)

СУТНІСТЬ ПРИНЦИПІВ УПРАВЛІНСЬКОГО ОБЛІКУ

The initial positions of management accounting and the qualitative properties of accounting and management information are fixed in its principles. The principles of management accounting allow us to determine its place in the system of activity of the enterprise. Strict compliance with these principles allows not only to organize management accounting at the enterprise, but also to ensure the development of its method, strengthen its position in the enterprise management system, and therefore their research is relevant and urgent. The purpose of the paper is to study the essence of management accounting principles based on the analysis of the views of research scientists in various literature sources. In the process of research, general scientific methods of cognition are used: historical approach is used to clarify the principles of management accounting in their historical development; logical method is used to establish the essence of each of the principles; system method is applied to determine the composition and number of principles in different scientistsresearchers; method of classification is used to combine the author's views on the principles of management accounting; grouping-to generalize similar principles in essence; graphic method is applied for a visual representation of the obtained research results. The conducted research revealed the lack of consensus on the number, composition and essence of management accounting principles. We analyzed almost twenty literary sources (scientific professional articles, textbooks and manuals), of which 68 principles with 92 author's interpretations of the principles of management accounting were summarized. ОБЛІК, АНАЛІЗ І АУДИТ 92 Випуск IІ (82), 2021 It is established that the overwhelming majority of researchers identify basic (general) and specific (special) principles of management accounting. The largest number (seven definitions each) is proposed in relation to the essence of: methodological principles; the principle of orientation of accounting to achieve strategic goals of the enterprise (strategic orientation); principles related to budgeting processes; the principle of evaluating the performance of structural divisions of the enterprise. Five different definitions are presented in relation to the principles of effectiveness, responsibility and frequency. There are more than 30 principles that are considered by only one author. There is also a tendency to identify fundamentally new principles (for example, moral and ethical ones) in the works of the last two years. It is revealed that in modern conditions, almost all works devoted to the study of management accounting principles determine the importance of global principles developed by the American Institute of Certified Public Accountants (AICPA) and the Privileged Institute of Management Accountants (CIMA). Although, now the global principles of management accounting are advisory in nature, however, their use seems relevant and appropriate to us for all business entities, regardless of their size, form of ownership, types and features of activity. Prospects for further research are seen in the consideration of the relationship between the principles of management accounting and management principles and the establishment of the quality and features of the manifestation of management accounting principles under the influence of industry-specific features of enterprises ' activities.

Beyond the top seven firms: Gender diversity of audit firm partners and their undergraduate accounting faculty

For the past few decades, the American Institute of Certified Public Accountants (AICPA) trend data show that women comprise the majority of accounting graduates from universities, yet the partner levels in accounting firms do not reflect this trend. In this paper, the authors leverage the disclosure of the engagement partner names for each public company audit on Form AP filed with the Public Company Accounting Oversight Board (PCAOB) to explore the gender diversity and educational roots of the audit partners associated with audit firms that generated less than $1 billion revenue in 2019. Using role model theory, the paper explores whether there is a relation between the number of female professors in a school and the number of female students from that school who progress to the partner level. The results show that smaller audit firms have, on par, similar levels of gender diversity among audit partners as the largest accounting firms. The results further show a positive relation between females holding chair positions in accounting departments over extended time periods and female graduates progressing to partner on audit engagements. However, there is no association evident between the number of tenured female full professors and the female graduates who subsequently become audit partners at smaller accounting firms. These results highlight that female faculty holding power positions and female partners in the audit profession remain more rare than common. The need to increase gender diversity for both accounting faculty and professionals suggests that professional networking across academe and industry remains critical.

БАЗОВІ, СПЕЦИФІЧНІ, ГЛОБАЛЬНІ ПРИНЦИПИ УПРАВЛІНСЬКОГО ОБЛІКУ: СКЛАД І КІЛЬКІСТЬ

The principles create a certain structure, which is provided for in the organization, system setup, and management accounting. Therefore, compliance with the principles of management accounting is unquestionable in its establishment at the enterprise, and the study of their optimal composition is urgent. The purpose of the article is to study and analyze the composition and number of basic, specific, and global principles of management accounting in various literary sources. The research methodology was based on general scientific methods: systemic, logical, historical methods, method of analysis, induction, deduction, as well as using the methods of classification and grouping. According to the results of the study, it is found that there are basic, special, and global principles of management accounting. At present, there is no single conventional and generally accepted approach to the composition and quantity of basic and special principles. Regarding the global principles of management accounting developed by the American Institute of Certified Public Accountants (AICPA) and the Chartered Institute of Management Accountants (CIMA), there are four principles (impact, relevance, value, trust). We have summarized 73 principles of management accounting, of which the vast majority (47 principles) are presented in only one literary source. Most literature sources reflect the following principles: evaluation of the performance of structural units of the enterprise; orientation of accounting to achieve strategic goals of the enterprise; effectiveness. The largest number of principles of management accounting, which are identified in the literature, is 20; the smallest number is 5; the vast majority of authors cite 7-8 principles. It is proved that the existing diversity of views of scientists on the principles of management accounting (in some cases, they are the same in name but different in content; in other cases, they are similar in content but different in the name; also, there is an artificial increase in their number when dissipating the content, etc.) leads to vagueness and confusion in their composition, quantity, and content. Although the global principles of management accounting are of a recommendatory nature nowadays, the obligation to use them seems to us relevant and appropriate. Prospects for further research are seen in the study of the content of the principles of management accounting, determining their optimal composition and quantity for the effective construction of management accounting in enterprises of various sectors of the economy, taking into account the peculiarities of their operation.

CPA Experience Requirements and Service Quality: Experience from the US

This study examines the requirement of obtaining prior practical experience toobtain a license to provide professional assurance services. Disciplinary sanctionsimposed by the American institute of certified public accountants (AICPA) is used tocompare differing state experience requirements required for licensing. The study usesthe per capita number of sanctions for substandard professional service as a proxy forthe quality of professional service being provided in each state. The results revealedconsistent associations between the length of minimum state experience requirementsfor licensure and the proxy. While the results suggest that experience provides societywith a benefit, the results do not quantify it and the justification for adopting a specificexperience requirement still requires a judgmental assessment of the trade-off betweenthe costs that the requirement imposes and the benefits it will bestow

The Impact of Cybersecurity Risk Management Examinations and Cybersecurity Incidents on Investor Perceptions and Decisions

SUMMARYIn response to cybersecurity risk and demand for information about organizations' cybersecurity risk management programs, the American Institute of Certified Public Accountants (AICPA) recently released a cybersecurity risk management examination service. We examine the effect of joint or separate provisioning of this service on investors' perceptions and decisions, and whether these effects differ when a subsequent cybersecurity incident occurs. We find that the negative signal of a subsequent cybersecurity incident reverses investors' positive perceptions of auditor competence and increases investors' sensitivity to potential independence impairments when the cybersecurity is jointly provisioned, leading to lower perceptions of audit quality. We also find that investors are less willing to invest when the examination is jointly provisioned compared to separately provisioned. Our results provide important insights to the literature and to purchasers and regulators by examining an emerging non-audit service and how a signal of non-audit service quality can affect perceptions of audit quality.

THE IMPACT OF NON-AUDIT SERVICES ON INSTITUTIONAL INVESTORS’ PERCEPTION OF AUDITORINDEPENDENCE: EVIDENCE FROM TURKEY

In recent years, the audit profession was confronted with different regulations, revised rules on Non-Audit Services (NAS) and on Auditor Independence. In-depth, Professional Accountancy Bodies amended their independence rules according to the Sarbanes-Oxley Act of 2002. For instance, the Securities Exchange Commission (SEC) and the American Institute of Certified Public Accountants (AICPA) in the USA, Capital Market Board (SPK) in Turkey made amendments to their independence rules on Non- Audit Services and on auditor independence in light of the Sarbanes-Oxley Act of 2002. The purpose of this paper is to examine whether “non- audit Services (NAS)” jeopardize institutional “investors’ perception of auditor independence in Turkey”. Therefore, the questionnaire was administered to 34 institutional investors in Istanbul, Turkey. It was generally found that institutional investors’ perception of auditor independence is not impaired at the time of the joint provision of NAS and audit Services to an audit Client.

Investors’ perceptions of the cybersecurity risk management reporting framework

PurposeThe purpose of this paper is to propose a research model to examine the perception of non-professional investors toward the cybersecurity reporting framework developed by the American Institute of Certified Public Accountants (AICPA).Design/methodology/approachThe proposed hypotheses were tested using structural equation modeling with data collected from Amazon's Mechanical Turk platform.FindingsThe findings conclude that investors' perceived benefits of the cybersecurity risk framework are positively related to investment intention. Information quality and cybersecurity awareness also positively influence perceived benefits of the risk framework and investment intention.Practical implicationsFindings of this study are relevant to both regulatory bodies and firms because non-professional investors’ perceptions of the benefits of the AICPA’s reporting framework are unveiled.Originality/valueFindings from this research help to provide a more in-depth understanding of the impact of various factors on investor’s decision-making process and also significant insights into the non-professional investor’s attitude toward the AICPA’s framework.