Perspectives of a Life Member of The AICPA
Harold Katz is a man who has seen business cycles come and go. A partner with Katz & Fram in California, Mr. Katz has been a member of the AICPA for 43 years. Mr. Katz is concerned about the direction that the profession is going, and is one of several CPAs involved in an effort to help reform the profession though an organization called CPAs For Reform. Mr. Katz speaks to AccountingWEB about his views of what's working and what needs to be changed in the accounting profession today.
AccountingWEB: You have been a member of the AICPA for 43 years now. Of all the changes that you have seen over the years, which trend or development do you feel has had (or will have) the most positive influence on the profession?
Harold Katz: If you had asked for the most negative influence on the profession that would have been an easy question to answer. The most positive influence is a little more difficult to write about. The one thing that comes to mind is the fact that of the 500,000 CPAs in the United States today, I am guessing that less than 5,000 of them lost their way and brought disgrace to our honored profession. The other 495,000, and I admit I'm guessing at these numbers, continue to practice with Integrity, Ethics and Honesty. That is why a recent poll quoted on our list service said that the individual CPA is still the most trusted advisor by the public that utilizes CPAs.
My concern about trends, is that I'm not sure just how long we can maintain that position when there is so much bad press about the profession and especially about the AICPA, the figurehead for our profession. At some point, like the Berlin wall, it can all come tumbling down on our heads. That is why I devote the time I do to CPAs For Reform, while still maintaining a normal 50 hour work week, and in the first two weeks of October, 80+ hours a week. It isn't easy, but the future of the profession that has been so good to me is at stake, and the leadership of the AICPA doesn't have a clue. They remind me of the Boards of Directors of Enron, Global Crossing, etc. Those are harsh words, but that is what I feel, because they will not talk to us, they just talk at us.
AccountingWEB: Which one has had (or will have) the most negative influence on the profession?
Harold Katz: I really do not like hitting on the Big 5 all the time, but the fact is they do the audits of all the major public companies. A small group of younger (everything is relative) partners adopted the theories taught by the business graduate schools about the use of SPEs, etc., and they forgot the major rule we were taught in accounting classes. That our primary responsibility when issuing an audited financial statement is to the readers (shareholders and creditors) and not to the client who is paying us. This deviation from the golden rule has not only been the largest negative influence on our profession, it has jeopardized our entire capitalistic free enterprise system that is dependent on the flow of honest information.
Another major negative influence on the profession was the change in state laws that allowed for CPAs to be paid commissions. This has led to the development of multi discipline practices that carry with them an inherent conflict of interest. In my opinion this is a greater conflict than the alleged conflict created by offering audit and consulting services. In my opinion, a CPA who has integrity, ethics and is honest, can offer both audit and consulting services. A CPA who has none of these three characteristics will be a bad auditor, even if he or she does not render consulting services. This is a subject which would require a separate interview.
AccountingWEB: What message would you send to college students contemplating their majors about pursuing a career in accounting?
Harold Katz: With the fervent belief that we, CPAs For Reform are not tilting at windmills, like Don Quixote did, and the belief that accounting is the spinal cord of our economic system and it cannot survive without us, and the belief that there will be real changes in the thinking of the AICPA, not just saying the right words all of a sudden, I think being a CPA is still a great profession to pursue. It certainly isn't an easy profession, but neither is being a Doctor, and I bet Bill Gates still puts in a lot of time running the company that almost controls the flow of information in the world, so nothing is easy. If they are looking for easy, marry money, and even that isn't easy as you usually pay a hell of a price for doing that. Even inheriting money isn't an easy road as history has shown us. I have obtained a great deal of satisfaction from doing the work I have done, or I wouldn't have kept on doing it. So I would tell students, come join us, the world cannot get along without us.
AccountingWEB: What message would you send to the media who are writing about all the recent scandals, and who may not be as familiar with the accounting profession as you are?
Harold Katz: First I would tell them to become informed, read the library of cpas4reform messages. Some of the messages are not worth the time to read, but many if not most of them are really informative and some of them are almost works of art. Therefore I would tell the Media to read them and then go out and confirm their accuracy. Talk to the writers, talk to the leaders of our group, talk to the small practitioners, and talk to most of the members of the Big 4, who I believe have not lost their way. Talk to senior partners of the Big 4, but ask probing questions based on what you have learned from your research. Don't accept the answers you have learned to accept from elected officials. Then let the public know about the other 495,000 CPAs. Speak of the difference between the masses of CPAs and the few who hold the power.
AccountingWEB: What were the factors that led you to get involved in CPAs For Reform?
Harold Katz: When the AICPA announced that the XYZ designation would be open to non-CPAs and they were anticipating about 600,000 non-CPA members joining the AICPA, as compared to the 350,000 CPA members, I became energized to join the fight against XYZ. This led to my ultimately learning all kinds of things about the AICPA I didn't like, and helping to found CPAs For Reform. For the first 41 years of my membership, I like most CPAs ignored what they did. It was only within the last 10 years that I began to notice things I didn't like, such as the leadership saying the small CPA firms were going to disappear. I have a small CPA firm and we are not going to disappear.
AccountingWEB: What is the most important thing that the AICPA should be doing today that in your opinion it is not doing?
Harold Katz: It should be concentrating all its efforts on building and branding the letters CPA, and what they stand for. Instead they deliberately went the other way. It is not a coincidence that the Big 4 and many other large national and regional firms do not even contain the words Certified Public Accountants in their title, in their ads, on their letterheads, or on their cards. In my opinion they all lost their way.
AccountingWEB: There were some vocal opponents during the Cognitor debate that had difficulty getting the ear of the AICPA. How will CPAs For Reform be different?
Harold Katz: CPAs For Reform will be different as we will listen and consider what our subscribers are saying. We will always remember that our purpose is to be of service to our members. Remember, we do not plan on replacing the AICPA. Our goal is to keep the AICPA and get them to represent all the members, not just a few powerful ones.
AccountingWEB: What is it that you would like the average CPA to do as a result of learning about your organization?
Harold Katz: I would like them to go to our website (www.cpas4reform.com), read our material, join our list service and then make their voices heard. I would like them to join the email discussions on our list service. I would like them to become informed and make their voices heard at the AICPA." I want to save the AICPA and redirect it from representing the Big 4 to representing its 350,000 members. I don't want to see 100,000+ members drop their membership, by which time it will be too late to save the organization. We need the AICPA to represent our profession. In my opinion, they have not been doing that during the last ten years.
AccountingWEB: Anything else that you would like to share with the AccountingWEB audience?
Harold Katz: There is no debate; our capitalistic system of free enterprise is the best in the world, even if it has a whole lot of warts. It is also not subject to debate that everything good that happens in the free world, all the social causes, all the money contributed to charities, all the good things that are done for people, for the poor, for the poor sick, etc., the money to pay for ALL of this comes from the business world which generates all sources of cash, at least until somebody invents a money tree. In my opinion, the system doesn't work without us CPAs.
Voice of the Editor
Which isn’t completely true. I mean, occasionally I drop by when I manage to sneak out of the nonstop frat party over at Going Concern, but I’m mostly a wallflower over there. I’m happy to say that I’ve been given express permission (or explicit orders, if you like) to wander over here to AccountingWEB more often.
Why is that, you might ask? My job is to replace the irreplaceable Gail Perry as Editor-in-Chief. What does that mean? I don’t really know! I think it’ll be fun getting a feel for things, throwing in my own thoughts here and there, and listening to the discussions you’re having about the accounting profession.