Seeking inclusiveness, perfecting innovation, following the Vision: AICPA chair Kathy G. Eddy

While in New York late last year, AICPA Chair Kathy G. Eddy, now serving a one-year term as the organization’s chief elected officer, sat down with Editor-in-Chief Robert H. Colson to discuss the AICPA’s current activities and plans and her perspective on issues facing the profession. From the beginning of the interview, Eddy conveys a sense of purpose and clarity of vision. Her conviction about a strong future for the CPA profession underscores her message about inclusiveness and her stated motto of “perfecting innovation.”

The CPA Journal: What path led you to the AICPA chair, and how does this position fit with your other roles?

Kathy G. Eddy: I didn’t take accounting in high school or have accountants in the family. I attended Marshall University and chose to major in accounting by looking at what I thought would be interesting. After graduation, I worked at a firm in Ohio; another woman there was very supportive and gave me perspective. After she went to work for a more progressive sole practitioner firm in Parkersburg, W.V., she encouraged me to join that firm, which I did. When the founder passed away, the surviving partners, including me, acquired the firm that is now McDonough, Eddy, Parsons & Baylous, A.C. The firm works almost entirely in management consulting, and our clients run the gamut from small mom-and-pop businesses to large firms.

My involvement with the AICPA developed progressively. After serving at the local chapter level, I got involved with the West Virginia Society of CPAs. Later I was appointed as an AICPA committee chair, then as an at-large board member, and then to the state legislation committee. I also served on the state board of accountancy.

Serving as the AICPA chair requires a commitment of almost four years, including as immediate past chair serving on the board, on some key committees, and as part of the leadership group. The year spent as chair is essentially a full-time job. But I think everyone is responsible for giving something back to a profession that’s been very good to us. It also helps you keep a finger on the pulse of what’s going on and how it affects your firm.

After my service as immediate past chair is finished, I have no grand aspirations. I’ll probably consider whatever comes along in terms of what I think I can contribute.

CPAJ: What are your thoughts on the Uniform Accountancy Act [UAA]?

Eddy: My background makes me well informed in this area: I co-chaired the national steering committee for implementing the UAA and served on the committee that helped draft the third edition of the UAA.

The 150-hour requirement is a matter of great concern. The intent and hope was that the states and schools would add more courses on business skills that people would need in the marketplace, not just add 30 more accounting hours. Whatever their thought process has been, it hasn’t produced an environment that makes accounting an attractive professional career that’s in demand in the marketplace. The educational community has missed an opportunity by not teaching strategic thinking, problem-solving, and communications. If students graduate with a strong grounding in these skills and an understanding of accounting, then the firm can teach them write-up work—but teaching them how to communicate with clients and assess problems will take longer. Once you get involved with a good auditing manager, you can learn the technical skills. But teaching problem-solving and communications out in the field is difficult.

NASBA can play a role here because it sets the “Three Es” [education, experience, and examination]. Experience—including what kind of experience should qualify—was a huge issue when we were drafting the act. For the states to adopt the one-year broad-based experience requirement would be an enormous leg-up in trying to attract quality people to the profession. A fair number of students say they’ll never be interested in auditing. But they’re truly interested in many things that a professional services firm does and they want to be CPAs. Requiring 500 hours of auditing experience is a waste of their time and a valid reason for them to lose interest. I’m proud to say that West Virginia is very progressive regarding the UAA, but it hasn’t been my influence—we just have progressive people.

CPAJ: Which of the many important issues currently facing the accounting profession and the AICPA will you emphasize as chair?

Eddy: Launching new initiatives during my term is really not a possibility. We have a full plate and I need to focus on the vision. My banner theme is “perfecting innovation.”

About 50% of the AICPA’s members are in industry, and about 50% are in public practice. How well the AICPA addresses its diverse membership is seriously misperceived and misunderstood. High on my list is seeing the AICPA do a better job of communicating with its members about what we do to serve everyone.

My own firm has benefited from the AICPA through the PCPS [Partnering for CPA Practice Success], practice aids, peer review, literature for small firms, and the focus on assurance services. I also believe that the portal, cpa2biz, will benefit small firms.

The state boards of accountancy overemphasize requirements to keep people out rather than how to help people do the best they can in the profession. Peer review addresses this by giving a firm incredible guidance to improve its practice and perform services in accordance with the public mandate. I agree with Ray Nowicki’s point in the October 2000 CPA Journal cover story: Peer review is an opportunity. Yes, we moan and groan about the data-gathering, but in the final analysis we say it’s a very good process. My own firm doesn’t do a lot of auditing, so we benefit enormously from peer review telling us how to be more efficient.

Regarding [the proposed global credential] Cognitor, I’ve come to see how it will benefit CPAs if they choose to obtain it. They don’t have to get it if it isn’t right for them. I should also point out that the name Cognitor isn’t final. The last major vote taken on the subject was to plan and restructure the proposal. We’re still studying demand among both the consumer public and prospective users. For example, Cognitor may make more sense to people who are 24 or 25 years old. We’re trying to focus more on the concept than the name, and we’re committed to the educational process that will involve. In one-on-one sessions, most people opposed to the proposal either change their minds in favor of it or become neutral to the extent that they ask constructive questions. I get lots of e-mail from people saying, “When Cognitor passes, you’re going to stop promoting the CPA.” But that’s wrong—the CPA is the trusted professional, and we’re going to maintain that base. So a lot of communication and education needs to be done before the member ballot.

CPAJ: What is your perception of the recent criticism leveled at the AICPA, including President/CEO Barry Melancon and immediate past Chair Robert Elliott?

Eddy: Many people don’t see how a progressive trade organization can also protect the public interest. The AICPA is going to transfer the selling of products and services—the things for which people call the AICPA a trade association—to the portal, cpa2biz.com. Doing that will allow us to focus more on professional issues such as the audit risk model, the SEC Practice Section, and, in the not-too-distant future, the financial reporting model.

I’m a firm believer that the right person is chosen at the right time. Bob Elliott was the right person for the job, but visionaries also bring turmoil. My role is to make sure that people realize how the AICPA’s initiatives are either good for them or won’t hurt them. Me, I’m the small-firm practitioner who has lived it and done it, and I firmly believe that these current initiatives are good for me, my firm, and the profession.

CPAJ: Who will be the hardest to convince?

Eddy: In each segment of the industry, people that are overextended ask, “How will Cognitor help me deal with this, or how will cpa2biz help me deal with that?” Additionally, in prosperous times, many people are resistant to change because they think, “If it’s not broken, don’t fix it.” But we’ve also seen that economic prosperity means that talent gets grabbed up by other sectors.

CPAJ: How do you regard speculation that the SEC’s independence rules will effectively disenfranchise the Independence Standards Board [ISB]?

Eddy: I’m committed to preventing that from happening and I’m concerned about government intervention in self-regulation. That’s why we fought the SEC’s proposal for a new auditor independence rule so hard.

CPAJ: Given that independence is such a gray area, what is your opinion on audit committees?

Eddy: Historically, I think that corporate audit committees have generally done a good job and that will continue. Although some decisions will be made differently, audit committees will arrive at the same answers as before. I don’t think we needed a new rule to tell them how to do their job—they’ve already been doing it.

CPAJ: Will the AICPA be working to mend fences with the SEC?

Eddy: Whomever the new SEC chair is, we’ll need to get in on the ground floor and be present with a tenor that is politic. Once a short list of prospective candidates for the position is available, we’ll be involved in educating those people. A good working relationship with the new SEC chair—and the new chief accountant, if there is a new one—is important to the profession. But it’s also a two-way street: The SEC has to be receptive. For example, the SEC is in favor of what many people call cookbook auditing, but with the financial information that’s now routinely available on the Internet, the cookbook financial reporting model won’t work, and we need a new one. So self-regulation isn’t perfect and neither is the government. We need to work together without becoming adversaries.

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.