MACPA’s PIU Town Hall SeriesFinding Opportunities Amidst 

the TurbulenceFall, 2010

Presented by:Tom Hood, CPA.CITP

CEO & executive Director

The recession is over? Many of our CPAs are continuing to see rough seas ahead

5

CPAs and businesses are

feeling overwhelmed by

the rapid and turbulent pace of

change

You would like to be ahead of the waves instead of being crushed by them

Photo: Pratt’s surfing page

Today we will show you how MACPA can help you survive and thrive these waves of change

Our agenda

• What do we see?– Economy – Regulations & Standards– Globalization– Technology–Workforce & demographics

• What are we doing about these issues?• Where are the opportunities and how we can help?

• What does it mean to lead in turbulent times?

Ever feel like you need an evacuation route?

“But a time of turbulence is also one of great opportunity for those who can understand, accept and exploit the new realities. It is above all a time of opportunity for leadership.”

‐ Peter Drucker, Managing in Turbulent Times

A useful framework for dealing with change – strategic thinking using our i2a –

Insights to Action SystemMaking sense of

a changing & complex world

How is the world

changing?

What does it mean to us?

What possibilities do we see?

What direction should we go?

Who do we need to inspire to help us get

there?

Why we are here and what we are doing about it

Why we are here and what we are doing about it

CPA

The Economy

Report from the future…

Where have the jobs gone – 8,000,000 down

Source: Small Business Labs blog – Fidelity.com

Are we in the “Loch Ness Monster” Economy?

“Characterized by a series of dips superimposed on a slow underlying economy thru 2020” ‐ Business Redefined by Ernst & Young

Is it a two speed economy?

Global vs DomesticRegional vs National

The Economy – MarylandWill we be one of the lucky ones?

5th Lowest unemployment last year• Eds• Meds• Feds

Last month unemployment rate 7.3% statewide average

Re‐Set, Re‐Think, Re‐ImagineAnticipation of a very large business model change amidst  rapid change – Steve King

There are two recessions – the obvious one and the not so obvious, the end of the industrial age where perfecting the model was the key. The new model will be completely different. – Seth Godin

#4 Rethinking the Business Model (25) from AICPA MFG

E&Y report outlines steps to grow in the “new normal”

Source: Ernst & Young report – Planning for Growth, Embracing the new “normal”

Want to know more? Join us on 1/07/2011

Fourth Annual First Friday Economic Outlook Forum

Baltimore Marriott Waterfront11:00 am – 2:30 pm

Regulations & Standards

Massive legislation in a very short timePatient Protection Act Dodd-Frank Wall Street

Reform & Consumer Financial Protection Act

Small Business Tax Relief Act

The Federal Issues• FTC Red Flags rule –privacy & identity theft

• Tax Preparer Registration & PTIN issue

• Patient Protection Act & 1099’s

• Sub S. Employment Tax Issue

• H.R.5297 ‐ Small Business Jobs and Credit Act of 2010

The CPA profession is part of the bigger infrastructurethat supports the US free market system. Like the pipes under

urban streets, it is often invisible until it breaks.

A useful framework to understand the CPA profession

Our infrastructure for regulating the US financial markets has been created from a series of reactions to crises and changes and

is in need of repair.

Federal & State Laws & Regulations – SEC, DOL, Treasury, GAO, PCAOB

CPA Profession Standards – AICPA & FASB, GASB, FASAB, IASB

State CPA Statutes (Law)State Boards of Accountancy issue licenses and regulate CPAs

The (infra) Structure of the CPA Profession

Where do major changes come from?Most changes come from regulators and standard setters

Us – AssociationsMACPA & AICPA

OR

Them – Federal & Statelegislators Infrastructure

New laws, regulations& regulators

TX

WA

OR

CA

NV

ID

MTND

SDWY

UTCO

AZ NM

HI

OK

KS

NE

MN

IA

MO

AR

LA

MS AL *GA

FL

WI

IL

MI

IN

KY

TN

SC

NC

VA

OH

NY

ME

CT RI

*MA

AK

WVNJDE

DC

MD

*PA

CPA Mobility Enacted 46

CPA Mobility Enacted Only for Other Mobility States – GA, PA, MA

*

In Process

Awaiting Governor Signature - 1

NH

CPA Mobility Legislation Pending - 2

VT

PR

GU

U.S. VIRGIN ISLANDS

29

• Collaborative effort with AICPA –CPA/SEA – NASBA & State CPA Societies

• 47 states passed legislation in three (3) years

• Maryland enacted it in 2008

What did we do when you were forced to have a license in every state you file

taxes in?

An example ‐ CPE Regulations involved all levels – law, regulations, and procedures

Maryland Senate & House passes bill

A Bill SB 128From State Board

LawMaryland Governor signs into law

Maryland State Board of Public Accountancy

Clarify thru regulationsAnd enforce the law

Changes the requirements to sit for the CPA exam to allow you to sit for the Exam upon completion of 120 hours (and the requirements of section 1 & 3) and get licensed upon completion of the final 30 credit hours (and the requirements in group 2)

An example of “us” - The 120/150 Hour CPA Exam Bill (HB 1137)

A tale of two bills – clotheslines and 120/150 hours

The clock runs out at midnight and we have to come back again next year

Recent example – The Dodd – Frank Wall Street Reform and Consumer Financial Protection Act of 2010

Crisis hits news

Bureau of Consumer Financial Protection

848 pages!

533 regulations60 studies94 reports

It’s 7:00 am at a town hall meeting in Aberdeen when the 

AICPA alert comes in…

More than 100 MACPA members call our senators and we defeat the amendment!

Protecting by advocating for members (CPAs) = real results!

Retained independent structure of financial accounting standards (FASB)Modified provision to audit broker‐dealers (PCAOB)Exempted CPAs from CFPA registration due to existing licensing and oversightStopped excessive liability exposure for auditors (aiding & abetting)Commented on SOX 404(b) exemptions

Working together with the AICPA and many State CPA Societies achieved these:

The Federal Issues – more waves of change

• H.R.5297 ‐ Small Business Jobs and Credit Act of 2010

• Estate Tax – on again – off again –on again

• FTC Red Flags rule – privacy & identity theft

• Tax Preparer Registration & PTIN issue

• Patient Protection Act & 1099’s

• Sub S. Employment Tax Issue

Remember this? $3,500.00 penalty applies

AICPA members have 90 Days from the date the court decision is rendered to comply if the FTC wins – all

others must comply by 12/31/2010

IRS Tax Preparer Registration

MACPA Fed & State Tax listservs

Update on PTIN

• Need “new” PTIN before 01/01/2011• Required for Signing Preparer or preparer of all or substantially all of tax return (major victory)

• Fee is $64.25• Only Actively Licensed CPAs exempt from exam• Registering gives your staff up to three years for exam

• CPAs in industry are exempt from filing for employers

Health Care & 1099 issue

Health Care & 1099 issue

Health Care & 1099 issue

Health Care & 1099 issue

We are still working on this – will be pushing Congress between now and 2012 to repeal this

bad legislation and will need your grassroots support

The State Issues – cascading from the federal level and revenue shortfalls

• Maryland Privacy Act• Maryland Tax Preparer Regulations

• Maryland Consumer Protection & Debt Counselors

• Sales Tax on Accounting & Tax Services

• Combined Reporting

Recent Leg / Reg Changes you need to know!

New Mobility LawMaryland Individual Tax Preparer ActNew Corporate Reporting RequirementsPeer Review Requirement – October 1stNew CPA Exam RequirementsNew CPE regulationsMandatory e‐fileNew Non‐Profit Audit Requirements > $500,000MD Independent Contractor Legislation

CPA Day in AnnapolisJanuary 19, 2011

MACPA 2011 Agenda• Pass 120/150 legislation• Stop Sales Tax on Accounting

Services• Exempt CPAs from Debt

Counseling Bill• Stop Trial Lawyers attempts at

Tort Liberalization –Comparative Fault

• Pass Safe Harbor legislation

CPA Day in AnnapolisJanuary 19, 2011

Help us help you – support our PAC

Our State Tax Committee takes a proactive position in General Assembly

Professional Standards are also rapidly changing

What do these guys have to do with accounting standards?

A: More than you think

SECFASB

FASBPCFRC

IASBIFRS & SME

PCAOB AICPAASB, ARSC, PRB

IAASB

AICPAPEEC

AICPAPEEC

IFAC

Public Company Private Company Int’l Company

FinancialReporting

Audit /Attest PerformanceStandards

Code of Conduct

Another way to look at standards & oversight

State Oversight & Enforcement of CPA LicenseCPALicensure

Six Ways Convergence is happening1. FASB – IASB Convergence Project2. SEC IFRS – The Long and winding roadmap3. Private Company Standards4. AICPA Auditing Standards Board ASB Clarity 

project5. AICPA Professional Ethics Executive 

Committee – convergence6. Green / Sustainability reporting

FASB – IASB Convergence Project extends deadline by six months to 12/31/2011

Source: Journal of Accountancy, August 2010

The Blue Ribbon Committee narrows the field down to the final three

From seven to three options1. U.S. GAAP with Exclusions for Private Companies2. U.S. GAAP—Baseline GAAP with Public Company Add-Ons3. Separate, Stand-Alone GAAP Based on Current U.S. GAAP

INTERNATIONAL ORGANIZATION OF SUPREME AUDIT INSTITUTION

Governmental auditors are also experiencing changes and convergence

• Increases in audits of ARRA

• Increases in A-133 audits

• Changes in Yellow Book

IAASB

IASB

Maryland ranks in top five states with highest audit deficiencies with DOL

EBP Audits (401k) & 403(b) Audit Quality must be raised in

Maryland

MACPA worked with the DOL to put on our first Employee Benefit Plan Conference in May, 2010

Look for the second annual conference in May, 2011

Sustainability is a growing global trend and showed up a key training needs for finance 

professionals

www.integratedreporting.org

70% of consumers are looking for businesses adopting sustainable business practices

Can green give you a competitive advantage?

Globalization

As the globe shrinks, 

opportunities grow for CPAs

Globalization – Chinese auditors visit MACPA Towson CPA Center

5 Forces of Globalization

1. Growth of consumers in emerging economies2. Technologies that empower consumers & 

communities3. Increase in labor productivity in developed markets4. Shift of economic activity between and within 

regions5. Increasingly global markets for labor & talent

Growth is projected to come from overseas for the next five years while the

US remains flat

Priority #1 Exports by Small to Medium Enterprises (SME’s)

• 33 % shipments overseas by UPS

• 25% of small practices had international clients

• US targets 100% increase in exports by SMEs

It is not either global or local, it is AND…

Glocal

Technology• Cloud• Mobile• Location‐based / Augmented Reality

• Security / Privacy• Social Media• XBRL

Are you on Facebook?

72% of Finance Professionals have a social media account

Source: Mergis Group Survey

It’s the power of the network

It’s the power of the network

Social media = social capitalreal world examples

72% Said it increased productivity by:

72% get answers to questions68% finding information needed to be successful62% know what kind of help is available

Source: CFO Magazine, July 2010

The Cost of Social Media Phobia?

The IRS is on Twitter are you?

The AICPA is on Twitter are you?

The MACPA is on Twitter

XBRL & the SEC Mandate 

MAPCA’s XBRL ProjectTrying to learn what it is all about

Cost of compliance is rising

Source: US SBA Office of Advocacy

Could we use $200 million a year for businesses and government in Maryland?

21.4 million people = $800 Million

5.6 million people = $200 Million?

Workforce & Demographics

Workforce & Demographics

Email Generation

Facebook Generation

These guys are retiring

These are making the purchasing decisions

These are the new workers

5 Generations in the workforce

Live First, Work Second

Digital Natives

They (younger generations) understand the technologies and values that shape the mind set of the

demographic. In short, they hold the answers to what it will take to transform and sustain a firm. - Jim Boomer

Are you already missing the next generation of clients?

Bottom Line: How to keep your star talent• Engage your top performers• Coach tomorrow’s leaders• Manage your Millennials

Think A M P• Autonomy• Mastery• Purpose

Bright spot?

Despite major challenges, the CPA profession has maintained its trusted advisor status with the 

public and investor communities Both Investors and Business Decision Makers rate CPA’s at the top of all professions, right after physicians.

Accounting Firms Most Trusted Advisors

• Generally speaking, how believable do you normally find statements made by someone who works for one of these organizations or groups

• “Echo Boomers” (18‐34) rated accounting firms highest–74%

67%62%

55%51% 49% 47%

36%

Acctg FirmsBanksInvestment FirmsHealth Ins. Co.Mortgage CompaniesGov't regulatorsCredit Card Co.

Source: Harris Poll, May 18

CPAs most profitable small businesses

Why we are here and what we are doing about it

Why we are here and what we are doing about it

CPA

Connecting our members to their Profession, each other, and the community

Connect

• Connect to the Profession• Connect to each other• Connect to our community• Drive the market to our members

Connect to students to fill the pipeline and promoting the CPA Career

Tomorrows CPA.org New/Young Professionals Network MACPA

Connect – drive the market to our members

New social media tools allow us to connect to more members in more 

ways

MACPA won 2 out of top 10 Biz blogs in MD

MACPA social media efforts featured in J of A and won 3rd place in Mobbies,

Top 75 Biz blogs & Top 50 Accounting blogs

Protect – the public interest and the CPA license and brand

Finally, the penalty for practicing illegally as a CPA gets serious

11 ½ years in jailUp to $ 11,500

The history of associations – Why do we exist?

The First Amendment of the US Constitution allowed “associations”:

• freedom of speech• to peaceably assemble• to petition the Government for a redress of grievances

Bill of Rights - submitted to the states for ratification on September 25, 1789 and adopted on December 15, 1791

US Constitution Bill of Rights

Achieve – our mission is to help you achieve success in a

rapidly changing world

Associations have enduring benefits for both the individuals and organizations that support them

“Association members earn, on average, $10,000 more per year than non-members” And are 19%

more likely to say they are “very-satisfied” with their jobs than non-members”

Source: Where the Winners Meet Study

by the William E. Smith Institute for

Association Research

Top 10 Issues Facing CPAs1. Economic Outlook 2. Tax 3. Business Operations 4. Implementation and Execution 

of Plans 5. New Business Development 6. Personal/Professional 

Development 7. Management and Leadership 8. Financial Regulatory Reform 9. Access to Financing and Credit 10 New Accounting Standards, 

IFRSSource: CPA Trendlines for AICPA Feb, 2010

Top Ten Issues for MFG1. Regulatory/Legislative (56)2. Private Company Leadership (47)3. Capital Markets Awareness / Recognition (34)4. Rethinking Business Model (25)5. Protect Audit/CPA Franchise (20)6. Risk Management (Audit efficiencies) (20)7. Leadership Development / Succession 

Planning (19)8. Global / International (Clients / IFRS / 

Branding) (17)9. Leveraging Technology & Social Media (17)10. MFG Issues specific forums / focus groups (8)

107

Business & Industry ResponsibilitiesAICPA Core – 1/3 of B&I Responsibilities

Financial accountingFinancial reportingAuditTax

2/3 Additional

1/3 Core

AICPA non-Core – 2/3 of B&I Responsibilities

Strategic planningSustainabilityBudgetingFinancial operations managementRisk management & internal controlsInternal auditGovernanceHR & benefitsIT, legal, purchasing

1. Economic Recovery and the U.S. Fiscal Outlook2. Health‐Care Reform3. Employee Benefits4. Financial Regulatory Reform5. Global Convergence of U.S. GAAP and IFRS6. Financial Instruments7. Financial Statement Regulation8. Revenue Recognition9. Business Taxation10. *XBRL

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Top Ten Issues for FEI

Grant Thornton report outlines  8 key areas for CFOs to focus on

1. Developing soft skills2. Understanding and applying international accounting standards3. Understanding complex accounting & auditing standards4. Adapting to an evolving regulatory framework 5. Addressing new external reporting needs6. Understanding ERP or IT systems & XBRL7. Employing quantitative risk management techniques8. Possessing specialized industry knowledge & company's non-financial business drivers

Top 10 Opportunities for CPAs1.Valuation2.Forensics and fraud3.Governmental –

State/local/NFP4. International

(IFRS and tax)5.Health care

6. Green / sustainability7. XBRL8. Tax planning9. Enterprise Risk

Management10. Renewable energy

Achieve - Technical skills are not adequate to keep up with the rapidly changing world

1. Communication & Leadership

2. Strategic & Critical Thinking3. Focus on the Customer,

Client, and Market4. Interpretation of Converging

Information5. Technologically adept

We created our Business Learning Institute to research, develop and teach these skills

Top 5 Competencies for the future are:

Achieve – Our own BLI program  at the AICPA Leadership Academy

Our “soft” skills are nationally recognized!

What is leadership and why is it important?

Leadership = Multiplication• 15 X – ROI strategy as process & alignment

• 8 X – Strengths• 6 X – Trust & Engagement• 20 X ROI Culture• 10 X ROI Leadership

How is leadership changing?

“What got you here won’t get you there.” – Emmanuel Gobillot - Leadershift

How Leadership is changing?

From• Information Stocks• Pyramid• Push• Centralized• Contractual

To• Information Flows• Network• Pull• Distributed• Engagement

Leadership is still about…

• Engagement• Alignment• Accountability• Commitment

“First I get all of my men facing the same direction.”- Napoleon

Soft is HardHard is Soft‐ Tom Peters “In Search of Excellence”

Turbulent times require new skills and new thinking

Source: Chief Learning Officer magazine

Our research shows three major skills: 

• Strategic thinking• Strengths‐based leadership

•Network leadership

The Red Queen was optimistic!

"Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"

The Tortoise was right

Sometimes you have to go slow to go fast

Elvis was wrong!What we need is

a little more conversation!

Five Qualities of Extraordinary Leaders1. Sight - Ability to see emerging

patterns and shift perspective when necessary

2. Insight - Ability to learn faster than the rate of change in your industry

3. Create - Ability to think strategically and critically to gain insights that create new opportunities

4. Communicate - Ability to collaborate inside and outside your organization and to build and sustain social networks of people engaged in the work

5. Inspire – Ability to mobilize support and engage others to join you in ACTION

The only question for leaders

Have I made you feel stronger and more capable?

Source: Emmanuel Gobillot -LeaderShift

Leadership defined

The four most important words for organizations are, “what do you 

think?”‐ Tom Peters

Tom Hood, CPA.CITPCEO

Maryland Association of CPAsBusiness Learning Institute

(443) 632‐2301E‐mail tom@macpa.org

Web http://www.macpa.orgBlog http://www.cpasuccess.com