I was just thinking about the future of CPAs. What are the three main functions CPAs, at least external CPAs, perform.
And what is the likely future for those three things?
first the backdrop. CPAs have lost the ability to govern themselves thanks to Enron et al, but that is just the latest round of fiascos as we discover in ZZZZ Best, Lincoln Savings, et al. Now the PCAOB oversees CPAs and the PCAOB's budget is determined by the SEC. And the SEC is responsible for overseeing public somp;any finanical statements. Except they never have done anything about that until it has been too late, the SEC is only on the scene AFTER the cows are out of the barn. So, clearly like any govt agency they are not going to admit that, who could be the scapgoat? Hmmm….
I can imagine the SEC taking the position that external auditors are really working for them. After all if the company fails it makes the SEC look bad. And after all, CPAs have an inevitable conflict of interest. The client pays them, gee problems arise when the cpa rules in favor of the client. So, are you following this, the SEC takes the position that the external CPA should really be working for, yes, the SEC! It will not be a big leap to see the SEC then deciding how much those cpas ought to be making, after all they are really quasi govt employees, and congress only makes about $165K per year. The Administration already has the position that one should not make more than $250,000. And remember to audit a public company a firm already has to be registered with the PCAOB. Limiting salaries would just be another govt ruling for the external cpas.
the next thing CPAs do, well prepare financial statements for bank loans. Hmm, who insures banks, well the Federal Government. So if the loan goes bad, it is really a hit on the government. So, perhaps the CPAs should be working for the govt, after all that is the REAL client, not the bank, as the govt insures the bank and therefore the loans the banK makes! It is not a stretch that the govt thinks CPAs should be reporting to them, not the banks themselves.
The third thing CPAs do is, well, income taxes. You will recall that KPMG paid the largest criminal tax penalty ever, about $450 M for its role in a tax shelter scheme. And KPMG never went to court….So not much of a stretch for the govt to decide that CPAs are really quasi govt tax collectors. The CPA should be working for the govt, why should the govt have to go back and second time and audit taxpayers, the CPAs should be doing that the first time!
APB gave way to FASB and GASB to PCAOB and now SEC.
I suspect that FNM and FRE would have been the tipping point for all this to happen except those had so many congressional fingerprints all over it. CIT is rumored to be the next bankrupt and has financed lots of small business. There is no way to tell what the tipping point will be but, what is your take on this One Two Three scenario>
Professor Elam 
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