President’s Memo: An Open Mind

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State Board members, executive directors and associates should have recently received a thoughtful message from NASBA Chair Ted Long regarding the June NASBA Regional Meetings. His specific request was that you come to those meetings prepared for a meaningful dialog and, importantly, with an “open mind.” I echo that appeal and hope that you will make an extra effort to attend your Regional Meeting this year. It is critical that all Boards of Accountancy participate in the important conversations that will impact the future of the profession and regulation.

We have been talking and writing about the increasing use and reliance on technology and, specifically, the impact it will have on the future of the profession. Events this year have only amplified the importance of that discussion.

In February, the Internal Revenue Service (IRS) issued summonses to Coinbase (the world’s most popular cryptocurrency exchange) for the names, taxpayer IDs, addresses and transaction records for clients who conducted transactions of more than $20,000 between 2013 and 2015. Other cybercurrency trading engines and platforms are also receiving inquiries from the IRS. Many Bitcoin and other cryptocurrency users were blindsided by the discovery that they would owe taxes on transactions they had believed were decentralized, non-trackable and unregulated. Trading entities in the U.S. are now issuing 1099-K tax forms to customers. With the use of blockchain and digital encryption for the cryptocurrency exchange medium, CPAs and firms will need a new level of technology comprehension to service these types of transaction engagements.

In March, the U.S. Securities and Exchange Commission (SEC) issued stern warnings to companies and cryptocurrency trading exchanges against hyping the sale of cryptocurrency, and indicating that they would be issuing subpoenas and scrutinizing the activities of these entities. Similarly, the Commodity Futures Trading Commission (CFTC) has joined the SEC in warning about fraudulent activities, including “pump-and-dump” schemes. The SEC, IRS and CFTC are not alone in their rising interest and concerns about the ramping-up of technology-based currency and investment practices. China recently ordered the removal of all promotion of cryptocurrency schemes from the Internet, and other major countries are looking at the issue. Ultimately, in the U.S. the CPA profession will be called upon to help decipher and account for both the gains and losses of this new type of investment.

Over the last few years at NASBA meetings we have discussed the increasing reliance on technology and data analytics in auditing and accounting, particularly in the largest firms. That trend is expanding. New products are coming to market that will allow firms of all sizes to use technology and consider big data in their engagements. That transition to new systems and methodologies will continue to escalate requiring all of us to consider the consequences, the possible regulatory ramifications and the necessary preparations.

One of the possible approaches we have publicly discussed is a new “technology pathway.” While the pathway is still only a concept, some stakeholders have already embraced it — and others are challenged by it. I am not surprised. Any departure from tradition should, and will be, challenged. At the Regional Meetings, our goal is to provide you with current and focused information about the pathway and other possible considerations that we hope will answer your questions and dispel some of the misinterpretation and concerns as to what is being discussed.

As with any proposed initiative, confusion abounds. I have heard that we are promoting turning “IT staff” into CPAs, and that the public will believe that there are two types of CPAs, neither of which is true. What we are talking about is attracting candidates with technology acumen, who probably have never considered becoming a CPA, to fill a need in the profession, including those in current accounting technologist positions. Their education, testing and license requirements would have to be as rigorous as the current requirements so that the resultant CPA would be indistinguishable to the public from any other CPA.

I could write volumes on how technology-driven change will create both major benefits and new concerns for an evolving profession. The point of these illustrations is not to predict the future, but to recognize that these are current situations that require skills and comprehensive knowledge that are unprecedented. Whatever actions we take, we must be careful to not disrupt the current pathway, and to protect and maintain the integrity and public perception of the CPA credential. As Chair Long stated in his message, “Nothing has been decided nor committed to as to what the best course of action is,” but “the risk of doing nothing is substantial.”

I look forward to continuing our discussions, where we should all come prepared and with “an open mind.”

Semper ad meliora (Always toward better things).

— Ken L. Bishop
President & CEO