Professional Issues Update

1. Professional Issues Update Presented by Art Sparks 2014-15 TSCPA Chair

2. TSCPAMission & Vision The mission of the Tennessee Society of Certified Public Accountants is to enhance the success of our members through service, support and advocacy. TSCPA Vision: “To be the premier professional organization serving CPAs in Tennessee”

3. TSCPA At A Glance • Total current membership is 9,758; • Approximately half are in public practice, and half are not in public practice; • TSCPA is 110 years old (founded in 1904); • Comprised of eight chapters; • $5,038,253 total net assets at 3/31/14; • 18 full-time staff; • Educational & Memorial Foundation; • Tennessee CPA Political Action Committee.

4. TSCPA’s Broad Strategic Initiatives • Promoting public awareness of the roles and the value of CPAs; • Representing the professional views of our members; • Helping to attract the best and the brightest people to the accounting profession; • Providing high-quality services and education; • Providing opportunities for members to interact at local and state levels; and • Maintaining the TSCPA as a highly-effective professional society.

5. Trends Facing the Profession Digital world #CPAPOWERED Technology Future of Learning Peer Review Financial Literacy

6. “What globalization was to the economic debates of the late 20th century, technological change is to the early 21st century.” —Lawrence H. SummersFormer Secretary of the Treasury,Former Chief Economist of the World Bank

8. 1994 1981 2006 2007 2010 2003 2004 2005

9. Digital World 3.3 hours 80% Amount of time respondents in a recent survey said they spent on smartphones each day of consumers who sign up for emails from a brand make a purchase based on an email within six months. $133billion Cloudand SaaS business is projected to grow 533% this decade By 2015, 40% of Global 1000 organizationswill use gamification as the primary mechanism to transform business operations $21billion 2011 2020 Sources: ExactTarget 2014 Mobile Behavior Study; Gartner Inc.

10. Trends Facing the Profession Technology Learning Peer Review Financial Literacy Business and profession transform Learner’s expectations Future of learning recommendations

11. The Task Force on the Future of Learning Firms State Societies B&I Reg Education AICPA

12. Business and Profession Transform • Disruptors emerge overnight • Increased regulation • Hyper-specialization • Globalization adds complexity • Technologies transforming business

13. Learner’s Expectations Have Changed • Competency plus compliance • Relevant and contextual • Collaborative, interactive, participative • Mentoring and coaching • Just in time, blended, tech-enabled Source: Future of Learning 1st Task Force meeting

14. Competency-Based Models Reward Learner Outputs Competency-based; rewards outputs and learner proficiency Creating Evaluating Time-based; rewards inputs and learner recall Analyzing Applying Understanding Remembering

15. Mix of Formal, Informal and Experiential Learning  Workplace integration of learning  Learning momentum  Learning event 10% 20% 70% Formal Informal Experiential

16. Future of Learning Recommendations • Innovate and Experiment • Ignite a Passion for Learning • Make Learning Personal • Measure What Matters

17. Innovate and Experiment Leverage technology to enhance learning experiences Adapt and evolve learning to meet the needs of high-performing professionals Small changes to learning can have a huge impact

18. Ignite a Passion for Learning Start with the learner Create meaningful, purposeful experiences that motivate and engage learners Make learning engaging and relevant

19. Make Learning Personal Filter content and focus resources Create learning opportunities that address individuals’ knowledge and competency needs Design for desired outcome Deliver any topic, anywhere, any way

20. Measure What Matters Create and leverage a unified, global competency framework Learning happens everywhere and can’t always be quantified in a test result or measured in hours Develop one uniform, global compliance standard Rethink how CPE is measured

22. Next Steps • Launch Future of Learning microsite and communications campaign • Pilot new learning methods and tools with State Societies • Incorporate competency-based approaches to CPE into AICPA membership requirements • Build Future of Learning recommendations into AICPA learning resources • Collaborate with NASBA, State Boards and State Societies on CPE requirements

23. TSCPA On Demand Video Library • This CPE is truly an ‘anywhere, anytime’ option. • TSCPA’s online video library provides the convenience of taking a course at your leisure. The video is available from the date of purchase until the course expiration date. • For more information on the On Demand CPE options, go to the website and click on On Demand Video Library under the Education tab.

24. Trends Facing the Profession Technology Learning Peer Review Financial Literacy Enhance quality Changes to Peer Review Practice Monitoring Department of Labor

25. 2-Phased Approach to Enhance Quality Regulator Engagement

26. Near-Term Changes to Peer Review Under Consideration • Enhance quality of peer reviewers • Evaluate “new” industry engagements promptly • Deepen review of high-risk industries and areas of concern • Create “SWOT” team • Make peer review results more informative

27. Principles for Practice Monitoring of the Future Increased public protectionthrough enhanced audit effectiveness via: • Earlier detection of engagement deficiencies • Systems that capture and include all firms that should be subject to review • Systems that capture and include all engagements that should be reviewed

28. Objectives of Practice Monitoring of the Future • More real-time and continuous process to detect issues earlier • Use of technology and people • Use of data from firms’systems • Dashboard that is useful to firms and AICPA/external monitors • Transparency and usefulness to regulators and public • Checks and balances to include all firms and all A&A engagements

29. Facets of the Concept

30. Current Initiative - MFC Project • Gathers data electronically at a granular level • Data analyzed for current issues • New tools and more relevant CPE can be developed

31. Current Initiative -Department of Labor • Ongoing Audit Quality Concern – Unacceptable deficiency rates – 32% • Firms with limited EBP practices have higher rate of deficient work – “Dabblers” • 248 CPA Firms in Tennessee perform EBP audits. • 72 of these firms perform 1-2 EBP audits. • Referrals of most egregious work made to AICPA Ethics Division or State Boards • AICPA Peer Review copied on referrals

32. Department of LaborResearch Project • Collaborative Effort between AICPA and DOL • AICPA was asked to verify peer review enrollment for approximately 5000 firms (nationwide) who had 2011 Form 5500 filings • 3907 Firms enrolled • 144 Firms not enrolled • 867 Firms could not be positively matched

33. Department of LaborResearch Project • Internal Review Conducted by AICPA on the 1000+ Firms with no proof of enrollment • Results Obtained – 23 Exceptions Found in Tennessee • 10 cases to date • 2 recalls • 2 firms that did not disclose audits during scheduling process • 5 that did not include EBP audits on list of engagements to reviewer • 1 data entry error

34. Department of LaborResearch ProjectWhat is Being Done? Recall Guidance Revised • Acceptance letter for prior review is recalled • Peer Reviewer should (presumptively mandatory) recall the peer review report • A new review must be completed within 90 days Additional Steps • Revisions to non-cooperation provisions • Revisions to firm representation letters • Reviewer checklists revised

35. Current Initiative -Proposed SSARS Changes Revised compilation standard • Would apply when an accountant is engaged to perform a compilation engagement New preparation standard • Would apply when an accountant is engaged to prepare financial statements New association standard • Applies when an accountant permits the use of his or her name in a report, document, or written communication containing financial statements that the accountant did not issue an audit, review or compilation report on. • Accountant may or may not have prepared the financial statements.

36. Submission of Financial Statements • AR section 80 applies when an accountant is engaged to report on compiled financial statements or submits financial statements to the client or to third parties. • Cloud computing and other applications have made it difficult to determine who (or what) has prepared the financial statements • ARSC proposes to revise the applicability so that the standard applies when an accountant is engaged to perform a compilation service.

37. Compilations and Non-attest Services • PEEC amended 101-3 to clarify that independence would not be impaired if a CPA designs or maintains internal controls for an attest client • Management must still accept responsibility for internal control • With this confusion removed, PEEC further amended 101-3 to clarify that preparation of financial statements is a non-attest service • Subject to general requirements of 101-3 • Consistent with new Yellow Book independence standards • Effective for engagements covering periods beginning on or after December 15, 2014

38. ARSC Reaction to PEEC • Because PEEC has defined preparation as a non attest service, compilation, review and auditing standards all need to be revised to state that preparation or drafting is not part of the attest service, but rather a non attest service. • Remove independence from compilation standard • By definition compilation becomes a non-attest service • Create a non attest compilation/preparation standard that puts requirements around what a CPA needs to do when preparing financial statements

39. Center for Plain English Accounting

40. Trends Facing the Profession Technology Learning Peer Review Financial Literacy Building the profession of tomorrow 360 degrees of Financial Literacy’s 10th Anniversary

41. One United Effort of the CPA Profession All state CPA societies 2,500+ events Thousands of CPA volunteers 70 million website visits + 1.5 billion+ media impressions = 360 Degrees of Financial Literacy 10.9 trillion+ Feed the Pig impressions

42. First and Only National Financial Literacy Public Service Campaign

43. Improving Americans’ Financial Future • Fewer young adults say they procrastinate on saving money: 46% in 2006 vs 41% in 2012. • Since 2006, significant increase in the percentage of young adults who report saving money regularly. • Increased percentage of young adults who report they are excellentor pretty good at managing money: 50% in 2006 to 62% in 2013. • Two-thirds of young adults feel financially stable.

44. Student Initiatives Update Accounting Academy 2014 | July 6-9 | Lipscomb University 94 applications this year 52 accepted applications from 30 schools; 9 past attendees and 2 optional on standby 17 Seniors>College 24 Juniors 11 Sophomores

45. TSCPA Scholarship Recipients By Year

46. TSCPA Scholarship Amounts

47. Named Scholarships • Paul Royston Award –top accounting student in TN • Robert Knapp Award –top student in Shelby County • Maxie O. Patton Award –top student at Tennessee Tech • Richard L. Townsend Award – top Macc student at UTK • Will J. Pugh, Sr. Award – top overall student at UTK • Calvin & Jean King Award • Appalachian Chapter Award • Chattanooga Chapter Award • Nashville Chapter Award • Memphis Chapter Award • West Tennessee Chapter Award * Every college/university receives at least one award as long as there is a qualified candidate.

48. Life Associate ProgramLevels of Support 15 Diamond Associates at $10,000 = $150,000 3 Volunteer Associates at $7,500 = $22,500 20Benefactor Associates at $5,000 = $100,000 13 Platinum Associates at $3,500 = $45,500 26 Gold Associates at $2,250 = $58,500 77 Silver Associates at $1,250 = $96,250 498 Life Associates at $500 = $249,000 TOTAL = $721,750

49. Connect with TSCPA through Technology and Social Media

50. Tscpa.com mobile Access your online TSCPA membership on your phone TSCPA’s Course Catalog is now Mobile Friendly! On Demand Video Library for CPE anytime, anywhere Mobile Communications