A voice, however, not the voice. PCAOB officials insist they will choose advisory council members based on the contributions applicants can make to standards setting. No one group will have pride of place. Thus, each of the Big Four will likely make its own nomination, expects Douglas Carmichael, PCAOB's chief accountant. "They don't need to come through the AICPA."
What did the AICPA do to bring such a loss of power upon itself? Nothing, Niemeier insists, adding that he has no beef with AICPA. He says the institute was simply swept up in the wave of accounting scandals that led to the passage of Sarbanes-Oxley.
Still, the longstanding influence of top-tier audit firms on standards setting "casts some doubt on whether standards [have been] truly set in the public interest," asserts Carmichael, a former AICPA executives who's gained a reputation as a tough critic of the industry. Although the standards-setting process wasn't necessarily designed to favor larger accountancies, "those people who have the resources and the time will have the influence," he claims. "The large firms had the financial resources, [and] that gave them more influence."
A related criticism, voiced mostly by CPAs working for small firms serving nonpublic businesses, is that AICPA's policies and programs are overly influenced by the marquee firms. Ezzell doesn't see it that way, however. "I don't think we're too aligned with the Big Four," says Ezzell, a partner at Deloitte & Touche, noting that many institute activities are geared toward smaller bookkeeping firms.
On the other hand, since the 17,000 or so publicly traded companies conduct about as much business as the 350,000 or so private ones, AICPA doesn't want to ignore CPAs who audit public companies, he says.
Going Private
Nevertheless, losing the audit standards-setting role for the public sector will likely trigger a shift in the AICPA's heading. The new direction, say some, will involve providing more support and standards for audits of private companies. Institute leaders are already exploring a plan to revamp the AICPA's Auditing Standards Board so that the standards it issues reflect "greater knowledge and background in the private-company arena," says Ezzell.
Part of the AICPA's push will apparently involve fighting attempts to add Sarbanes-Oxley provisions to state laws. In his inaugural address last year, AICPA chairman Ezzell pledged to "work with great vigor to prevent the Act's provisions from inappropriately cascading to the state level and applying to all areas and practitioners that serve nonpublic companies."
One example: Sarbox's requirement that corporations and their auditors attest to the adequacy of internal controls. The standard is "a great thing for a public company," Ezzell notes, "but for a small, closely held company with $5 million in sales, that might be beyond [what's reasonable]. At that level, PCAOB is not beneficial to the marketplace."
How successful the AICPA will be in holding the line on private company audit standards, however, might depend on how well the fledgling public company oversight board carries out its mission. "If PCAOB rules make sense and are effective, probably over time everybody will gravitate to their standards," says Eisner LLP's Rosen. "But if they're difficult and hard to work with, you will see two sets of standards."
In the meantime, the AICPA will likely seek out a new identity — and renewed clout. It won't be easy. Observes consultant Koltin: "They've hit the bottom."
For his part, Carmichael thinks the AICPA could be effective in speaking out on national tax policy. "It's really up to them to define what their role should be going forward," he says. "How they do that will mean a lot about what their future influence is."
It remains to be seen if addressing tax issues will be enough for a professional association that once set the standards for the entire audit industry. "They have been influential within their membership," says Carmichael. "The real issue is whether they can be a voice outside the membership again."
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