Hidden Agenda? AICPA Opens ABV to Non-CPAs

CPAs Object to AICPA Rebranding ABV Credential

Objection to AICPA’s opening ABV credential to non-CPAs

In May 2018 the American Institute of Certified Public Accountants (AICPA) Council voted to open its Accredited in Business Valuation (ABV) designation to non-CPAs. Given the swift and relentless blow-back, the AICPA may have misjudged membership’s support for what appears to be an ‘ends justify the means’ dilution of the ABV brand. After all, the AICPA represents CPAs. (Actual CPA licensing is controlled by each state’s board of accountancy.)

The ABV credential is now available to both CPAs and non-CPAs. Does this radical departure from the ABV gold standard diminish professional valuation standards? Will it not dilute the ABV brand? How will CPA/ABVs as stakeholders be affected? Will relaxed credentialing affect all CPAs? Is not the ABV brand prestigious solely because of CPAs? Why, then, is it not worth preserving?

What was AICPA leadership desiring to accomplish and at what cost to CPAs? Corner market share by outfoxing competition? Recruit new dues-paying members in a changed demographic? Is this purely a financial issue benefitting the AICPA to the detriment of individual members? All of the above?

This article delves into the ABV credentialing change controversy. By way of full disclosure, in addition to being a family law attorney, I am also a CPA and member of the Tennessee Society of CPAs and AICPA.

AICPA Stays Competitive

CPA members have a lot of concerns regarding the AICPA Council’s vote to open the ABV credential to non-CPAs, or Other Qualified Professionals (OQPs). To say a contingency are in opposition would be understatement.

Was hollowing-out the ABV designation really the best way for the AICPA to remain competitive and relevant? Some wonder whether ABV-marketing has overpowered the organization’s core responsibilities to its CPA membership. The AICPA admits to targeting non-CPAs employed with the largest CPA firms. Is this a tactic to expand its Certified in Entity and Intangible Valuations (CEIV) market share?

There is also intense objection to the Council’s lack of transparency. Apparent procedural manipulation resulted in its “unanimous” May vote (Spring Council) and subsequent October vote (Fall Council). Have procedural failings undermined member trust? Before delving into the issue of opening ABV designation to non-CPAs, here’s ABV credentialing at a glance.

Basics of ABV Credentialing

The ABV designation originated to distinguish CPAs providing valuation services – an extraordinary subset of CPAs. Among CPAs, the two most influential credentials are, and have always been, the ASA and ABV. (ASA as “Accredited Senior Appraiser” through the American Society of Appraisers.)

In 1998, AICPA’s exclusive ABV designation first became available to qualifying CPAs who passed a rigorous exam and met education and business valuation experience requirements. At the tip of the ABV credentialing spear over 20 years ago was Arizona’s Kevin R. Yeanoplos, CPA/ABV, ASA. Yeanoplos has served the AICPA in many roles over the years and is in the Business Valuation Hall of Fame.

As do many Forensic and Valuation Services (FVS) and rank-and-file CPA members, Yeanoplos remains critical of how leadership handled the entire ABV-matter, right on through the Fall Council Meeting. Integral in building the respected ABV brand and community for the last two decades, Yeanoplos is now championing the cause to reverse the AICPA vote to diminish the long-standing ABV brand. (He was an Open Letter signatory, see the timeline below.) Yeanoplos views AICPA’s opening the ABV-door to non-CPAs as the very first encroachment on CPA-turf, a move “subtractive to CPAs.” And it’s too big a change to cram down.

Out with Old ABV, In with the New

Before the AICPA Council’s 2018 vote last May, application for ABV credentialing was for CPAs only who had passed the ABV examination and who had the requisite education and business valuation experience. Throwing in a few more hoops to jump through, now anyone with a “bachelor’s degree or equivalent” who can “demonstrate considerable expertise in business valuation through their knowledge, skill, experience and adherence to professional standards” is a qualified ABV candidate. Are educational or experiential equivalencies ever in parity with being a CPA?

Current ABV applicants fall into two groups: CPAs and OQPs. The CPA applicant must pass the ABV exam (or equivalency), obtain 1,500 hours of valuation experience and complete 75 hours of valuation continuing professional development (CPD) within a 5-year period. The OQP applicant, a non-CPA, must take the Professional Conduct and Standards Education for Finance Professionals course and pass the ABV exam (or equivalency). Within a 5-year period, the OQP must prove 4,500 hours of valuation experience and complete 75 hours of valuation CPD. For non-CPAs employed with large CPA firms this is a wonderful thing as the larger firms offer more opportunities to work in business valuation full-time. Permission to compete directly with CPA/ABVs granted.

The AICPA claims the ABV brand is neither altered nor diluted by loosened credentialing for non-CPAs. Why? Because the mere act of having “CPA” after one’s name is sufficient to separate wheat from chaff, or CPAs from OQPs. Is that true? Many think not.

Does this dilute the CPA brand? That’s quite likely. The Nashville Chapter of the Tennessee Society of CPAs opined that opening ABV to non-CPAs is watering-down what it means to be a CPA, let alone a CPA/ABV. The AICPA leadership seems to believe they would rather make money than be more exclusive.

On October 27, in response to my email inquiry on this subject, Susan Coffey, CPA, CGMA, AICPA Executive Vice President – Public Practice, stated AICPA’s position that, despite an increase of ABV non-CPAs, the “CPA/ABVs will continue to be differentiated by their CPA license.” Is that not overly simplistic? Why not work toward making the CPA/ABV more prestigious instead of less so?

Does any of this pass the smell test?

Negative Perceptions Cling to Council’s Actions

Can AICPA leadership recapture member trust?

Opening the ABV to non-CPAs has embittered many members for numerous reasons and consternation is not diminishing. This has become a very big issue within the AICPA’s FVS community, many of whom feel betrayed. Concern is also growing among those who rely on forensic and valuation CPAs as expert witnesses, such as family law attorneys like myself (for instance, in high asset divorce trials). Does opening the ABV-door to OQPs implicitly lift non-CPAs to the same level of education and experience as CPAs? How could it not?

Is AICPA tone-deaf to membership? Maybe. Has AICPA leadership gone rogue? Among rank-and-file members, perception that the AICPA sold them out is widespread. By opening the floodgates to ABV certification, leadership disregarded how the ABV brand earned its prestige. That is, the ABV is built upon two decades of outstanding, dedicated CPAs whose forensic and business valuation qualifications are as authentic as the individuals themselves. Perception of leadership betrayal has undermined member trust.

Can AICPA recapture member trust given increased member-ire? Having approached the ABV issue from seemingly every direction, sincere and honest discussion over Council’s vote has left many in the FVS community convinced AICPA leadership purposefully sacrificed its own in casting a net over the wider non-CPA market. Another big problem was leadership’s lack of transparency, something that smacks of hidden agenda. A timeline of events puts this concern in perspective.

Timeline of Events

Has the AICPA leadership of this national organization sold out its own membership? What follows is a reduced timeline of the relevant period. You be the judge.

October 2017: Without obtaining input from the CPA/ABV community at large, the National Accreditation Commission (NAC) voted for the AICPA Council to approve a “pathway” for OQPs to ABV credentialing.

April 2018: The NAC voted unanimously to open the ABV designation to OQPs. The AICPA Board of Directors approved submitting to Council its recommendation and resolution to open up the ABV to non-CPAs. However, the AICPA did not release any details to membership of its proposed change prior to its May vote. Was lack of transparency deliberate, assuring the ABV-agenda went forward without resistance?

May 2018 Spring Council: On May 22, the AICPA Council voted to adopt a resolution opening ABV credentialing to non-CPAs. On May 25, it notified membership of the Council’s vote by email – this was the first notice to members of any such vote. Uproar followed with numerous written and verbal expressions of discontent among the ranks with ample offerings of what the AICPA could do.

Some members are convinced the May 22 vote was practicably unanimous for wholly illegitimate reasons. For one, this crucial motion was presented at day’s end to a fatigued group with only a fraction of voting members present. Two, the presentation was flawed with false truths to essentially advocate AICPA leadership’s position. Three, that the motion was even on the Agenda took some Council members by surprise. And four, Eric L. Hansen, CPA, CGMA, as AICPA Chair ruled there was no disagreement on the motion and, therefore, the motion “unanimously passed” without a yea or nay vote. Was this a transparent process?

June 18 Open Letter: Dissenting stakeholders sent an Open Letter to the AICPA with 32 CPA/ABV signatures affixed. Clearly frustrated the AICPA “did not inform or consult with its members or other affected stakeholders about this important change prior to the May 22, 2018, Council vote,” the Open Letter reported member concerns over the impact of reduced ABV accreditation standards and lack of procedural transparency. Among other things, dissenting stakeholders argued the AICPA “effectively diluted its original message to the public and lowered the standards for its valuation certification.” This was one of many dissenting letters sent to AICPA leadership (discussed later).

July 16 AICPA Webinar: The AICPA’s post-mortem webinar on “The Changing Landscape of Business Valuation” was to educate membership after the fact. There was no relevant educational webinar before the May vote. Was this intended to diffuse dissent or bolster legitimacy of the Council’s action?

July 18 Survey: The Open Letter dissenters released their survey results. When asked “Are you in favor of changing the ABV criteria to admit non-CPAs?” Among the 1,840 CPA/ABV responders, 94% said “No.” Is greater clarity of dissent necessary? The AICPA did not survey its members prior to the May vote. Had it done so, the debate would have been lively and thoughtful. And the process transparent.

July 19 Response: AICPA’s Coffey responded to the Open Letter. In a nutshell (I’m paraphrasing): You knew this was coming, we’ve been discussing it since 2015 and we voted. There’s “a lot of support” for what we did, but we’ll do better getting the word out next time. “[T]hank you wholeheartedly for your passion, dedication and volunteer service over the last 20 years,” but things are going to be different now.

No mention of why the motion was on the May Meeting agenda without prior notice to membership. Robert’s Rules of Order anyone?

July 28 Rebuttal: The Open Letter stakeholders rebutted the AICPA’s July 19 response item-by-item and proposed:

[F]irst, AICPA management immediately suspend the change to the ABV criteria; second, AICPA redo its internal process of approving any change to the ABV criteria by seeking and considering input from all stakeholders (including current CPA/ABVs) and then have Council revote; and third, if, after reconsideration, AICPA still wants to issue a valuation certification to non-CPAs, it create a second valuation credential separate from the ABV.

See Special Report – AICPA ABV Credentialing Debate, FVLE Issue 74, Aug./Sept. 2018, page 25-35.

2018 Fall Council Meeting: On Sunday, October 21, a panel discussion preceded Council Member S. Neil Jay’s (CPA/ABV) motion to suspend AICPA’s May action and allow membership opportunity to provide additional input on the ABV issue. In debate, Yeanoplos and Jay argued for the motion to suspend. Thomas E. Hilton, MSF,  CPA/ABV/CFF, CVA, CGMA (and AICPA Hall of famer) and Bethany M. Hearn, CPA/ABV/CFF, argued against the motion to suspend in favor of opening ABV to non-CPAs.

Yeanoplos provided results of the Open Letter stakeholders’ survey establishing a clear majority opposed opening the ABV to non-CPAs and seemed to have persuaded the panel. The voice-vote after debate closed was a resounding 30-40% favoring Jay’s motion to suspend implementation of new ABV criteria. In the face of this opposition, the Council still voted down the motion to suspend, effectively reaffirming their May vote.

A number of members perceived the panel discussion to be a marketing pitch for non-CPAs and suspected pre-determined questions were distributed to facilitate prepared responses from the panel. Further, the “Q&A” following the panel discussion was much less a question and answer discussion and more a planned filibuster from select people who were sympathetic to the AICPA cause. Not an honest attempt to present the issue fairly. Was all of this just window dressing?

October 21: AICPA Publisher Kim Nilsen reported on the Fall Meeting for the Journal of Accountancy. See AICPA Council Votes to Move Forward with Expanded Eligibility for Valuation Credential.

October 22: AIPCA offers its letter to members regarding the Fall Meeting vote. Coffey remarked on the “robust panel discussion exploring all viewpoints” on the issue and debate from ABV stakeholders. With Jay’s motion to suspend voted down, the “expanded access program” shall go forward. The Council again claimed the expanded program is not unpopular among members. Coffey cited the August 16 AICPA article about ABV Poised for Growth. Ironically, nearly every comment to that article is critical of AICPA’s action – “Self-Serving,” “Inappropriate,” “Not convinced,” and “strongly disagree.”

October 27: Connecting with me via email, Coffey restated the AICPA’s position:

[T]he AICPA Governing Council at its October 2018 meeting discussed a motion to suspend its prior decision [to] offer the ABV to Other Qualified Professionals (OQPs). And after hearing robust debate from both sides of the issue, Council voted to reaffirm its prior decision. Additionally, as part of that process the AICPA Council re-affirmed the National Accreditation Commission’s (NAC) decision to significantly increase the requirements for obtaining the ABV. The valuation experience requirement for OQPs, for example, was tripled from 1,500 to 4,500 hours.

Why? Because while the AICPA Council recognized that the significant increase in the demand for valuation services requires additional valuation professionals, they also wanted to ensure that those professionals will be held to the high standard of excellence as established by the CPA profession. This will not only help maintain the high professional and valuation standards established by the AICPA, but it will help elevate the entire valuation profession. The CPA is a great foundation for the ABV credential, but we also recognize that many highly qualified accountants/finance professionals do not to [sic] pursue the CPA license. CPA/ABVs will continue to be differentiated by their CPA license, which is recognized for integrity and objectivity. The AICPA’s guiding principle has been to increase the quality of valuations to better protect the public interest through increased clarity, consistency and transparency.

[Emphasis added.]

Are CPA/ABV stakeholders living in a parallel universe? CPAs who built the ABV brand believe this monumental change was foisted upon them against their will through obfuscation and failure to disclose. Betrayal hurts. Betrayal by family hurts most.

Power of the ABV Brand

CPA exclusivity made for powerful ABV branding when only CPAs were permitted to offer these premier valuation services. Approximately 3,400 CPAs are ABVs now. After 20 years, the businesses and the general public associate ABV with CPA. Confusion in the marketplace if AICPA action stands is likely. Does this parallel the battle attorneys fought from 1960-1980 to prevent the unauthorized practice of law by non-attorneys? In those cases, ultimately the single greatest concern was protection of the public. See Florida Bar v. Moses, 380 So.2d 412 (Fla. 1980). Is this so different?

If being a CPA is no longer the cornerstone of ABV credentialing, then what weight remains to the ABV brand? In a courtroom battle of valuation experts, will the CPA/ABV opinion still carry the greater weight of the evidence against an opposing non-CPA/ABV expert? Are judges likely to find the difference simply nuancical and not substantive?

Competing Credentials in the FVS Market

Are global initiatives more important to ABV credentialing than membership exclusivity?

Was the AICPA’s objective solely about generating revenue for the organization at the expense of individual CPA members? Did the Council open the ABV to a younger group of OQPs because the majority of CPA-members are in their mid-50s or older? Is this about the demographics of self-interest? Is this evidence the AICPA has moved toward consolidation?

We know that competition for CPA business valuation membership is strong. (See Chris Mercer, ASA, CFA, ABAR, on AICPA Opens the ABV Credential to Non-CPAs, Controversial to Some and the Future for Others.) The American Society of Appraisers (ASA) offers the Accredited Senior Appraiser and Accredited Member credentials. Some CPAs obtain both ABV and ASA/AM. The National Association of Certified Valuators and Analysts (NACVA) offers Certified Valuation Analyst (CVA) and Accredited in Business Appraisal Review (ABAR) credentials. The London-based Royal Institute of Chartered Surveyors offers Member RICS (MRICS). These three – AICPA, ASA, and MRICS – compete in offering the Certified in Entity and Intangible Valuations (CEIV) credential. With AICPA offering both CEIV and ABV to non-CPAs, it will have substantially improved its position among the big three.

Are global initiatives more important to ABV credentialing than membership exclusivity? The “I” in AICPA stands for “institute” not “international.” Has AICPA’s global marketing initiative usurped rank-and-file CPA membership here in the U.S.? Did opening up ABV to non-CPAs implement the more pressing global marketing initiative? As its stated primary goals, the AICPA’s:

[O]bjectives shall be to unite certified public accountants in the United States; to promote and maintain high professional standards of practice; to assist in the maintenance of standards for entry to the profession; to promote the interests of CPAs; to develop and improve accounting education; and to encourage cordial relations between CPAs and professional accountants in other countries.

Will opening the ABV designation to non-CPAs help AICPA embrace new members? Almost certainly, but at tremendous cost to CPA/ABV stakeholders. Are we witnessing a power shift away from individual CPAs and membership’s collective will? A consequence of the AICPA/CIMA merger presented as “joint venture” to the Council?

In Michael Rapoport’s article in the Wall Street Journal, CPAs Fight to Protect Part of Their Turf (Aug. 20, 2018), he noted how the AICPA, by creating non-CPA/ABVs, can begin meeting a growing market demand for business valuation specialists – about $4 billion annually. This change is not without sacrifice, though. Rapoport interviewed Michael Crain, CPA/ABV, CFA, CFE, on the AICPA’s proceedings. “Frankly, it was a secretive process, not disclosed,” said Crain, and the AICPA’s method of recruiting new members was done in “an underhanded way.”

Growing Contingent of CPAs Object

State CPA societies raised concerns over Council’s vote and lack of transparency

Objections to the AICPA’s action was not limited to the Open Letter discussed above. Member dissent was and continues to be far reaching. At least 12 state societies pointedly raised their concerns over the Council’s vote and lack of transparency. Several are summarized below.

• New York State Society of CPAs to AICPA on July 25.

NYSSCPA strongly opposed the AICPA’s action, stating “[t]his monumental change in characterization of the credential squarely contradicts the reasons initially presented by the AICPA, encouraging members to invest significant time and effort to obtain the credential for CPAs-only as a ‘distinctive mark of excellence.’” Being a CPA has always been a “hallmark of the credential, and conveyed a unique combination of independence, knowledge, experience, and integrity to the public and regulatory agencies.” Palpably disappointed in the AICPA, the NYSSCPA believes CPAs “will no longer have the advantage in a court proceeding when opposing experts are non-CPAs holding our credential.” The society succinctly recommended AICPA “reverse” and “reinstate the requirement that only a CPA can hold the ABV credential.”

• CalCPA Forensic Services Section (California) to AICPA on August 15.

CalCPA made findings and recommendations. Among its findings, “[i]nsufficient information underlying the AICPA’s reasoning for the [ABV] change was provided to members in advance of the AICPA Council vote.” The change is “unpopular with many CalCPAs members as well as CPAs nationally” and more member support should have been sought. Among CalCPAs, the “overwhelming negative reaction” to AICPA’s action was one of “[l]ack of transparency.”

• Massachusetts Society of CPAs to AICPA on August 23.

MSCPA suggested review of the process and report to Council, delayed implementation, and that “AICPA consider allowing Council to set aside its previous vote of approval once a full review of the process is complete.” Furthermore, “we urge the AICPA to be expansive in stakeholder engagement, gathering feedback and communication as consideration is given to opening additional credentials to OQPs to ensure that there is a very transparent and well-informed decision-making process.”

• Mississippi Society of CPAs, Business Valuation and Litigation Support Committee (BVLS) to AICPA on September 7.

BVLS voiced concern and opposition to the changed ABV credentialing. The MSCPA newsletter, Volume XLIV, Sept. 2018, described the society’s letter as requesting “the AICPA adhere to the AICPA Foundational Priorities,” stating the “change in the ABV pathway is contradictory to the AICPA’s own key focus areas that support its vision and mission. The MSCPA BVLS strongly encouraged the AICPA to reconsider its vote to change the ABV criteria.”

• Utah Association of CPAs to AICPA on September 27.

UACPA stated absolute disapproval of opening the ABV to OQPs. Adamant that “[t]his is an issue of transparency” and “information presented for the vote was misleading” by indicating ABVs “were in favor of this change.” Furthermore, “[h]ad this voting item been presented to Council in pre-read materials in a timely manner before each regional or council meeting, we would have had adequate time to poll our members and represent their voice instead of pencil whipping a vote on the last day of Council when only a fraction of the voting members were present.” Utah provided a list of what AICPA could do to rebuild the trust it has lost in its own membership – “vacate the vote.” Ouch!

How many CPA society letters does it take for the AICPA Council to reverse course and admit it mishandled this entire matter? Whatever support the Council believes it garnered in favor of opening ABV credentials to non-CPAs, it does not seem to reflect a true assessment of ABV-stakeholder and membership opinion. Reproof of AICPA leadership continues to grow with the ultimate goal of vacating the May vote. This is not a “mere tempest in a teapot.”

Is it justification or excuse for the AICPA to collect more money off ABV credentialing by offering the prestigious designation to non-CPAs? Will not lowering ABV standards erode public trust?

Being a CPA is who we are. Not one of us can afford to lose prestige as a CPA. We are unique in holding a place of genuine esteem in America so this is very personal. ABV is part of the brand of being a CPA. This is not about the money. It is about respect for the expertise of the individual CPA.

What now? Many CPAs are doing everything to overturn the AICPA’s May vote. In this, all CPAs are stakeholders.  If you are a CPA and have a thought you would like to share, please connect with me on LinkedIn.  Let me know if you want your thoughts published here.