Before there was a tax code (1913), before there was a Department of Labor (1913), before the SEC (1935) and before the PCAOB (2002), even before audits, there were CPAs (New York – 1896). How did the profession rise to the level of prominence in business without license to do something specific?
It wasn’t until 1931 that a legal decision, “Ultramares”, established the principle of third party reliance. At about the same time the word “certify” was removed from the report and replaced with “examined” to make it clear that the report was an opinion and not a guarantee.
The first accounting standards were issued somewhere around 1938, and by 1959 there were 51 pronouncements known as Accounting Research Bulletins – this eventually became GAAP. The pronouncements were issued by the Committee on Accounting Procedure (CAP). The first auditing standards were issued in 1939 by the American Institute of Accountants committee on auditing procedure. In 1941, the SEC mandated that the auditor’s report had to be made in accordance with GAAP (they didn’t do that in 1935 because there was no GAAP).
All of this happened AFTER the concept of Certified Public Accountant (CPA) became a reality by act of the state of New York legislature. It wasn’t until 1915, shortly after the enactment of the Internal Revenue Code, that you could become a CPA in Indiana.
The requirements in 1915? Well … you had to be 21 years old, a high school graduate, have three years of experience as a professional accountant and submit “proof” of all of that to the newly created “state board of certified accountants” after the board was organized (not sure exactly when that happened). Then, per Indiana law, “shall be granted without examination a certificate authorizing him to practice as a certified public accountant”. Of course this had to be done within 90 days. After that you would have had to take an examination (which didn’t exist at the time, but this new board had the authority to create one). The early CPAs were grandfathered. That is how the profession got its start
It was a new era … the late 19th and early 20th century. The industrial age was upon us. The early pioneers of the CPA profession saw a need to create this credential which is now highly regarded.
Fast forward to the late 20th and early 21st century. It’s a new era. An evolving global economy, new expectations for business reporting – integrated reporting. More socially and environmentally aware consumers. An increasingly knowledge-based economy where the sustainability of businesses relies on metrics that weren’t thought of 100 years ago. Hard assets on the balance sheet just aren’t as important as they once were.
Enter CGMA … for a defined period there is no test. U.S. CPAs can be grandfathered. In a few years a test WILL be required. There aren’t even standards for reporting. There is a new model for competency assessment and development. Those early CPAs actively participated in creating this profession and a credential that is highly regarded. CPAs today can do the same with a new credential, creating new standards, new learning models and perhaps a new profession growing out of one of the most respected in today’s business world.
Seize this opportunity to shape the future.