American Institute of Certified Public Accountants (AICPA)
What Is the American Institute of Certified Public Accountants (AICPA)?
The American Institute of Certified Public Accountants (AICPA) is the primary professional organization for Certified Public Accountants (CPAs) in the United States, playing a central role within the broader field of [accounting and auditing standards]. Established as a non-profit entity, the AICPA is responsible for setting ethical standards, developing U.S. auditing standards for non-public companies, and preparing and grading the Uniform CPA Examination. The organization also advocates for the CPA profession, provides educational resources, and offers professional development for its members across various sectors, including [public accounting], industry, government, and education.
History and Origin
The American Institute of Certified Public Accountants traces its origins back to 1887, with the formation of the American Association of Public Accountants (AAPA). This early organization aimed to professionalize accountancy and ensure ethical, competent practices. Over the years, the association underwent several name changes, including the Institute of Public Accountants in 1916 and the American Institute of Accountants in 1917. In 1936, a significant merger with the American Society of Public Accountants led to the decision to restrict future membership exclusively to CPAs. The organization officially adopted its current name, the American Institute of Certified Public Accountants, in 1957.
A pivotal moment in the AICPA's history occurred in the 1970s when it transferred its responsibility for setting generally accepted accounting principles (Generally Accepted Accounting Principles or GAAP) to the newly formed Financial Accounting Standards Board (FASB). Despite this shift, the AICPA retained its critical function in setting auditing standards, professional ethics, and quality control for CPA firms. For more information on the AICPA's extensive history, the organization provides a detailed timeline of its development.
Key Takeaways
- The American Institute of Certified Public Accountants (AICPA) is the national professional organization for Certified Public Accountants in the U.S.
- It sets ethical and U.S. auditing standards for non-public entities and develops and grades the Uniform CPA Examination.
- The AICPA advocates for the accounting profession and provides resources for its members.
- The organization's history dates back to 1887, with several transformations leading to its current structure.
- The AICPA collaborates with other bodies, such as the National Association of State Boards of Accountancy (NASBA), to evolve the CPA licensure model.
Interpreting the AICPA
The AICPA's influence is primarily observed through its standard-setting activities and its role in maintaining the integrity of the CPA profession. For auditors, the AICPA's Statements on Auditing Standards (SASs) provide the authoritative guidance for conducting audits of non-public companies. These standards cover all aspects of an audit engagement, from initial planning to the issuance of an [audit report]. Compliance with these standards is crucial for maintaining professional credibility. For individuals aspiring to become CPAs, the AICPA is central to the certification process through the Uniform CPA Examination, which assesses knowledge in core areas like [financial accounting] and taxation.
Hypothetical Example
Imagine a small, privately held manufacturing company, "Widgets Inc.," needs an annual audit of its [financial statements]. Since Widgets Inc. is not a publicly traded entity, its audit will be conducted in accordance with the auditing standards set forth by the American Institute of Certified Public Accountants. An independent CPA firm, whose auditors are members of the AICPA, would be engaged. The auditors would refer to the AICPA's [Generally Accepted Auditing Standards] (GAAS) to plan and perform the audit. This would involve assessing the company's [internal controls], examining financial records, and gathering sufficient evidence to form an opinion on whether the financial statements are presented fairly in accordance with GAAP. The AICPA's guidelines ensure a consistent and high-quality audit, even for private businesses.
Practical Applications
The AICPA's influence extends across various facets of the financial world:
- Standard Setting: The AICPA's [Auditing Standards Board] (ASB) issues Statements on Auditing Standards (SASs), which are the authoritative standards for auditors of non-public companies. These standards dictate how audits are planned, executed, and reported, ensuring consistency and reliability in [financial reporting].13,,12
- Professional Conduct: The AICPA establishes and enforces a rigorous [professional ethics] code that all its members must adhere to. This code guides CPAs in maintaining integrity, objectivity, and independence in their professional duties.
- CPA Licensure: In collaboration with the National Association of State Boards of Accountancy (NASBA), the AICPA develops and grades the Uniform CPA Examination. This examination is a critical component of earning the CPA license, ensuring that new professionals possess the necessary knowledge and skills.11 The CPA Evolution initiative, a joint effort by the AICPA and NASBA, is transforming the CPA licensure model to adapt to the evolving demands of the profession, launching a new exam in 2024.10,9 Further details on this initiative can be found on the dedicated CPA Evolution website.8
- Quality Control and [Peer review]: The AICPA mandates a peer review program for CPA firms performing audit and attest services. This program involves one CPA firm reviewing the work of another to ensure compliance with professional standards and maintain the quality of audit engagements.7,6
- Advocacy: The AICPA actively lobbies legislative bodies and interacts with regulatory agencies like the [Securities and Exchange Commission] (SEC) to advocate for the interests of its members and the broader public, influencing policy on matters ranging from taxation to [financial planning].
Limitations and Criticisms
While the AICPA plays a vital role in the accounting profession, it has faced scrutiny, particularly concerning its standard-setting authority for public companies. Prior to the [Sarbanes-Oxley Act] of 2002 (SOX), the AICPA was the primary body for setting auditing standards for all companies, both public and private. However, following major accounting scandals in the early 2000s, SOX created the Public Company Accounting Oversight Board (PCAOB). This act shifted the responsibility for setting auditing standards for public companies to the PCAOB, largely in response to concerns about the profession's self-regulation.5
This division of authority has led to a dual system of auditing standards in the U.S.: AICPA standards for private companies and PCAOB standards for public companies. Some critics argue that this bifurcation could lead to a perceived difference in audit quality or rigor between public and private company audits. While the PCAOB initially adopted the AICPA's standards as interim guidance, it has since issued its own distinct standards.4 This divergence is a subject of ongoing discussion within the profession and academia, with some research exploring the implications of expanded audit reports and the informational value of auditor disclosures.3
AICPA vs. Public Company Accounting Oversight Board (PCAOB)
The American Institute of Certified Public Accountants (AICPA) and the Public Company Accounting Oversight Board (PCAOB) both play crucial roles in regulating the auditing profession in the United States, but their scopes and authorities differ significantly. The AICPA is a professional organization that sets auditing standards for audits of private companies, non-profits, and governmental entities not subject to SEC oversight. Its standards, known as Generally Accepted Auditing Standards (GAAS), are part of its broader mandate to support CPAs and the accounting profession.
Conversely, the PCAOB is a government-created, non-profit corporation that oversees the audits of public companies to protect investors. Established by the Sarbanes-Oxley Act of 2002, the PCAOB sets auditing, quality control, and ethics standards for registered public accounting firms that audit public companies. Firms auditing public companies must register with and be regularly inspected by the PCAOB. This distinction means that while an AICPA audit adheres to standards designed for a wide range of non-public entities, a PCAOB audit is specifically tailored for public companies, with a direct focus on investor protection and compliance with SEC regulations. The PCAOB's auditing standards are publicly available on its official website.2
FAQs
What is the primary role of the AICPA?
The primary role of the AICPA is to represent the CPA profession in the United States. It sets ethical and auditing standards for non-public companies, develops and grades the [Uniform CPA Examination], and provides resources and advocacy for its members.
Does the AICPA set accounting standards for all companies?
No, the AICPA does not set accounting standards (GAAP) for all companies. That responsibility was transferred to the Financial Accounting Standards Board (FASB) in the 1970s. The AICPA primarily focuses on auditing standards for non-public entities, professional ethics, and CPA licensure.
How does the AICPA ensure the quality of audits?
The AICPA ensures the quality of audits for non-public companies through its Auditing Standards Board, which issues [Statements on Auditing Standards]. Additionally, it maintains a [peer review] program, where CPA firms' audit practices are periodically reviewed by other qualified firms to ensure adherence to professional standards.
What is the CPA Evolution initiative?
The CPA Evolution initiative is a joint effort by the AICPA and the National Association of State Boards of Accountancy (NASBA) to transform the CPA licensure model. It aims to ensure that the CPA credential continues to reflect the skills and competencies required of accounting professionals in a rapidly changing business environment, including changes to the [Uniform CPA Examination].1