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The World Practice of Public Accounting is [Becoming] Flat

Column: Final Thoughts

From the Oct. 2008 Issue

Thomas Friedman made quite an impact with his 2005 best-seller “The World
is Flat.” His list of 10 “flatteners” — technologies
that interconnect the people and economies of the world in ways never before
possible have proven to be eerily accurate. What originally felt a little distant
suddenly feels much closer to home.

Here at The CPA Technology Advisor, we work hard to make sure our content is
appropriate across the breadth of public accounting, and we take special efforts
to keep the stereotypical “small practitioner” always at the center
of our efforts. Remember that firms of fewer than 10 comprise over 90 percent
of all practices in the United States. It’s with this backdrop that I
found a few nuggets from our latest reader survey to be so fascinating. Our
survey tells us that nearly one-third of you (32.41 percent to be exact) have
“clients doing business on an international level.”

Coupled with the well over one-half of you (56.48 percent) serving clients
that “sell products directly on the Internet,” one very quickly
begins to understand that our profession IS changing, and it’s changing
to better serve clients who are, in turn, changing to better serve their customers
who are, in turn, living in a flat world!

is at the heart of all of Friedman’s flatteners … except the fall
of the Berlin Wall (which to many is attributable to the Star Wars imitative
technology), which Friedman admits is metaphorical anyway. Technology is not
only the enabler (i.e., the root CAUSE), but it’s also the SOLUTION to
the problems the flattening causes. This isn’t an unusual situation for
our profession. Does anyone REALLY think we could handle passive losses or AMT
without computers? Certainly not! Their availability makes complexity possible
— the problem — and that availability makes the solution practicable.
And around we go.

Enter IFRS. International Financial Reporting Standards are standards and interpretations
adopted by the International Accounting Standards Board (IASB). In “bygone
days” (say the late ’70s!), the appearance on PCPS and the SEC Sections
of the AICPA seemed to be foreshadowing a true big GAAP/little GAAP divide.
As we all now know, that certainly didn’t happen. Instead, what happened
was an almost crippling growth in standards and a flight to cash basis accounting
(and OCBOA) by smaller firms serving smaller clients. Fast forward 30+ years,
and we’re back at the same dance. IFRS will soon be mandated for all U.S.
public companies.

That will almost immediately be expanded (if only by practical market force)
to all subsidiaries and then quickly to major trading partners. The professional
accounting educational system has already begun incorporating IFRS into its
curricula, and the AICPA has announced that the CPA exam will soon include IFRS
as part of the “body of knowledge.” But this time things are different.
HALF of us serve clients selling on the Internet (note: the Internet is not
good at recognizing international borders!), and nearly ONE-THIRD of us serve
clients doing business internationally.

Our profession is neatly arranged in firm sizes designed to properly serve
clients who, when stratified by size, roughly mirror our own stratification.
Firms tend to serve clients up to about five times their own size. And there
are just enough of US to serve THEM! And if THEY (our clients) begin doing business
in ways that will require their reporting to meet IFRS standards, then WE will
have no choice but to help them comply. This isn’t going away, and we
will have to deal with it. Technology caused it.

The good news is that technology will be at the center of the solution, as
well. Just as the Internet has obliterated “here” and “there”
for sales, it has done the same for services. Professional services firms can
now access world-class expertise via the Internet and be fully competitive with
larger, more geographically diverse firms. WebEx, LogMeIn, Citrix, GoToMeeting,
Terminal Services, VoIP, Groove, Google Docs, etc. all make the practice of
public accounting “flat.” Your clients can buy and sell anywhere,
and you can serve them anywhere with staff working anywhere.
Wow! It’s a great time to be in public accounting.

Update: In our April/May 2008 issue, I
wrote about extended validation
, the new “green bar” that helps
combat online scams such as phishing, in which legitimate websites are “spoofed.”
At that time, I pointed out that Copanion (publishers of the GruntWorx product)
stood alone as green-bar implemented providers serving our profession. They’ve
now been joined by PayCycle,, SmartVault
and The
Certification Authority/Browser Forum (CAB Forum), the author of the guidelines
for issuing Extended Validation (EV) SSL certificates, recently announced that
approximately 5,000 EV SSL certificates have been deployed. If you want an interesting
conversation, ask YOUR vendor why they haven’t adopted this new, higher
level of security. Send me a note about your chat. I’d love to hear!

Web Find: Last month, I blogged []
about a new Outlook add-in called XOBNI. The acronym is INBOX backwards. In
spite of the cheesy name, it’s a very slick little add-in. Word is that
Microsoft tried to buy them but, like Yahoo!, they valued being independent.
If you have e-mail management needs (and who doesn’t), you might want
to give this a try. Oh, by the way, it’s FREE!


Mr. LaFollette is Executive Editor of The CPA Technology Advisor. He is the
Senior Manager of Tax and Technology Consulting at Eide Bailly, LLP, and can
be reached at
He also publishes the tax and accounting blog at