Are You Ready for New Assurance Services
The growth opportunities for CPAs are much larger than anyone imagined. The profession's current accounting and auditing income--about $7 billion annually--could double or triple through the introduction of new assurance services. And the opportunities are open to CPA firms of all sizes. But change will not come without effort. New services must be identified, new competencies must be developed, a customer-focused mind-set will be needed and competition and other barriers must be overcome. Nevertheless, great opportunities are available for all CPAs. That was the conclusion of the American Institute of CPAs special committee on assurance services, which began studying the economics of the audit-assurance function more than two years ago and recently reported its findings and recommendations. The report is available on the Internet--as part of the AICPA Web site (www.aicpa.org). This article is the first in a series that will highlight findings and suggestions from the special committee's report. The article describes the extent of the new opportunities and the concept of assurance services. LOOKING BEYOND THE TRADITIONAL ROLE The opportunities are both impressive and timely. The special committee found clear evidence that financial statement audits are a mature product. Accounting and auditing revenue, adjusted for inflation, has remained flat for the last seven years. The traditional audit of financial statements adds value to both users and clients, is widely appreciated for its effect on the integrity of the capital markets, contributes to the CPA's reputation for objectivity and integrity and will continue to be in demand in the future. But the greatest opportunity for growth lies in assurance services. A close look at potential customers and the trends changing the practice environment shows why. The need for information services is exploding and in those needs lie opportunities for the CPA profession. The core benefit of the audit-attest tradition--information improvement--provides a foundation for new value-added services. The quality of the information that organizations and individuals use will increasingly influence their fates. * Decision makers' needs are influenced by the headlong pace of economic change, the intensity of competition and heightened levels of interdependency--both global and domestic. A higher proportion of economic inputs to corporate operations is "knowledge work," a term coined by business writer Peter Drucker to describe the activities of workers who manipulate knowledge. By definition, knowledge work is information-dependent. * Information technology is transforming the way data are created, stored, transmitted, accessed and interpreted, making possible measurements and reports with timeliness, breadth, accuracy and analytical features that are a quantum jump from the best of paper-and-pencil days. Information can be part of a modern business problem--when essential facts are available but can't be located amid virtual mountains of data. But brought to bear on decisions, it also can be a huge part of the solution. * Accountability is playing an increasing role in social, economic and political life. All sorts of stakeholders in groups, political units and organizations want those who affect their lives to be accountable for the responsibilities they have assumed. Effective judgments about whether or not economic and other responsibilities have been met depend on sound information. THE CONCEPT OF ASSURANCE SERVICES To pursue service expansion under these conditions, a service concept was needed that was in the audit-attest tradition but more comprehensive. The special committee defined assurance services as "independent professional services that improve the quality of information, or its context, for decision makers." This broad concept includes audit and attestation services and is distinct from consulting (although similarities exist) because it focuses primarily on improving information rather than on providing advice or installing systems. …