The Zicklin Graduate Accounting Society sat down with Professor Donal Byard in March 2014 to attain some insight into his background, the field of Accountancy today, the CPA Examination, and Baruch College’s PhD program in Accountancy. Professor Byard is an Associate Professor of Accountancy at Baruch College. His areas of expertise include: financial accounting, financial analysts and their roles as information processors in financial markets, intangible assets, corporate disclosure policy, and IFRS. He is a member of the Editorial Board of The Journal of Business Finance & Accounting, and acts as an ad hoc reviewer for many scholarly publications including The Accounting Review, The British Accounting Review, Contemporary Accounting Research, The Financial Review, The Journal of Accounting, Auditing and Finance, The Journal of Accounting and Public Policy, Review of Accounting and Finance, and Review of Accounting Studies. He is a member of the Dean’s Taskforce on Research at Baruch College - Zicklin School of Business, and served on the review panel for the PSC-CUNY awards presented by the City University of New York. He was an Academic Fellow with the U.S. Securities and Exchange Commission in Washington D.C. from 2008-2009. He received a teaching excellence award at Baruch College - Zicklin School of Business in 2004. He has also written many scholarly publications and is currently co-writing another entitled, “The Effect of Mandatory IFRS Adoption on Analysts’ Forecast Errors,” to be published in The Journal of Accounting Research.
ZGAS: Can you give us some insight into your academic background and how you came to teach at Baruch College?
Professor Byard: I obtained my Bachelor in Business Studies (BBS) Degree in Accountancy and Finance from the University of Limerick in Ireland, and my Master of Business and Science (MBS) Degree in Finance from University College Dublin. After graduation, I taught as an Assistant Lecturer (adjunct professor) in Ireland. While teaching in Ireland, I met a Fulbright Professor in Strategy visiting from the University of Maryland, and he piqued my interest in pursuing a PhD in Accountancy at his school. I applied, was accepted, and ultimately completed my PhD there. After completing my PhD, I became an Assistant Professor at the University of Cincinnati. I worked as an Assistant Professor at the University of Cincinnati for four years before moving to Baruch College in 2002, and have been here ever since. I thoroughly enjoy teaching here. In addition to teaching, I’m the co-coordinator of the PhD program in the Accounting department.
ZGAS: How different are the educational requirements for an Accountancy Degree in Ireland?
Professor Byard: The requirements are very similar to those in the United States; in fact, they are more similar than dissimilar. In terms of a few differences, students in Britain, Scotland, and Ireland become Chartered Accountants, and used to be taught British GAAP, but are now taught IFRS, both of which are relatively more principles-based than our rules-based U.S. GAAP. Universities in the U.K. and Ireland don’t focus so much on teaching accounting rules and reporting standards; students are expected to learn these after graduation when they are working in the profession. At the university level, the material taught is more theoretical and conceptual. The accountancy curriculum encompasses a great deal of mathematics, economics, and statistics. Another difference is that in the U.S., students can graduate from an accountancy program and pass the CPA Examination within 18 months. In Britain, Scotland, and Ireland, students may take 3-4 years to finish their professional training and certification.
ZGAS: What brought you into the field of Accountancy?
Professor Byard: I spent two years working at Citibank in Dublin, first in the area of financial control, after which I moved into corporate lending. In both positions, I found that accounting was crucial for economic decision-making. This, coupled with the fact that I found accountancy intriguing, led me to pursue a career in the field.
ZGAS: Regarding the fields of Accountancy and Finance, both of which you encountered in your positions at Citibank, how interconnected are the two?
Professor Byard: I think the two fields frequently cross paths and mix together quite well, particularly in New York. In the New York metro market, I would say half of all auditing jobs are related to financial institutions and, as a result, require some knowledge of financial markets and instruments. A weakness audit firms often face is that junior associates don’t have a satisfactory understanding of financial instruments. For example, one cannot figure out the accounting for a derivative, if one does not understand the derivative contract itself and the underlying cash flows it could trigger. I hold the belief that individuals in the finance field should have a strong understanding of accounting, and vice versa. If accountancy students want to become well-versed in the area of finance, I recommend reading a book on accounting for financial instruments entitled, Financial Instruments and Institutions: Accounting and Disclosure Rules, by Stephen G. Ryan. This book is available at the Baruch College Library.
ZGAS: In your opinion, what are the “hot topics” in the field of Accounting today?
Professor Byard: Today, Revenue Recognition, Accounting for Leases, eXtensible Business Reporting Language (XBRL), and Accounting for Financial Instruments are considered “hot topics.” Revenue Recognition and Accounting for Leases are two new standards that are in the pipelines of the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB). These two new standards are part of the convergence initiative between the FASB and IASB. Longer term, the accounting for financial instruments needs simplification.
ZGAS: What are your thoughts on the FASB and IASB convergence project?
Professor Byard: The initial agreement for the convergence project between the FASB and IASB was that the Boards would line up a comprehensive list of key topics, identify the differences between each Board’s standards, and turn resolution of those differences into projects of both Boards. Following that, the FASB and IASB would concurrently put out the same exposure draft for a particular project, so both adoption and a fully converged standard would occur simultaneously.
In a true convergence project, one of the Boards would take the lead, and design a new standard, which would ultimately be adopted by both boards. This has not necessarily happened. For some of the current convergence projects, such as Revenue Recognition, the FASB took the lead, and others the IASB. Additionally, during the convergence projects there was so much debate and discussion that went into adopting new standards that they ultimately became converged work. Thus, it would be unfair to say that one Board designed the standard, and the other piggybacked along.
The Securities and Exchange Commission (SEC) has still not clarified its long-term view, with respect to possible use of International Financial Reporting Standards (IFRS) by domestic U.S. firms. The mandatory push to make all U.S. companies switch to IFRS is unlikely. However, the SEC may opt to allow U.S. firms to choose between reporting in IFRS or U.S. GAAP. Today, international companies that are listed on U.S. Stock Exchanges, such as British Petroleum, have the option to report in U.S. GAAP or IFRS. However, U.S. companies listed on U.S. Stock Exchanges must report in U.S. GAAP. If the option to switch to IFRS is offered by the SEC, we may only see a small number of very large U.S. multinational firms switching for specific reasons, such as that their competitors are reporting under it.
A major concern regarding the convergence project is it cannot go on indefinitely. It’s somewhat surprising that it has been going on for this long (the FASB began to show its support for a converged set of standards in 1999). Possible IFRS adoption in the U.S.does not seem to have the same degree of urgency it had a few years ago.
ZGAS: Do you think that the FASB and IASB will ever be truly converged?
Professor Byard: I believe this will happen, but more likely in the longer time horizon, such as the next 10-15 years. It should be mentioned that the Boards are not that far off, as they are already 85% converged.
ZGAS: Which U.S. GAAP Standard needs the most revision?
Professor Byard: I would say that accounting for financial instruments, which involves topics as derivatives, hedging and impairment, is extraordinarily complex. Before the financial crisis, the FASB and IASB undertook a convergence project that attempted to simplify accounting for financial instruments, but did not make any progress. There was further de-convergence following the financial crisis; both Boards rushed though individual changes in the area, which may have made things more complex. At the time, the FASB pushed through changes in measuring the fair value, and recording the impairment of financial instruments, without following the due process, by order of Congress. This meant changes that would normally take a matter of months, took a matter of weeks. The IASB, similarly, did not follow the due process, as they were ordered to push standards in this area though quickly, by order of the European Union.
ZGAS: What are your thoughts on the complexities non-public companies face in complying with the vigorous reporting Standards of U.S. GAAP?
Professor Byard: The AICPA is working on this project. Their approach is to create a scaled-down version of U.S. GAAP for private companies, whereby, they would not have to comply with certain requirements. U.S. GAAP is primarily designed for large public companies that can deal with regulatory complexity. For smaller non-public companies, without many sophisticated investors that require vast amounts of information, the regulatory complexities can be costly. On the downside, however, if smaller non-public companies are exempted from reporting requirements, the door for all sorts of manipulations can be opened. Figuring out where to draw the line for such exemptions is not an easy thing to do.
ZGAS: Is accounting statement fraud more difficult today, as a result of all the regulations put in place after Enron?
Professor Byard: In the U.S., the Sarbanes-Oxley Act of 2002 (SOX) put through changes intended to improve reporting quality. As best as we can tell by looking at the behavior of firms, reporting quality has improved.
The changes to financial reporting quality and creation of an oversight board (Public Company Accounting Oversight Board or PCAOB), put through for SOX in the U.S. have been replicated in many countries globally. However, no other country has a regulatory organization like the SEC, with a long history of tough inspections and regulations. Regulatory agencies in larger countries, such as the U.K. and Australia, have begun to impose penalties and force re-statements like the SEC. On the other hand, many smaller countries do not have the resources to have tough regulatory agencies.
In terms of IFRS adoption, one of its selling points is that it will improve reporting quality, since it requires more disclosure than is the case with domestic accounting standards. However, this may only be true in countries with good legal systems and enforcement of laws. In other words, investors should not take IFRS financial statements from all around the world at face value and automatically assume they are comparable. Differences in legal systems and enforcement of laws could mean that standards are being differently interpreted and enforced in varying countries. This will be an important issue going forward.
ZGAS: In terms of the demands placed on Accountancy students post-graduation, has what is required of them been greater than in years past?
Professor Byard: There was a longer training period years ago, where today you are expected to know things more quickly. Today, students go straight into work after graduate school, so there is not much of a build-up when they join firms. The work culture has changed as well, so there is much more intensive monitoring on the job, along with systematic performance reviews and feedback. To compensate, however, students start jobs at higher salaries.
ZGAS: What are your thoughts on job competition among Accountancy students?
Professor Byard: The accounting field has always been competitive, and there have always been pyramid structures. For instance, if the NY office of a Big 4 firm hires 500 students in a given year, after 12-14 years, maybe 3-4 will ultimately make partner. This has always been the case. It should be mentioned, however, that regulatory requirements and complexity always create more jobs in accounting. We saw this with SOX and, in time, we will see a similar effect with the Dodd-Frank Wall Street Reform and Consumer Protection Act.
ZGAS: How has globalization changed the field of Accountancy?
Professor Byard: Before the financial crisis, some employers in Western countries were worried that they would not be able to hire enough accountants in the future. They no longer have that concern. One of the major reasons for this, is outsourcing in the field has exploded, as a result of globalization. Outsourcing is occurring for lower- level accounting jobs, such as A/P and A/R clerks, but also for higher level jobs, such as auditors, and tax preparers. One of the attractions of IFRS for such employers is that it could make outsourcing easier. Thereby, we might see more of this in the future with IFRS.
ZGAS: In regards to the CPA Examination, what sort of preparation is necessary?
Professor Byard: Students must do independent studying for the examination. Universities cover the material that is applicable, but they don’t teach students about the format of the examination, and how to actually take it. CPA reviews teach this, so I highly recommend students take a formal CPA examination review course.
ZGAS: When should students take the CPA Examination?
Professor Byard: I suggest that if students are able, they should take the examination once they’ve completed the required courses. If they do not finish the required courses before they graduate, upon graduation, they should sign up for a CPA review and the CPA Examination immediately. They should try to complete two sections before starting work, and the next two within eighteen months.
ZGAS: Could you give us some insight into and advice about the PhD program in Accountancy? Should those interested in pursuing a PhD attain a CPA Certificate?
Professor Byard: It doesn’t do any harm to get a CPA Certificate; so, if one is able, one should take the CPA Examination. However, if a student has already made up their mind to be an academic and is not planning on going into practice, a CPA Certificate is not required. Those that want to pursue a PhD in Accountancy should invest time developing their overall quantitative skills in areas such as statistics, econometrics, and economics.
Before students make up their mind about going into academia, one of the main things they need to do is figure out what “accounting research” is all about, and if it is something that interests them. They must figure out what a PhD in Accountancy is all about, to determine if that is really what they want to do in their careers. Academia is a different and unique career path. Very few PhD’s go into practice or industry. In sum, anyone applying for a PhD program should do their homework on what an academic career is all about so they have a clear view on what they are getting into.
PhD programs in universities are small—for instance, the PhD Accountancy program at Baruch College has only 14 students. About 2-3 students per year are accepted into about 50 PhD Accountancy programs at U.S. universities; further, about 100-120 students per year in the U.S. graduate with a PhD in Accountancy. Thus, standards for acceptance into these programs are high.
In terms of requirements for admissions: GMAT scores should be 700 and above with good quantitative and verbal scores; good undergraduate and graduate GPA’s, usually 3.9 and higher; some knowledge about accounting and what it does, even though students don’t necessarily need an Accountancy Degree; a clear idea of why one wants to attain a PhD in Accountancy; show that one has read up on accounting research and found it interesting; good questions; and great quantitative and writing/verbal skills. IT skills are big plus because accounting research requires is a lot of statistical analysis. If student’s GMAT scores are not high enough, they should re-take the examination, because their score is the first item looked at for acceptance into a PhD program.
There are many benefits to be realized from going into academia. Anyone with a master’s degree can teach as an adjunct professor, but such professors have lower salaries, and much less job security than PhD’s. PhD’s actually focus relatively less on teaching and relatively more on research, since universities compete to be seen as excellent in research.
ZGAS: What skills do employers feel Accountancy students lack most?
Professor Byard: Verbal and written communication skills, and to a lesser degree, the ability to work in teams. Largely, students must be well-rounded overall, to truly excel.
ZGAS: What is your take on networking, and can you share a personal experience with us?
Professor Byard: Networking skills are crucial for students, but even more so for Accountancy students, because they must network with executives from accounting firms during recruiting events. I would say networking skills are important for all facets of life, from business to personal.
In my own experience, when I go to conferences, where members of academia give research presentations, most of the time is not spent listening to the presentations, but talking to other members of academia about the topics presented and various other issues. I would say 80% of the time at a conference is spent networking, while 20% is spent listening to presentations.