Letters

Business Aircraft and Depreciation
When I read the article “Deductibility of Business Aircraft” (JofA, Jul.03, page 57), I was surprised the depreciation issue was not discussed. In light of recent tax law changes, taxpayers may be allowed significant depreciation deductions if the aircraft is used for business purposes. Tax savings from such a significant deduction may be a key factor in determining whether or not it makes sense to purchase a jet.

Ben Berger, CPA
Manager
American Express Tax and Business Services Inc.
Timonium, Maryland

CPAs and Incidental Investment Advice
The article “Investing After 50” (JofA, Jun.03, page 20) tells CPAs how to advise their clients about investments.
As a CPA and chartered financial consultant (ChFC), I have been working exclusively in financial planning and related services for several years. My primary market is working with other CPAs, and it is based on the assumption they would be unwilling or unable to perform the services discussed in the article.

It also is my distinct impression that to avoid being required to register as an investment adviser, a CPA can give clients only incidental investment advice in connection with other accounting services.

If I am not under a misimpression of the rules in this area, the article seems to be missing the disclosure of what problems CPAs would expose themselves to in providing the kind of detailed investment advice it describes.

Tom Stenzel, CPA, ChFC
Woodinville, Washington

Editor’s note: The JofA has written frequently in recent years about the need for CPAs who provide investment advice to register with the SEC or with their state securities department. When we publish articles about the nuts and bolts of giving such advice, as in this article, we take it as a given that accountants will comply with all necessary investment adviser registration requirements, even though we don’t specifically list those rules in each article.

Finds DCA Strategy Lacking
I’m surprised that the article “Investing After 50” included dollar-cost averaging (DCA) among the recommendations for CPAs who advise clients age 50 and over. Academic research over the past 20 years has shown that a DCA strategy does not necessarily result in superior returns even after adjusting for risk. The following is an excerpt from Dr. Moshe Milevsky’s book Wealth Logic: Wisdom for Improving Your Personal Finances:

“DCA is an inferior strategy. Alternate strategies result in greater expected wealth for the same level of risk or identical wealth for lower risk.

“Replacing one major investment decision with many smaller ones does not make the final outcome any safer. Therefore, if you have the money now and you have the choice, it is best to pick an asset allocation that you are comfortable with—and live with it. If you don’t have the money now, invest it as soon as it is available without using an averaging strategy.

“If you use DCA as a savings strategy, then you are essentially investing when you have the money, and forcing yourself to save, which is a good thing. The conscious decision to split your investments over time is the problem.

“Saving money on a regular basis is a wonderful idea, unfortunately investing it isn’t.”

Dean Knepper, CPA, CFP
Managing Member
Lifetime Financial Planning LLC
Herndon, Virginia

Maintaining Independence
As all CPAs know, the two great pillars of our ethical responsibility are independence and public disclosure. This formula goes back a long time, even before the establishment of the Securities and Exchange Commission.

Today, the structure of our economy is greatly different from what it was when the profession adopted its ethical standards for independence and public disclosure. For one thing, everything is much bigger. CPAs audit companies that are larger and more powerful than many nations. So, it has become extremely difficult, some would say impossible, to maintain our independence in the new economic order. We’ve uncovered plenty of evidence of this problem in recent years, haven’t we?

Some have been calling for expanded public regulation, a distasteful solution to many of us in the accounting profession. However, it is clear incremental change will not fix the problem.

Another possible solution would be expanded public disclosure requirements, which compensate for the structural difficulties of independence.

“Accountability by Numbers” (JofA, Jun.03, page 61), an article about performance measurement, presented an example of the kind of additional information investors and the public might want to see on a more frequent basis. I believe the idea of a balanced scorecard oversight system would be more desirable for the accounting profession than expanded public regulation.

We could get by with incremental changes until the next big scandal, or we could eliminate the risks of scandal by taking bold steps now to align our ethical standards with today’s world. Personally, I would prefer the latter strategy.

Tom Louderback, CPA
Louisville, Kentucky

On U.S. Health Care
The article, “Health Care Costs on the Rise” (JofA, May03, page 59), made me realize just how far the United States is from providing its citizens the basic human right of affordable health care.

This article, like many similar ones I have been reading lately, discussed the expensive alternatives available to obtain health care. I fail to see how people can write such stories without indicating their dissatisfaction with the whole system. If people are lucky enough to work for the right employer, they don’t have to worry, but that seems to be only a select few.

I believe one way CPAs could regain public trust would be to advise their clients to write to their representatives in government and demand affordable access to proper health care for all Americans.

Kathleen Beenham, CPA
Basingstoke, Hants
United Kingdom