On the Horizon: Accountancy Reform

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APRIL 2007 - This year’s changing of the guard in Washington and Albany could be good news for New York CPAs. New York State gained many key leadership positions in the new Congress, and a fresh pair of eyes in the governor’s office may provide the NYSSCPA with the perfect opportunity to modernize New York State’s antiquated accountancy laws.

Change is long overdue. The law under which New York State CPAs are currently governed was created in 1897, before income tax and before computers. It was the first accountancy law in the nation, passed in the first state to license CPAs. The last time this law was significantly revised was 1947, when Jackie Robinson became the first African-American to play Major League baseball. Although the law has almost nothing to do with how CPAs practice today, it still has the power to strip CPAs of their licensure.

But there is hope. The dramatic shift in our state and federal governments could prove to be a harbinger of reform. Specifically, a bill is being considered in the state legislature that the NYSSCPA will be working hard to get passed into law. This bill, which was introduced by Senator Ken LaValle and has passed the New York State Senate for the fourth consecutive year, would update New York’s accountancy law for the first time in 60 years. The NYSSCPA endorses the bill because it would finally bring the profession up to date in many key areas. The bill would—

  • make peer review mandatory for all CPAs in public practice;
  • expand the regulated scope of practice to reflect the many services performed by CPAs;
  • regulate all CPAs, including those in industry;
  • expand experience qualifications for licensure;
  • provide greater due process in disciplinary hearings;
  • clarify that commissions and referral fees are not allowed for attest services, but may be accepted for the performance of non-attest services, upon written disclosure to the client in accordance with rules to be adopted by the Board of Regents; and
  • enhance requirements for continuing professional education (CPE).

These reforms are needed for the profession and for the public interest that it serves.

In the New York State Assembly, an alternative bill was introduced two years ago by Assemblyman Ron Canestrari. The Assembly bill omitted some important reforms that the Senate bill included, such as mandatory peer review, authorization of commissions and referral fees for non-attest services upon written notification to the client, and experience qualifications. It also contained provisions that would be extremely harmful to the profession’s ability to serve the public, such as setting exorbitant penalties against CPAs and CPA firms, authorizing nonlicensees to perform compilations, and adapting provisions of the Sarbanes-Oxley Act (SOX) in ways that would conflict with federal and existing state regulations. It would also adversely affect the practices of small and medium-sized CPA firms that serve publicly traded corporations and governmental entities not subject to SOX. When the Assembly passed this bill in 2005, CPAs throughout New York demonstrated the profession’s strong opposition to the proposal. As a result, in 2006 the bill was stopped in the Assembly Higher Education Committee, then chaired by Assemblyman Canestrari, and did not reach the floor for a vote. This was a prime example of grassroots politics—legislators hearing directly from their constituent CPAs and CPA firms—and it made a crucial difference.

The Assembly’s bill conformed in many respects to a reform proposal of then–Attorney General Eliot Spitzer, which was introduced by Senator LaValle in 2005 at Spitzer’s request. That proposal never moved out of the Senate Higher Education Committee in 2005–06, due in part to opposition by the NYSSCPA and our strong support for the reasonable reforms in Senator LaValle’s own accounting reform bill.

Assemblyman Canestrari is now the majority leader in the State Assembly, and he and Senator LaValle understand the issues facing New York CPAs. Hopefully, Canestrari and LaValle will work together—along with Governor Spitzer—to achieve meaningful reform. But let’s not leave it up to chance. It’s important that legislators hear from their constituent CPAs at this time. I’m asking all NYSSCPA members, if they haven’t already done so, to contact their state legislators and ask them to work together in this vital area. To send an e-mail, log on to www.nysscpa.org, and under Government Affairs click on “Contact Your Elected Representative.”

The NYSSCPA will be speaking with members of the New York State Legislature to see how we can assist in bringing the Senate and Assembly bills together to achieve the first meaningful modernization of accounting legislation in six decades. Let’s not allow this opportunity to pass us by. Now is the time to effect change in New York State’s accountancy laws.

Louis Grumet
Publisher, The CPA Journal
Executive Director, NYSSCPA
lgrumet@nysscpa.org

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.

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