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LaValle, Stavisky Cosponsor Compromise Effort
By Colleen Lutolf, Trusted Professional Staff
Posted on 4/3/08
NEW YORK -- For the ninth consecutive year, an accountancy reform bill that would make sweeping changes to the CPA profession in New York state has been introduced in the State Senate.
For the first time in those nine years, the reform bill boasts bipartisan sponsorship. Senator Kenneth P. LaValle (R-Suffolk), who has, as chair of the Senate Higher Education Committee introduced accountancy reform in New York state for the past several years, was joined this year by Toby Ann Stavisky (D-Queens), the Senate committee’s ranking minority member, as a primary cosponsor.
“As chair of the Higher Education Committee, I have been trying for almost a decade to bring the parties together for meaningful reform that would better protect the citizens of New York,” LaValle said. “It is significant that the State Education Department and the New York State Society of CPAs have agreed to set aside their differences in their approaches to accountancy reform in New York and come together for the public good.”
Stavisky said she decided to join LaValle in sponsoring the bill because “it’s important to codify some of the issues. I don’t think the accounting profession’s scope of practice has been the subject of legislation in more than 50 years, and I think it’s time we entered the 21st century. This legislation will prevent abuses and at the same time improve the quality of the profession of accounting so consumers benefit, because they are the ultimate clients.”
The senators introduced the bill, which would amend the state’s education law, at the request of the New York State Education Department (SED). The reform bill is a product of compromise, said NYSSCPA Legislative Counsel Dennis O’Leary.
“It is significant to note that the NYSSCPA is supporting the State Department of Education’s legislation and has collaborated with the SED and the New York State Board of Public Accountancy to achieve long-overdue reform to the state’s antiquated accountancy law,” he said. “Unlike prior years, there has been a renewed willingness by both the SED and the Society to compromise and develop workable reforms.”
The state’s accountancy law has not been significantly amended since 1947, despite the Society’s concerted efforts in accountancy reform for the past nine years.
“This bill would expand the definition of scope of practice to include all types of professional services that involve the use of professional skills and competencies, including professional services rendered for one’s employer,” according to the SED. “This would keep the definition of practice in step with the reality of day-to-day activities performed by CPAs and public accountants.”
The SED also asserts that this bill would enhance public protection by ensuring that CPAs are professionally accountable for functions they currently perform.
The
new bill includes major elements from previous accountancy reform bills
that were unanimously passed by the State Senate in each of the last
five legislative sessions, but also includes proposals for temporary
practice permits for out-of-state CPAs who wish to practice attest and
compilation services in New York, cross-border practice privileges in
New York for non-attest services by out-of-state CPAs, mandatory quality
review of a firm’s attest and compilation services as a prerequisite
for triennial firm registration, and
requiring continuing professional education for all New York-licensed
CPAs, not only those who are individual practitioners, owners or employees
of a CPA firm.
The new Senate bill includes:
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clarification and expansion of the currently regulated scope of practice to cover all services CPAs provide, including those involving the use of professional skills and competencies in matters related to accounting concepts or the recording of financial data or information or the preparation or presentation of financial statements, including management advisory, financial advisory, and tax preparation and advisory services (encompasses such professional services rendered for one’s employer);
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inclusion of all CPAs under the auspices of the New York regulatory structure, including CPAs in industry, government and academia;
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requiring registration of all CPA firms rather than only partnerships;
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allowing firms subject to discipline by the Board of Regents under the firm registration process to enter consents in disciplinary actions without admitting or denying allegations of professional misconduct or based upon other grounds, including failure to undergo the required quality review of their attest and compilation services every three years;
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mandating that all CPAs, including those who are not in public practice, complete continuing professional education (exemption statement may be filed with the SED by CPAs who do not engage in any services within the expanded scope of practice);
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making the performance of attest and compilation services an exclusive professional practice right of CPAs and CPA firms;
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providing statutory definitions of critical professional services provided by CPAs, such as “attest” and “compilation”;
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expansion of the qualifying experience requirement for CPA licensure in New York to include experience within the bill’s expanded scope of practice, either as a result of employment or the satisfactory equivalent as specified in regulations by the SED Commissioner;
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codification of a rule of the Board of Regents that provides for endorsement of an out-of-state CPA license;
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clarification of incidental practice by an out-of-state CPA whose principal place of business is other than New York, and whose services are short term, performed primarily in the other state and rendered for a client whose physical place of business is other than New York.
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conversion of the requirement for complying with mandatory continuing professional education from a registration year to a calendar year;
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authorization of disciplinary action in New York against a New York-licensed CPA practicing in another state, for acts which the licensee would be subject to discipline in the other state;
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a specified language requirement that must be used by nonlicensed individuals and entities for financial statements, and such language is distinct from the standard reporting language used by CPAs, so that the public can differentiate between the licensed and nonlicensed practice.
It’s becoming clearer to New York legislators that accountancy reform needs to be enacted, NYSSCPA President David A. Lifson said.
“The governor, Assembly and the Senate are being told by the regulators and the regulated that these changes to the laws are necessary for public protection,” he said. “And it’s unusual to have the regulator and the regulated in such strong agreement.”
Lifson said he is “cautiously optimistic” because the bill is a compromise between several parties.
“I know that when you have a law that has something for everybody but nothing that is what anybody exactly wants, there’s something everybody could say positive about it and something everybody could say negative about it,” he said. “We’re one profession but we’re coming at it from very different places.”
The Accountants’ Coalition, which is comprised of New York’s largest firms, had supported the provisions of an earlier draft bill that was developed jointly with the SED and the Society last year, and served as the basis for this year’s compromise bill by the SED. But in a March 19 letter sent to the NYSSCPA Board of Directors, 10 of New York’s largest CPA firms encouraged the Society to support legislation that would seek to adopt Section 23 of the Model Uniform Accountancy Act, which would allow out-of-state CPAs to practice in New York state without notice or fee, also known as Section 23 Substantial Equivalency. The letter stated the firms would work collectively to introduce legislation that would implement the new “no notice, no fee, no escape” Section 23 substantial equivalency of the UAA in New York state.
The Assembly has never passed accountancy reform legislation previously passed by the Senate, mainly due to concerns about the substantial equivalency practice provisions for out-of-state CPAs with prior notification and payment of a fee to the SED, O’Leary said.
The LaValle-Stavisky bill does not include substantial equivalency provisions as currently outlined in Section 23 of the UAA. Instead, it would allow a CPA, licensed by and in good standing in a state, whose CPA licensure requirements are deemed by the SED to be significantly comparable to New York’s, to apply for a temporary practice permit to practice in New York for up to 180 days during a 12-month period, and renewed annually for a maximum of five years.
The bill would also establish, according to the SED, an endorsement process for a foreign credential issued by a foreign jurisdiction that regulates the practice on the basis of the applicable educational, examination and experience requirements established by the foreign jurisdiction. The applicant must have received a baccalaureate, a higher degree or its foreign equivalent with a concentration or the equivalent in accounting coursework, and have completed an experience requirement significantly comparable to section 7404 for the education law, which outlines CPA licensure requirements in New York state; or completed four years of experience in the United States or foreign jurisdiction that the state board for public accountancy has determined is equivalent to experience required in New York within the 10 years preceding the application; and passed a uniform qualifying examination in accordance with United States Standards that is acceptable to the state board for public accountancy.
If passed into law, all registered public accounting firms that perform attest or compilation services would be required to participate in a mandatory quality review process effective January 2011, according to the SED.
The law’s provisions would take effect 180 days after being signed into law.
