New York State Society of CPAs Testifies Today Before State Senate Committee

New York State Society of CPAs Testifies Today Before State Senate Committee

FOR IMMEDIATE RELEASE: FEBRUARY 6, 2002 at 9AM EST

CONTACT:
Lois Whitehead
Public Relations Manager
(212) 719-8405
lwhitehead@NYSSCPA.org

Joanne S. Barry, Communications Director
212-719-8354
jbarry@nysscpa.org

Senator Kenneth P. LaValle Conducts Public Hearings on CPAs in Post-Enron Era

NEW YORK, NY, February 6, 2002 - The New York State Society of Certified Public Accountants (NYSSCPA), the oldest and largest state accounting association in the nation, will testify today at hearings conducted by Senator P. LaValle, Chair of the New York State Senate Higher Education Committee. The testimony will address CPA independence and regulation in light of the recent bankruptcy of the Enron Corporation. Senator LaValle leads the nation in setting up such hearings at the state level to look at the regulation of CPAs.

In its testimony, NYSSCPA will call for "raising the quality bar" and will make specific recommendations for changes in New York State regulation, disciplinary systems, enforcement and peer review. The NYSSCPA also points out the need for a state initiative to assist citizens with retirement planning.

In addition, the testimony addresses the interplay between auditing and consulting services, specifically in the non-SEC registrant sector of the economy. The NYSSCPA advises that any consideration to constrain consulting services in the non-SEC sector could have an unintended negative impact on small and medium sized businesses that rely on CPA firms for business advice. Removing such services would disrupt businesses unnecessarily and force them to seek similar services from lesser qualified providers. These businesses tend to not have staff in the areas where expertise is required, and rely more heavily on their external auditor for specified consulting services.

Following are the recommendations outlined in the testimony:

Reconstitute the State Board for Public Accountancy. The New York State Board does not function as an independent regulatory and enforcement body, as it does in all other states. Instead, it functions in an advisory capacity only to the Board of Regents, which regulates the profession. The NYSSCPA recommends that this Board be reconstituted with more power, independence, stature and resources to protect the public. Consistent with other initiatives at the federal level, the Board should include additional public members with stature and backgrounds that would ensure strong public oversight.
Enhance the State Education Department's capacity and resources. The New York State Education Department's Office of Professional Discipline (OPD) needs additional qualified staff and resources to be able to investigate and discipline effectively. The disciplinary process must reinforce the profession's ethics code and New York State laws.
Ensure public and private cooperation in disciplinary proceedings. The Society recommends creating an effective, cooperative joint investigation and disciplinary action process between OPD and the NYSSCPA Ethics Committee to enforce the code of professional ethics and the public accountancy laws and regulations. Currently these two bodies proceed independently. Cooperation will coordinate efforts and expedite timely completion of investigations.
Extend and intensify the peer review process. Improve peer view (a process in which one CPA firm analyzes the quality control systems and professional work product of another) of CPAs with certified peer reviewers selected with an independent body. Currently firms can select their own reviewers. Make mandatory peer reviews for all registered CPA firms that provide audit and attest services. Currently, only CPA firms who audit SEC registrants are required to be peer reviewed.
Register and regulate all CPAs. Currently, New York State does not register or regulate CPAs who work as financial statement preparers or internal auditors. Like CPAs in public practice they are a part of the system of checks and balances that provides integrity to financial statements. These CPAs should also be subject to discipline for professional conduct breaches and to continue professional education.
Raise the quality bar. The NYSSCPA has developed educational programs and professional guidance on quality control processes for CPA firms. It is currently developing more extensive guidance on issues such as the analysis of independence threats and safeguards and document retention and recovery guidelines.
Elevate public confidence in financial reporting. Strengthen the current regulatory environment to prohibit unregulated individuals from preparing financial statements.
Require ethics education. Integrate business ethics into high school and college curricula to highlight that technical competence is constrained by a demanding code of ethical conduct that stresses independence and protection of the public.

Directing attention to losses experienced by Enron employees in their retirement accounts, NYSSCPA called for the support of state initiatives to assist individuals in their retirement investment planning with proper advice about diversification in a retirement investment portfolio made available to all citizens of New York State.

Testifying for the NYSSCPA were three ethics specialists: Marilyn A. Pendergast, CPA of Urbach Kahn & Werlin LLP, former NYSSCPA President and current chair of the Ethics Committee of the International Federation of Accountants; Vincent J. Love, CPA of Kramer & Love, a member of the NYSSCPA Board of Directors and Financial Accounting Standards Committee and Allen L. Fetterman, CPA of Loeb & Troper, Chairman of the NYSSCPA Audit Committee.

"The events of the debacle at Enron deeply concern the members of the New York State Society of CPAs," Pendergast said. "The CPA's primary responsibility is to protect the public. The issues raised by the apparent failure of Enron management and external auditors cause us to want us to find out what was known and done, by whom and when. We want to know to what extent inadequate accounting and auditing standards played a role in this case, so we can change them. If inadequate standards were not the cause, but lax enforcement was, then we should address their enforcement."

Copies of the NYSSCPA full testimony are available at www.nysscpa.org.

About the NYSSCPA

Representing nearly 30,000 CPAs, the New York State Society of Certified Public Accountants (NYSSCPA) was incorporated in 1897. The Society is a nonprofit organization that seeks to establish and maintain high standards of integrity, honor, and character among certified public accountants. Its members are CPAs working in public or private practice in a state that serves as the home of Wall Street and major financial institutions.

The New York State Society of CPAs is located at 530 Fifth Avenue, New York, NY 10036. To learn more about the Society call 800-633-6320 or visit the Society's website at www.nysscpa.org.