Recommends State Law Include Standards Exemption

By Anthony J. Mancuso, CPA

As part of its discussion on a New York version of the Uniform Accountancy Act that would amend the state's public accountancy law, the NYSSCPA board of directors included a provision that would allow CPAs to issue financial "management use only" statements for a client's internal needs. Since a practitioner is simply consulting with management, and a third party is not receiving and relying on the information, the board believes such statements should be exempt from professional standards.

The board's proposal would permit licensed individuals to provide a client with financial information including, but not limited to, historical financial statements, personal financial plans, working trial balances, or financial forecasts and projections based on the client's written representation that the information is for the client's personal use, even without application of acceptable standards. To perform these services, the CPA must obtain a written understanding from the client describing the intended services' nature and limitations, including a statement that the CPA shall neither issue an opinion nor express a form of assurance and a statement that the financial information shall not be distributed or otherwise made available to a third party.

Practitioners' Attitudes

After many years of long discussions, much controversy, and different opinions, the issue of plain paper financial statements, management use only statements, assembly, or fourth level of service is still under debate. Some practitioners believe that consulting with clients and releasing financial information for internal use, without preparing an accountant's report, is an important client service. Others believe that not issuing a report diminishes the CPA profession, lowers the standards for performance and, thus, demeans the image of the CPA in the public's eye.

Those in favor of permitting financial statements for management's use only believe it onerous to adhere to standards when both the client's and the CPA's intent is simply consulting and providing internal information to the client, not the public. Practitioners who want standards changed believe third parties should rely only on those services in which both the client and the CPA intend to distribute financial information. Thus, third parties have no right to rely on information presented in a plain paper financial statement if it carries no assurance from the CPA.

Practitioners who favor retaining current standards believe that freedom to produce financial information outside a framework or set of standards will tend to lower quality, and that such statements will not be perceived as a professional product, even by the client. In the process, they fear the profession will lose its distinction in the marketplace. Further, when engaged to provide financial information to a client, standards or law should not allow accountants to render financial statements that might mislead, even if intended for internal use, since there always is a chance that third parties may inadvertently obtain access to such statements.