From left: AICPA President Barry Melancon discusses the plain paper issue with NYSSCPA officers P. Gerard Sokolski, Alan Weiner, and David A. Lifson.

The NYSSCPA board of directors voted on February 4 to adopt the experience licensure requirement as set forth in the Uniform Accountancy Act published jointly by the AICPA and National Association of State Boards of Accountancy. The board also voted not to include in the New York version of the UAA a provision that would permit "plain paper" statements, or financial statements that CPAs can provide for clients' use, that do not necessarily comply with technical professional standards.

The latter vote on plain paper reporting included a contingency plan to move the issue forward. Both votes revise board decisions from previous meetings (as reported in the November 1998 and January 1999 issues of The Trusted Professional) and are the result of extensive deliberations on the UAA and how to best achieve reforms in New York.

Experience Requirement

The board had previously rejected the UAA's broad-based experience provision in favor of existing New York rules that require CPA candidates to obtain experience while working in a CPA firm, primarily in the attest area. The UAA's one-year experience requirement calls for CPA-type skills verified by, but not necessarily under the direct supervision of, a licensed CPA. Licensure candidates may obtain experience at any employer, not necessarily a public accounting firm. The UAA requires additional audit and attest experience for CPAs who supervise and are responsible for issuing attest reports.

Society board members initially were concerned that a two-tier system--CPAs who can do attest work and CPAs who cannot--would confuse the public. Some members also felt that the structure and discipline of working at a CPA firm were important in providing the appropriate professional and ethical attitude that the public associates with the CPA credential.

AICPA President Weighs In

In an attempt to help the board make a well-informed decision on UAA provisions, AICPA President Barry Melancon attended the meeting and spoke in support of the UAA in its current form.

Melancon stressed that the board should consider each UAA element in the context of the total regulatory scheme that the act proposes. Provisions address not only licensing individuals but also licensing CPA firms that provide audits and other attest services to the public, and subjecting those firms to mandatory peer review. Melancon pointed out that this assures the public that only CPAs possessing the necessary experience are responsible for audits, reviews, compilations, and other attest services.

Melancon also noted that the UAA experience provision tried to find a compromise to accommodate the existing rules in most states, and that several states have no experience requirement. He said there is no empirical evidence that the work of CPAs and CPA firms has suffered because of the lack of experience as a prerequisite for licensure.

The NYSSCPA board also heard from Harold Soshnick, chair of the Society's Tax Division Executive Committee and nominated as 1999­2000 vice president, who reported that his committee felt that requiring experience in the attest area for those CPA candidates seeking to specialize in taxes is no longer feasible in today's profession.

"Gone are the days when it is easy to put a tax person on an audit to holler and tick or count securities," he said.

By keeping the attest requirement in place, Soshnick said the profession in New York would be at risk of disenfranchising 40 percent of its potential members who do not plan to engage in attest work.

After much deliberation, the board reasoned that if it makes sense to no longer require candidates to have experience in the attest area, New York should accept the UAA experience requirement completely for the sake of uniformity and substantial equivalency, the UAA's key component that outlines nationwide standards to ease the ability for CPAs to practice across state lines. The majority of the board agreed that licensing firms that do attest work and a strong self-regulatory system would protect the public and should allay any fears that there would be confusion as to which CPAs could or could not provide attest services.

Plain Paper Statements

In reconsidering its view to permit plain paper reporting, which many CPAs feel would legitimize what is a not uncommon practice, especially in the more nontraditional areas of planning and consulting, NYSSCPA President George Foundotos (Suffolk) asked for feedback from a task force he formed to address the issue. Board member and task force chair Robert Cheskes (Suffolk) reported that this group of accounting and auditing specialists opposed the provision on the basis that it would circumvent existing professional standards. The task force felt there are efficient ways to provide the information working within the existing professional standards.

NYSSCPA Vice President David A. Lifson, a strong supporter of the board's original position on this issue, explained the difficulty of complying with the letter of professional standards when providing financial information communicated to and from clients in such dynamic ways as electronic transmission. He pointed out that in substance, individual transactions in electronic form can be a trial balance one minute and financial statement seconds later.

"Plain paper is a misnomer," he said. "It has nothing to do with paper at all."

Keep Standards Setting Out of Government

AICPA President Melancon, while admitting that he supported marketplace directives to bring change to the profession, did not address the benefits or pitfalls of allowing CPAs to issue what some also refer to as an assembly or fourth level of service. Instead, he stressed his view of what is best for the profession, and cautioned that allowing government to legislate the standards-setting process would set a bad precedent.

He asked the board to allow time for a process now under way at the AICPA to work its course. Melancon said that a major part of the Institute's regional council meetings in March will discuss ways to give CPAs greater freedom to deliver market-driven services. The AICPA's actions are motivated strongly by recent Florida legislation that creates a new level of assembly service, and also by the NYSSCPA board's initial decision to modify the UAA to allow such statements in New York. Melancon stressed the seriousness of the issue, particularly since the AICPA must address if and how it will discipline Florida members who violate current standards.

"We have a problem in Florida that we need to fix and this will be a substantial part of the council meetings in March," he said.

Melancon said the AICPA's board of directors would take nonbinding feedback from the regional meetings to decide what action the full council should take at its May meeting, and what direction the Institute's Accounting and Review
Services Committee should consider if there is a strong message that professional standards need revision. He encouraged NYSSCPA leaders to be a vocal part of these meetings and deliberations if the Society wants to effect change.

Society Treasurer Arthur Hoffman (Westchester) noted that forgoing state legislative change would require a "leap of faith" that the AICPA would modify professional standards in a way that would enable New York CPAs to serve their clients and compete in the marketplace. To date, attempts to accommodate this perceived need have not been successful. (See the January issue of The Trusted Professional for a history of the issue.) Other board members stressed that it is important for a broad cross section of CPAs to move the issue forward since past experience has shown that state society accounting and auditing committees have resisted changing professional standards.

To address such reservations, the board agreed to give the NYSSCPA government relations staff contingent authority to reinstate the plain paper language if it appeared there was no clear evidence that the AICPA was likely to revise professional standards to satisfy the board's desires. NYSSCPA leaders also plan to attend the AICPA meetings to present the board's views.

The Society expects to introduce its version of the UAA reforms to the New York State Legislature shortly. Watch future issues of The Trusted Professional for updates. *