Article

March 1999 Issue

State Education Department Proposes Legislation to Redefine Scope of Practice

By Johanna Duncan-Poitier

Last month, I described New York's system of professional regulation and confirmed the Board of Regents' active commitment to the evolution of the public accounting profession. I am pleased now to share important news with you about a New York State Education Department legislative proposal that updates the definition of the practice of public accountancy in the education law to reflect the realities of current practice.

Accountancy's existing scope of practice, which has not changed substantially since it was enacted in 1947, does not reflect the full range of services currently provided by CPAs. It limits the scope of practice of public accountancy to the provision of core services involving audit, review, and compilation. We recognize, however, that the practice of the profession has evolved considerably to include numerous other services, such as financial planning, management advisory services, and more.

CPAs are distinguished from nonlicensees by their education, training, and ethics--in short, by their professionalism. The public engages a CPA because they trust that the services provided will equal the high standards of the profession. That trust is based upon the public's knowledge that the CPA is accountable for the services the licensee provides. A definition of practice that does not recognize the current range of accountancy services undermines the distinction between a CPA and a nonlicensee and also undermines the public's trust in the CPA profession. The following elements of our legislative proposal reaffirm the public's understanding that the services provided by CPAs are of the highest quality:

The proposal clarifies the definition of the attest services that only CPAs and public accountants can provide.
It also brings into the scope of practice additional services, such as tax and financial advisory services, that are provided by CPAs. This addition would enhance public protection by ensuring the public that these vital services will be held to the same high standards that are currently applied to attest services.
In addition, the proposal supports the integrity and independence of the profession by continuing to distinguish CPAs as trusted experts backed by years of experience, training, and education.
Proposed revisions also update the law to reflect recent U.S. Supreme Court and other federal court decisions that allow the provision of certain CPA services while a CPA is employed by a business entity.

The proposed legislation would allow CPAs, in some circumstances, to provide certain services while employed by non-CPA firms; important public protection features of the current law and rules would remain. This is particularly important in an age where the number of CPAs employed by private industry, the government, and education nearly equals the number of CPAs employed by public accounting firms.

We are also addressing the extent to which certain financial services may be provided by business (nonprofessional) entities. The proposal amends existing law to reflect those services that may be rendered by business entities and other persons if they do not "hold out" as CPAs. Services such as tax preparation and financial planning services could be provided by business entities as long as they do not hold out to the public that they are practicing as a CPA firm.

This is a time of exponential change in the practice of public accountancy. We are seeking to keep the laws in New York abreast with the contemporary breadth and scope of CPA practice. The State Board for Public Accountancy, which includes members of the CPA profession, performs an integral role by advising the department on current industry trends and practices. These trends include legislative proposals for alternative practice structures, the expansion of services to compete in today's marketplace, and revisions in many state laws that govern the practice of accounting.

The department's legislative proposal is separate and distinct from legislation the NYSSCPA is proposing this session. Legislative action is critical to ensuring the integrity of the profession and the protection of the public. I am confident that our proposal achieves our mutual goal of providing a definition of practice that will serve the accounting profession into the 21st century. We look forward to working with the NYSSCPA to continue to promote the evolution of the profession in the public's interest. Please share any comments you may have on this legislative proposal with Daniel J. Dustin, executive secretary for the State Board for Public Accountancy, (518) 474-3836, e-mail: CPABD@mail.nysed.gov. *

Johanna Duncan-Poitier is the State Education Department's deputy commissioner for the professions, where she leads the office of the professions.