PRESIDENT'S COMMENTARY

By George T. Foundotos, CPA

In this country, we elect people to represent us and do what is best for the whole. This means that on occasion, the elected will make decisions contrary to what had been said or contrary to the perceived wishes of the electorate. Representative democracy in action. Well, that is what has happened to the NYSSCPA recently, with respect to the proposed accountancy law.

At the February board of directors meeting, the board was to give the final look-see to our draft law, before its submission to the legislature. Concerning the experience requirement, our proposal was different from the Uniform Accountancy Act, the model bill and set of regulations proposed by the AICPA and the National Association of State Boards of Accountancy. But it bothered me that we were different. I wanted to make sure we clearly understood the differences before the Society submitted its draft. Once submitted, it is difficult to ask for changes.

I therefore invited Barry Melancon to come to our board meeting to explain, on point, the rationale for the model bill's experience requirement. As an aside, I asked him to discuss the "plain paper" issue. He addressed the board for about an hour on the experience requirement and explained the difference very clearly. It was a matter of acknowledging reality and raising the standards.

In New York, the State Education Department currently regulates the individual CPA for attest work. Tax work, financial planning, and all those other wonderful things we do are not regulated. The firms are not regulated, although they are supposed to be registered. This is the significant difference in the UAA--what is regulated. The UAA proposes to regulate firms. After all, what entity issues the financial statement, the individual or the firm?

So what is a firm? Well, a firm is defined as an individual, partnership, LLP, or PC. Under New York law, the issuing entity escapes regulation. That is the very weakness the model bill tries to overcome by regulating the firm. Under the UAA, the firm has to be qualified to issue attest work. It does this by having people specifically qualified to do attest work. And the definition of this work also is being changed. The new standards being written take a qualitative view, rather than a quantitative one.

In New York, you now need two years' experience in the attest area (meaning about 60 to 65 percent minimum of your time) to qualify for a license. This is scheduled to change to one year with the implementation of the 150-credit hour requirement. If you cut away all the nonsense, this is a quantitative approach--two years doing bank recs, A/R exceptions, counting securities, or whatever. The new standards, being developed as we speak by the AICPA and NASBA, are qualitative in their view. While some time interval will be required, the emphasis is upon the quality of your time, which is really the quality of your experience.

To me, these changes strengthen the professional standards, not weaken them. I know it is different from everything we have thought of in the past, but I can accept this change. Mind you, I come from the generation that had to have the diploma in hand before sitting for the exam and was required to have three years' attest experience in order to sit for the auditing part. Different standards do not necessarily mean weaker ones. All it means is it is different. We now can encompass the entire firm in the regulatory process and look to the quality of the professional experience, not just the "time in grade."

It is unfortunate that we did not have all the information when we communicated with the members. This bill is still evolving and subject to changes nationally and locally. But your elected Society representatives must ultimately decide with the most current information available. I had no problem asking the board to reconsider their previous decision, and I have no problem with the result. YOUR board members did what they are supposed to do--represent you. I am proud of them, that they had the courage to change a popular decision to one which I believe is better.

The sensitive plain paper issue also was discussed for about an hour. There is enough support to revisit this issue. It is not overwhelming support, but it is good solid support. In my humble opinion, we have to decide if the profession, client, and marketplace exist to serve the professional standards or the professional standards exist to serve us. Did the professional standards setters give the plain paper proposal a fair shake? Don't the marketplace and the client have a say in the professional service they want their CPA to deliver within some parameters? The SAP and SAS and SSARS and GAAS and GAAP, etc., are not my idols to worship. They are my tools to use. I am a professional who is engagement driven, not standards driven.

By the time you read this, some members of the New York delegation to the AICPA Council will have represented you at all five regional council meetings (Chicago, L.A., Orlando, Big D, and N.Y.). The purpose (in the middle of tax season, no less) is to garner support for a re-evaluation by the standards setters of this matter. If they do not, then government will be asked to set standards, and woe be unto us if they do. Speaking for me only, all I ask is for a fair open reconsideration. I do not want to blow away standards just for the sake of doing this or appeasing a paying client. I want an open consideration, regardless of the outcome. It is crucial, too, that this be open to prevent the intercession of government standards setters.

Finally, I must report that NYSSCPA Executive Director Lou Grumet and Director of Governmental Affairs Fong Chan have been working very diligently to gather support for our legislation. They have succeeded in getting some influential legislators to sponsor our bill, which will make its passage easier, we hope. More on this later.

Grind out those returns, folks. Be well! *