Members Approve Revisions to Ethics Code and Bylaws

Commissions Rule Changed and New Membership Categories Added

By James A. Woehlke, CPA

The NYSSCPA membership voted to change the Society's ethics code and bylaws at an April 29 special meeting. The Society's ethics rule now conforms to the AICPA's rule regarding accepting commissions and referral fees. The numerous bylaws changes range from the creation of five new membership categories to the overhaul of the professional responsibility article.

The vast majority of members voted by proxy. Members cast 2,331 votes on the ethics rule revision with 2,053, or 88 percent, in favor and 278 in opposition. Concerning the bylaws changes, members cast 2,069 votes overall.

At the members' meeting, former Society president Stuart Kessler (Westchester) asked to have a separate vote on ballot item No. 34, which places an affirmative obligation on the nominating committee to take into consideration the diversity and geographic dispersion of the membership. This provision individually passed by a vote of 1,889 to 180. All other bylaws provisions passed by a vote of 1,658, or 80 percent, in favor, 255 supporting all but certain provisions, and 156 opposing all the bylaws revisions.

"The membership's approval of changes to the Society's code of ethics and bylaws is important to the future of the CPA profession in New York," President George T. Foundotos (Suffolk) said. "The changes will enable the Society to meet the challenges of serving a vibrant, ever-changing profession."

Accepting Commissions and Referral Fees

The NYSSCPA's ethics rule now conforms to the AICPA's regarding how and when members can receive commissions and referral fees. The new ethics Rule 503 states that a Society member can accept commissions as long as the member does not perform an audit, review, compilation, or examination of prospective financial information for the client. The rule provides an exception for compilation clients if the report discloses a lack of independence.

When receiving a commission, the rule now requires that a member disclose the commission in plain language. Regarding referral fees, members must simply disclose the referral fee, whether paid or received by the member, to the client.

A new interpretation to Rule 102, Integrity and Objectivity, accompanies the changes to Rule 503. Interpretation 102-7 notes that Rule 102 requires a member who receives a commission or who receives or pays a referral fee "to maintain objectivity and integrity, act in the client's interest, and not knowingly misrepresent facts or subordinate his or her judgment to others." The interpretation also advises, "A member may not recommend a product or service, or make a referral, without determining that the product, service, or referral is appropriate for the client."

New Membership Categories

The bylaws vote indicates that the most controversial change is the expansion of associate membership categories, with the largest number of opposing votes, 341, cast against allowing CPA firm employees to join the Society. Still, members approved this new category as well as four additional categories: international, student, CPA candidate, and academic associates. Although nearly all Society member benefits apply, associate members cannot vote on member matters or serve as officers or directors.

The growth areas in most public accounting firms today are tax and consulting, and many firms employ more and more professional non-CPAs in these areas who make vital contributions to the firms and the profession. Individuals employed in a professional capacity by a CPA firm but who are not CPAs or on a CPA track can now participate in NYSSCPA activities and contribute more to the profession. Firms benefit since all their professional employees can take advantage of networking opportunities available at Society committee meetings and other programs.

International associates are chartered accountants and CPAs licensed outside the United States who belong to recognized institutes of accountancy. The NYSSCPA expects that these new members will offer insights to the issues and impacts of economic globalization.

Until now, students wishing to enter the CPA profession had limited opportunities to bond to their chosen career. The new membership category gives them access to additional self-help and networking opportunities, chapter organizations, and the Society's committee structure, among other benefits.

After graduating from college, students qualify for the CPA candidate category that now includes individuals who have passed the CPA exam but have not yet fulfilled the experience licensure requirement and those studying for the CPA exam. A person can remain a CPA candidate associate member for up to five years.

The academic category includes auditing, accounting, and tax professors who are not CPAs. This new membership group is another step in the Society's and the profession's efforts to build stronger bridges to the accounting academic community.

Ethics Bylaw Changes

With the approval of bylaws changes proposed by the Society's Professional Ethics Committee, the professional responsibility article now includes:

* Distinction between a trial board established by the Society and the joint ethics enforcement program's joint trial board;

* Better explanation of what a membership suspension entails;

* Requirement that the member notify the Society if an event occurs that would result in disciplinary action taken against the member;

* Clear statements that failure to cooperate with the Professional Ethics Committee or to comply with remedial action determined necessary by the Professional Ethics Committee is a bylaws violation;

* Accommodation for settlement agreements between the Professional Ethics Committee and the disciplined member; and