State Board Studies UAA

By Danielle D'Angelo

The New York State Board for Public Accountancy devoted the bulk of its four-hour September meeting to the Uniform Accountancy Act proposals and their impact on the profession in New York. In particular, the board considered the experience requirement, the acceptance of commissions, non-CPA ownership rules, and the CPA=CPA provision.

National Association of State Boards of Accountancy (NASBA) President David Costello and its legal counsel Noel Allen presented an overview of the UAA and the thought process behind the key provisions. The board also asked for comments from the State Education Department and the NYSSCPA.

Developed jointly by NASBA and the AICPA, the UAA is a model bill and set of regulations that proposes sweeping changes to the governing of the accounting profession.

Experience Questioned

Allen stressed that the UAA's one-year experience requirement for general licensure better represents the state of the profession today.

"If half of all licensees do work outside of attest services, you need to look at a broader way to define experience," he said.

The UAA allows CPAs not involved in the attest function to gain their experience in nonattest work, which can be earned working in industry or at a non-CPA firm. This nonattest experience needs to verified by, but not necessarily under the supervision of, a CPA.

Many state board members challenged the one-year experience provision.

"You're asking us to reduce our standards. This is a big issue for us," said Arthur Ainsberg, the board's vice-chair, reflecting the views of other members.

While the recent adoption of the 150-hour educational requirement in New York changed the necessary experience for licensure from two years to one, the revised regulation follows more stringent guidelines than those proposed by the UAA, including requiring attest work and supervision by a CPA. Moreover, many in the profession point out that the 150-hour program essentially did not lower New York's standard since those candidates with a master's degree already only needed one year's experience and the new regulation mirrors this requirement.

The UAA requires CPAs doing attest work to meet stricter experience requirements and adhere to applicable professional standards now being defined, including supervision by the CPA responsible for the attest engagement. NASBA President Costello pointed out that while he and most CPAs feel a formal experience requirement is important to ensure the quality of work, there is no strong evidence supporting this claim, leaving it open to judicial challenges.

"Empirically, no one has shown there is a quid pro quo with experience and malpractice. Courts are telling us 'show us how,'" said Costello.

The joint committee of NASBA and the AICPA recognized that there is no universal norm for experience across the country. While the UAA's one-year experience for general licensure is less stringent than New York's standards, several states currently require no experience. According to Costello, the joint committee took a practical view that stressed a standards-based, not a time-based, approach to find common ground to achieve the UAA's primary goal of "substantially equivalent" requirements for education, examination and experience.

Commissions Also Challenged

The other area of contention for a number of state board members is the UAA's rule allowing commissions.

"Many feel that it took us 100 years to get our reputation for independence and integrity but it will take only 10 for it to disappear if we accept commissions," said Don Johnson, the state board's chair.

Costello and Allen responded that commissions are already accepted in a majority of the states and there have not been any complaints. The joint committee ultimately felt that the attest function is the main area necessary for public protection, and the UAA prohibits commissions from clients for whom CPAs provide attest services.

The commission issue is a timely one since the State Education Department's recent interpretation of New York's education law showed that the state has no jurisdiction to discipline CPAs who accept commissions outside the law's narrowly defined scope of practice. (See the related story on page 1.) SED Deputy Commissioner for the Professions Johanna Duncan-Pointer participated in the discussion and stressed the need to draft a New York law that protects both the public and the future of the accounting profession.

The NASBA representatives also presented the UAA's non-CPA ownership requirements, and the CPA=CPA provision which allows all licensed individuals to use the CPA credential, even those not in public accounting, provided they adhere to the required professional standards including CPE and applicable conduct rules. Some state board members questioned permitting non-CPAs to own up 49% of an accounting firm and the practical ability for CPAs to maintain control, particularly in smaller firms.

The meeting concluded with comments from NYSSCPA President George Foundotos and Executive Director Louis Grumet on the Society's efforts to develop a New York version of the UAA to present to state policymakers in the next legislative session. Foundotos and Grumet welcomed the state board's participation, and invited members to attend the NYSSCPA's October board of directors meeting which included a vote on the UAA provisions. (See the November issue of The Trusted Professional for a complete report on the NYSSCPA board's actions.) Foundotos stressed the importance for New York to be a leader on the UAA to have more control of the issues before they are defined by the activities of others, perhaps even those outside the profession. If New York is in the forefront, its actions will help shape the views of other states.