Regents May Make Accountancy Reform Legislation a Priority

Regents May Make Accountancy Reform Legislation a Priority

By Dennis O’Leary, Legislative Counsel

ALBANY—New York State Education Commissioner Richard P. Mills last month presented to the Board of Regents a preliminary priority legislative proposal to update the state’s accountancy laws.

The proposal, “Revising the Public Accountancy Statute to Reflect Contemporary Practice and Oversight,” is one of ten that comprise the Regents Priority Legislative Program for 2004. Final approval of the program is set to take place at the board’s next meeting on Nov.13 and 14 in Albany.

According to a Sept. 22 memorandum Mills sent to the Regents, the program is designed to focus on “major initiatives and address issues that are important to the [State Education Department (SED)].” The legislative priorities, which are linked to the Regents’Strategic Plan and budget proposal, are limited in number to ensure sufficient commitment of energy and resources by the board, the commissioner and the SED.

“While the practice of public accountancy has evolved over the years, the public accountancy statute has not been substantially updated since 1947,” states the memo. In addition, because of recent national events involving CPAs and CPA firms, “there is a need to update and modernize the statute to reflect contemporary practice and oversight.”

In presenting the legislative priorities during the Regents’ Oct. 9 meeting, Mills described the accountancy proposal as a major piece of legislation to define the scope of practice and to bring the regulation of accountancy into the 21st century. None of the Regents raised questions on the accountancy proposal and there was no reference in the memorandum or at the meeting to the state Senate’s unanimous passage of major accountancy reform legislation by Sen. Kenneth LaValle (S.302-D), which is supported by the New York State Society of CPAs. (See “State Senate Passes Accounting Legislation” on page 1 of the July 2003 Trusted Professional for more information.)

As reported in the October Trusted Professional article “State Accounting Board Recommends Substantial Equivalency to SED,” the New York State Board for Public Accountancy voted 12-1 at its September meeting to recommend to the SED that provisions on substantial equivalency be included in the department’s accountancy reform legislation. The accountancy reform proposal presented by Mills includes a substantial equivalency provision described in the memo as follows:

Under this concept, a CPA licensed by and in good standing in another jurisdiction may be granted the right to practice public accountancy in New York, if his or her state of licensure is deemed by the SED to have licensure requirements substantially equivalent to New York’s. Under the provisions of substantial equivalency, an out-of-state licensed CPA maintaining a principal place of business in another jurisdiction may practice in New York upon the submission of notification and payment of a fee to the SED. As part of the annual notification process, the licensee acknowledges that he or she may be subject to Regents’ disciplinary action for unprofessional conduct while practicing in New York.

Among the other provisions included in the accountancy proposal under consideration by the Regents are:

Expansion of the current audit and attest scope of practice to reflect all the professional services by licensees under the CPA or PA title, including peripheral functions, such as tax accounting, financial management or estate planning. According to the Mills memo, “This revision would better protect the public by ensuring that when CPAs or PAs, as licensed professionals, provide these services they will be accountable. These peripheral services also can continue to be provided by an unlicensed person.”
Registration of all CPA firms, regardless of form of organization, that are lawfully engaged in the practice of public accountancy. The Mills justification for this provision is “The amendment would allow the Regents to revoke a firm’s registration or take other appropriate disciplinary action against firms similar to individual licensees whenever disciplinary action is sustained by a duly authorized professional disciplinary agency.”
Eliminate the exemption from mandatory continuing education for CPAs employed in private industry, government or academia, and expand the number of subject areas available for the concentrated learning option.
“All firms providing auditing services would be required to undergo an independent quality review of the firm’s administrative and quality control policies and procedures over these services at least once every three years by an organization or firm approved by the SED. Firms participating in the federal firm inspection program may be considered as complying with the quality review requirement.”
“Profession specific penalties for professional misconduct would be established, as public accountancy may be the only profession which has national or multi-national firms with thousands of partners practicing the profession.”
Establishment of a Public Accountancy Task Force supported by a funding mechanism and “consisting of CPA investigators, prosecutors and support staff to accomplish the proposed new provisions of the bill.”

Many of the specific points, other than the new piece on substantial equivalency, were included in the SED’s 2003 proposal that was placed before the legislature, but did not pass in either the Senate or Assembly. Certain major provisions already are included in modified form in the unanimously approved state Senate bill S.302-D.

“The Society’s Legislative Task Force will closely review any Regents’ priority legislation affecting the practice of public accountancy, and will provide our analysis to the state legislators,” NYSSCPA Executive Director Louis Grumet said of the proposal.