* NEW YORK STATE SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS AND CONSOLIDATED ENTITIES *

CONSOLIDATED FINANCIAL STATEMENTS

WITH SUPPLEMENTARY INFORMATION

MAY 31, 1998

The financial statements presented in this edition of The Trusted Professional reflect a year of loyal member volunteerism, dedicated staff, and a transition period to prepare for a new executive director. We continue to be committed to quality professional service to our clients, the financial markets, and the public at large. We welcome your comments and suggestions. Without our devoted membership, we would be unable to fulfill our mission.

As you are aware, the Society's financial statements are prepared by our staff and then reviewed by an independent CPA firm, O'Connor, Davies & Co., LLP. There also is significant membership involvement in this process.

Our Audit Committee, composed of members of the board of directors, worked closely with the Society's staff and O'Connor, Davies. In addition, there was a joint meeting of the Audit Committee and the Executive Committee to review and discuss a first draft of the financial statements and the management letter. Following some changes recommended at that meeting, there was an extensive review and discussion of the financial statements and management letter at the October 28, 1998, meeting of the board of directors.

We are grateful for the diligent efforts of our members in a most important Society activity.

Barry B. Seidel, CPA

1997-98 President

INDEPENDENT AUDITORS' REPORT

Boards of Directors and Trustees

New York State Society of Certified Public Accountants

Foundation for Accounting Education, Inc.

New York State Society of Certified Public Accountants Benevolent Fund, Inc.

Dollar for Dollar Productions, Inc.

We have audited the accompanying consolidated statements of financial position of New York State Society of Certified Public Accountants and consolidated entities as of May 31, 1998 and 1997, and the related statements of consolidated cash flows for the years then ended, and the consolidated statement of activities for the year ended May 31, 1998. These financial statements are the responsibility of the Society's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the aforementioned consolidated financial statements present fairly, in all material respects, the consolidated financial position of New York State Society of Certified Public Accountants and consolidated entities, as of May 31, 1998 and 1997, and their cash flows for the years then ended, and changes in their net assets for the year ended May 31, 1998, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. Supplementary consolidating information on pages 15-16 is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole.

September 21, 1998

(Except for Note 12, as to

which the date is October 28, 1998) O'Connor, Davies & Co., LLP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business Operations and Summary of Significant Accounting Policies

Business Operations

The New York State Society of Certified Public Accountants (Society), and its related but separate entities, Foundation for Accounting Education, Inc. (Foundation) and New York State Society of Certified Public Accountants Benevolent Fund, Inc. (Benevolent Fund) are not-for-profit organizations. Dollar for Dollar Productions, Inc. is a for profit corporation. The individual entities have interrelated directors/trustees and share common facilities and personnel. Various expenses including occupancy costs and salaries, have been allocated between the Society, the Foundation, and Dollar for Dollar Productions, Inc. based upon services rendered by common personnel and usage of common facilities.

The Society subsidizes the operations of its regional chapters. The financial statements reflect revenues, expenses, assets and liabilities of the chapters.

The Foundation was formed to engage in educational, research and related activities in the field of accountancy, including the sponsorship of courses and seminars to provide continuing education for members of the profession. In addition, the Foundation provides information on career opportunities in the accounting profession and scholarship assistance at the undergraduate level.

The Benevolent Fund was organized to aid members and their families who are in need of financial assistance and to provide referral service for members suffering from substance abuse disorders. It is supported by contributions and bequests from members of the Society and income derived from investments.

Dollar for Dollar Productions, Inc., a wholly owned subsidiary, was formed by the Society to develop a personal finance television series for national distribution on PBS Stations. All costs incurred to May 31, 1998 have been charged to operations as recovery against future revenue is uncertain.

Principles of Consolidation

The accompanying consolidated financial statements reflect the financial position and results of operations of New York State Society of Certified Public Accountants, Foundation for Accounting Education, Inc., New York State Society of Certified Public Accountants Benevolent Fund, Inc. and Dollar for Dollar Productions, Inc. All material inter-entity transactions have been eliminated in consolidation.

Financial Statement Presentation

The classification of an organization's net assets and its support, revenue and expenses is based on the existence or absence of donor-imposed restrictions. It requires that the amounts for each of three classes of net assets--permanently restricted, temporarily restricted, and unrestricted--be displayed in a statement of financial position and that the amounts of change in each of those classes of net assets be displayed in a statement of activities.

These classes are defined as follows:

Permanently Restricted - Net assets resulting from contributions and other inflows of assets whose use by the Society is limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the Society.

Temporarily Restricted - Net assets resulting from contributions and other inflows of assets whose use by the Society is limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of the Society pursuant to those stipulations. When such stipulations end or are fulfilled, such temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities and changes in net assets.

Unrestricted - The part of net assets that is neither permanently nor temporarily restricted by donor-imposed stipulations.

Basis of Accounting

The accompanying consolidated financial statements are prepared on the accrual basis of accounting, in accordance with generally accepted accounting principles.

Use of Estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Contributions

Contributions are recorded as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.

Dues, Subscription and Conference Revenues

Revenues received for future dues, The CPA Journal subscriptions and conferences are deferred to the applicable year.

Advertising

Costs of promotion and advertising are expensed as incurred.

Accounts Receivable

Accounts receivable consists primarily of membership dues, the CPA Journal advertising, quality review administration fees and show exhibition displays. The allowance for bad debts accounts is based upon prior years' experience and management's analysis of possible bad debts.

Investments

Investments are generally stated at market value which are determined at quoted market prices.

Inventory

Inventory consists of course materials stated at the lower of cost or market, using the first-in, first-out method.