Accountancy Board Contemplates UAA Reforms

Accountancy Board Contemplates UAA Reforms
Submission of Peer Review Reports and Practice Privileges Among Proposals

By Dennis O’Leary, Legislative Counsel

Continued from the Home Page

Last revised in November 2002, the UAA is a model bill and set of rules that the American Institute of CPAs and the National Association of State Boards of Accountancy (NASBA) designed to provide a uniform approach to regulation of the accounting profession.

Developed for exposure by NASBA, the four major proposals include: extension of reciprocity practice privileges to out-of-state licensees meeting certain requirements; submission of peer review reports to the accountancy board; licensee reporting of convictions, judgments and disciplinary proceedings to the accountancy board; and documentation for attest engagement and retention of those documents for entities not covered by the rules of the Public Company Accounting Oversight Board.

The first proposal on reciprocity for out-of-state CPAs with four years of qualifying experience within the past 10 years did not receive much support by the accountancy board. Some members expressed concern that the requirement is too lax, fearing that virtually any out-of-state CPA would qualify to practice in New York.

“We weren’t really clear where NASBA was trying to go with that piece because you already have Section 23 of the UAA, which is substantial equivalency,” said accountancy board Executive Secretary Dan Dustin. “We weren’t sure why if somebody didn’t meet substantial equivalency why you would want to give them practice privileges.”

Subsequent to the meeting, Dustin said he learned from a NASBA representative that the provision would allow individuals with deficiencies to obtain practice privileges. An example of a deficiency could include an individual licensed in a jurisdiction that has a 120-hour education requirement. This proposed rule would allow an individual who met the four-out-of-10-years experience requirement to gain practice privileges even though he didn’t graduate from a 150-hour program.

Both the State Education Department (SED) and the New York State Society of CPAs have endorsed the concept of substantial equivalency in legislation as the basis for out-of-state licensees to practice in New York.

According to the substantial equivalency provisions in the SED’s proposed legislation, the out-of-state CPA would be eligible to practice in New York without the need to obtain a CPA license from the department, if the SED verifies that the state or jurisdiction of licensure has CPA licensure requirements that are substantially equivalent to New York’s requirements. Similarly, if an individual CPA’s licensure qualifications are verified by the SED to be substantially equivalent to New York’s requirements, but that CPA is not licensed by a “substantially equivalent” state or jurisdiction, that individual would be eligible to practice in New York without the need to obtain a CPA license from the department. A practice privilege through substantial equivalency would only be available to out-of-state CPAs who do not have a principle place of business in New York. In contrast, reciprocity under the NASBA proposal appears to bypass any verification of substantial equivalency.

“The New York State Legislature must first address substantial equivalency before addressing reciprocity,” said Vincent J. Love, NYSSCPA vice president for legislation. “I’m pleased that the State Education Department and the Society share the legislative goal to enact substantial equivalency. The Society believes NASBA should reconsider expansion of reciprocity in UAA rules.”

The NASBA proposal relating to submission of peer review reports would apparently overcome the current provisions in the UAA that prohibit disclosure of peer review reports by the agency that administers the peer review program. As noted in NASBA’s exposure draft, “The requirement for submission of peer review reports changes the peer review program from a purely educational program of professionals offering guidance to other professionals, to an enforcement program offering greater public protection.”

While there are differences in the wording, state Sen. Kenneth LaValle’s bill, S.302-D, passed unanimously by the state Senate last June, would establish a peer review program under the auspices and regulations of the SED, and require the results of peer reviews to be filed with the department. It also declares that a “summary of the results of the peer review” shall be deemed a public record and subject to disclosure to the public under the state’s Freedom of Information Law. Peer review must first be established by New York’s legislature before NASBA’s proposed refinements on disclosure are considered for rules in New York.

“We (the accountancy board), through the (New York State Board of) Regents’ priority legislation, are looking for more reports than are listed in this document,” Dustin said. NASBA’s proposed rule is limited to all adverse peer review reports, second consecutive modified peer review reports and any report review that is the second consecutive report to contain comments and recommendations.

Through its proposal, NASBA has reopened a contentious issue raised last year in a proposed Regents’ rule that characterized the failure of a licensee to report the occurrence of certain events to the SED as professional misconduct. Society members stood firmly opposed to self-reporting, under penalty of professional misconduct, information that is not based upon any guilty finding, such as required reporting of a pending disciplinary action or a settlement in private litigation. Members directly lobbied the Regents and were influential in the ultimate expiration of the proposed rule.

As stated in NASBA’s exposure draft, the proposed rule “requires the licensee to notify the board, within 30 days, of the imposition of discipline by governmental agencies or credentialing bodies, criminal charges, disciplinary charges filed by governmental agencies and any judgment, award or settlement of a civil action or arbitration proceeding of $150,000 or more in which the licensee was a party.” When considering the Regents’ proposal last year, the accountancy board agreed to set $30,000 or more as the triggering figure upon which the reporting of settlements in civil actions and arbitrations would be required.

On the fourth proposal on record documentation and retention, New York is far ahead of NASBA’s proposal. Effective in January 2003, the Regents adopted its own seven-year records documentation and work paper retention rule. The primary difference, Dustin said, is in the number of days to assemble a complete set of work papers. The Regents’ rule is 45 days, as compared to NASBA’s proposal of 60 days. Though not yet finalized, the PCAOB’s rules would mandate 45 days for assembling work papers.

The comment period on these proposals ended on June 1. According to Dustin, the accountancy board currently is not going to take an official position on NASBA’s proposed rules.

In another related development at the accountancy board meeting, the SED’s amendments for its 2003 accountancy reform legislation were announced. Introduced by Lavalle on April 30, the amended bill is posted on the Society’s website (www.nysscpa.org) as S.4935-A. The amended bill, however, has not yet been introduced in the state Assembly.

The Society continues to actively support accountancy reform bills S.302-D by LaValle and the identical Assembly bill A.8555-A, by Assemblyman Ron Canestrari. At the time this article went to press, S.302-D was expected to be reported by the Senate’s Higher Education Committee to the Senate floor.