February 2000

Scope of Practice Debated at Senate Roundtable

Accountancy Reform Legislation Discussed

At a New York State Senate-sponsored roundtable discussion on February 7, participants presented varying views on the CPA's scope of practice as defined in two accountancy law reform bills now before the Senate. The bills are S. 4402, introduced by Senators Kenneth P. LaValle, Nicholas Spano, Nancy Larraine Hoffman, John Marchi, Caeser Trunzo, and Dale Volker; and S. 4133, introduced by Senator LaValle.

The meeting drew CPAs, regulators, and other parties interested in the bills. The participants agreed that state regulators should have the authority to discipline CPAs in public practice for all professional services they provide. The group had varying opinions, however, on what is the most effective way to clearly articulate that authority.

Both bills address the need to amend the current accountancy statute, yet each takes a different approach in defining the profession's scope of practice. Senate bill 4402, which the NYSSCPA supports, maintains the current law's definition of scope of practice as primarily the attest function and modernizes the statute to include references to professional standards that reflect today's CPA practice. Senate bill 4133, supported by the State Education Department, expands the current scope to include a detailed list of services in addition to attest that CPAs currently perform, such as tax preparation, financial planning, and management consulting, among others.

Diana Georgia, counsel to the Senate Higher Education Committee, opened the meeting stating that Senator LaValle and Assemblyman Edward C. Sullivan, one of the two main sponsors of the Assembly's companion legislation, recognize the need to reconcile the two reform bills and that the Senate convened the roundtable in an effort to gain a better understanding of differing views on scope of practice. She first asked participants their views on the current law's scope and how it relates to services CPAs perform today.

"I really feel it covers everything I do," NYSSCPA Secretary Jo Ann Golden said. "Not only does the law define the attest function, but it also covers professional behavior."

Other CPAs pointed out that the current scope defines services that are specific only to CPAs--i.e., those services relating to issuing financial statements relied upon by third parties. Representatives from the Coalition for Affordable Accounting, a group that advocates views of nonlicensed accountants, on the other hand, took issue with this view and said that the existing language, if interpreted literally, would prohibit them from issuing financial statements for their clients' use only.

When Georgia asked for clarification on the distinction between services performed by CPAs and those performed by nonlicensed accountants, the discussion turned to the role of Statements on Accounting and Review Services (SSARS) and who can perform services under SSARS. In response to her question on why only CPAs can issue statements in accordance with SSARS, regulators from the State Education Department and the National Association of State Boards of Accountancy said that adherence to such professional standards is what separates licensed and unlicensed professionals.

"SSARS is not just a onetime event," NASBA President David Costello said. "It is a body of knowledge. It is based on education, rigorous examination, and continuing experience--a totality."

Public Protection: S. 4133 vs. S. 4402

As the discussion turned to the specific legislation, differing opinions arose as to which bill's scope of practice best protects the public. Daniel Dustin, executive secretary of the New York State Board for Public Accountancy, argued that SED needs an expanded scope that categorically defines services that CPAs currently perform since, under the current law's definition, the state has no recourse to discipline CPAs and protect the public for any services other than the attest function.

Not all roundtable participants agreed that S. 4133 defines all CPA services and that it would protect the public.

"The list of services is like mulligan stew," NYSSCPA past President Francis Nusspickel said.

Nusspickel and NYSSCPA past President George Foundotos mentioned WebTrust and ElderCare, two assurance services recently developed by the AICPA, as examples of practice areas not clearly identified in SED's legislation. Another practitioner pointed out that many CPAs sell computer software to their clients, a service also not outlined in the expanded definition. Some participants commented that it is difficult to predict how the profession will evolve.

"S. 4133 lacks the perspective of what the future can hold," Charles Schoff, a member of the state board, said. "We don't know what we are going to be dealing with in the future and how we will deal with it."

Others said that the current law's definition and the similarly worded scope of practice in S. 4402 provide less public confusion about who the state regulates and for what services.

"The SED provides a laundry list of what CPAs can do," NYSSCPA past President Marilyn Pendergast said. "It should be a list of what only CPAs can do. Tax preparation, for instance, would wind up misleading. The public would think that anyone who does taxes is licensed before the state."

Pendergast and Golden were among participants who said that legislators and regulators must view the scope of practice in S. 4402 in the context of all the laws that regulate the professions in New York state, not just the sections dealing with public accountancy. They pointed out that other sections of the law define "unprofessional conduct" to include acting in a fraudulent or grossly negligent way. They also questioned SED's interpretation of the existing law and the department's belief that it currently does not have legal authority to discipline CPAs for misconduct relating to all professional services.

The CPAs at the meeting expressed surprise that SED brings disciplinary proceedings against only those CPAs convicted of a felony relating to the performance of professional services. Many participants displayed similar astonishment that SED has such a limited view of its enforcement powers under a law enacted more then 40 years ago. In response, Georgia said that she would seek a ruling from the state attorney general.

In response to criticisms of the services defined in S. 4133, Dustin said that SED developed the list after a long and deliberate process in which the department concluded that it could only address unprofessional conduct to the extent of CPA services specifically listed in the law's scope of practice.

David Silverman, president of the National Association of Enrolled Agents, part of the Coalition for Affordable Accounting, argued that the scope of practice in both S. 4133 and S. 4402 prohibits nonlicensed accountants from conducting compilation and review services that many individuals now perform. Georgia asked whether the coalition would accept legislation that includes "safe harbor language" to allow unlicensed individuals to issue financial statements that would not be considered the practice of public accounting--i.e., providing a safe harbor against the unauthorized practice of accounting. She acknowledged that groups that support S. 4402 were working with the coalition to reach a compromise.

The meeting ended with general agreement that CPAs in public practice should be subject to SED discipline for all the professional services they provide--attest and nonattest. The group did not reach a consensus on what revisions the law needs in order to clearly state that concept. Georgia said that as a result, she is not comfortable in immediately moving forward on either bill but found the discussion beneficial. She said that talks will continue and that she believes resolution is possible.

"We want to resolve this hopefully this session," Georgia said. "Sitting and talking to you like this as opposed to having a public hearing is much more worthwhile for me. I have a greater appreciation for your profession and a greater understanding of the evolution of it."

See the accompanying box for a list of participants in the roundtable discussion. Watch The Trusted Professional and http://www.nysscpa.org for updates on the accountancy reform legislation. *