April 2000

State Board Chair Speaks on Alternative Forms of Practice

Says Independence Standards Need Revision

Arthur S. Ainsberg, chair of the New York State Board for Public Accountancy, recently discussed the impact of alternative forms of public practice, warning that current independence standards do not adequately address the changing scheme of the profession.

Speaking February 23 at the Emanuel Saxe Lecture at Baruch College, Ainsberg took note of large corporations such as American Express and H&R Block, which are acquiring CPA firms at such a rate that they now rank among the 10 largest accounting firms in the United States. He also addressed the recently proposed transactions from Big Five firms regarding their consulting divisions.

"This effectively enables them to spin off their consulting practices into public vehicles or divisions of public corporations," Ainsberg said.

He views these developments as cause for enormous concern for the profession's regulators, whose major role is "maintaining the most important characteristic of the CPA--the independence statute." He said that independence is what differentiates the CPA profession from any other, and he expressed concern that the independence rules have not kept current with the recent structural changes.

"The train has left the station without adequate rules changes ensuring the integrity of the independence 'statute,'" he said.

Ainsberg also warned of the growing media attention to the profession, stressing the powerful influence that the financial press has on public opinion.

"We have the media ready to pounce when they recognize a situation having 'conflict of interest,' 'independence,' or 'financial fraud' in the headline," he said.

The Independence Standards Board has been charged with coming up with answers to a number of extremely complicated ethical questions, he said, and the profession and regulators should create appropriate independence standards for the 21st century.

"It is incumbent upon all of us to recognize that independence cannot be sacrificed." *