April 2001

How Would the UAA Impact New York’s Small and Mid-Sized Accounting Firms?

In an effort to assess the impact passage of the Uniform Accountancy Act (UAA) would have on small and mid-sized firms, The Trusted Professional recently questioned New York CPAs about specific aspects of the bill.

In general, the accountants said the UAA, which was reintroduced in the State Assembly on Feb. 8 and State Senate on Feb. 12, would allow their firms to compete in a changing and increasingly demanding marketplace. Robert Fagliarone of the Fagliarone Group P.C., a mid-sized firm with several offices in central New York, said the bill would enable accountants to offer clients more products and services.

“Right now we’re limited to the audit and attest functions—that’s what the certificate is for,” Fagliarone said. “Bigger is not necessarily better, but in accounting bigger is better because the public demands more and better services.”

In addition to facilitating expansion into financial services, some of the CPAs said the UAA could help the profession meet the demands of the public by raising the bar on accounting education. The bill proposes licensure requirements that would include 150 hours of education, up from 120 hours.

“Anything that helps bring up the level of competency of people coming into the profession is wonderful,” said David M. Einhorn of Richard A. Eisner & Co. LLP, a mid-sized firm located in New York City. Nevertheless, the education provision concerns CPAs who expect to have to increase starting salaries to attract recent graduates with 150 hours of education.

One aspect of the UAA that engendered some difference of opinion is the experience requirement for incoming professionals. Thomas E. Riley of the Fagliarone Group’s Syracuse office opposes the bill’s provision that would allow CPA candidates to substitute one year of a broad range of experiences verified by a CPA for the currently required two years of auditing experience.

“Public accounting is a unique experience, and the required experience should be met by doing public accounting work. Experience from other fields is not fair to the public,” he said.

However, Kevin J. McCoy, managing partner at Marvin & Company, a small firm in Latham, N.Y., believes the auditing experience requirement is unfair and favors larger, New York City-based CPAs.

Unlike the New York City region, the Albany-Schenectady area does not have many public companies or SEC registrants. The client base of Marvin & Co. is mostly government or service-related companies, according to McCoy, and only allowing auditing experience count towards the experience requirement drives many qualified CPAs out of the upstate regions.

On the matter of commissions and referral fees from nonattest clients, the respondents were in concert that the UAA would benefit CPA firms by allowing them to generate considerable new revenue.

“We’ll be able to accept money for services we gave away in the past,” Fagliarone said, “either because we weren’t trained to do it or we weren’t allowed to charge for it. Clients accept brokers and insurance salesmen getting commissions. They’ll accept it with us.”

Riley agreed, saying commissions could be a tremendous source of revenue that the public will eventually accept.

Depending on whether they represent firms with out-of-state offices, the respondents either reacted very favorably or were impartial to the UAA’s substantial equivalency provision, which allows for interstate practice of public accountancy. Bennie L. Hadnott of Watson Rice LLP, a mid-sized firm with offices up and down the East Coast, said the UAA would make recruiting incoming professionals easier since standards could be applied consistently in New York and in other states. And such consistency would ease the relocation process for New York firms that want to place accountants in out-of-state offices, he said.

Riley believes substantial equivalency will not have a big impact on his practice, stating that he does not try to recruit CPAs from around the country. But Fagliarone, who spends a good deal of time in Florida, thinks the bill could pay dividends, possibly making it easier for him to open a Florida office.

“Equivalency would be a specific asset to the profession. We could all stay auditors, but [auditing is] not the future of the profession,” Fagliarone said.

While he believes there will always be a market for auditors, Fagliarone acknowledged the moneymaking opportunities outside the auditing arena.

With respect to the bill’s proposal to allow for 49 percent ownership of CPA firms by non-CPAs, the respondents said the provision would not have an immediate impact on their firms. In the long run, however, they surmised the change in ownership could affect the way firms are structured.