April 2001

Hard at Work: A Synopsis of Recent Society Endeavors

By Jay Dismukes

As an institution that functions solely for the betterment of its members and the profession, the New York State Society of CPAs places a premium on keeping the lines of communication open between its members and important governmental, regulatory, and standard setting bodies.

Through the efforts of its members at every level—chapters, committees, conferences, publications, and website—the NYSSCPA makes every attempt to provide a forum for the views of its 30,000 members on the latest Society developments as well as federal and state accountancy news, rules, and regulations. Additionally, the Society strongly encourages member feedback and tries to address all concerns and interests accordingly.

Recent NYSSCPA Initiatives

In March, the Professional Ethics Committee, chaired by Allen Fetterman, and the Auditing Standards and Procedures Committee, chaired by William Stocker, submitted comments on the exposure draft, “Statement of Independence Concepts: A Conceptual Framework for Auditor Independence,” to Arthur Siegel, executive director of the Independent Standards Board (ISB).

The Auditing Standards and Procedures Committee informed the ISB that it has three primary concerns regarding the conceptual framework: lack of distinction between concepts that apply to Securities and Exchange Commission registrants and nonregistrants, impractical reliance on independence “safeguards,” and insufficient guidance on the appearance of independence.

Small items notwithstanding, the Professional Ethics Committee indicated its overall approval of the concepts, definitions, and models in the exposure draft.

Also in March, the Society’s Financial Accounting Standards Committee, chaired by Robert Sohr, commented on the exposure draft, “Business Combinations and Intangible Assets: Accounting for Goodwill,” as developed by the Financial Accounting Standards Board (FASB).

“The committee believes that purchased goodwill is a wasting asset and, accordingly, should continue to be amortized over its useful life,” Robert Dyson and Steven Rubin, principal drafters of the comments, wrote to Timothy S. Lucas, FASB director of research and technical activities. In contrast, “FASB appears to view goodwill as a wasting asset whose value is replenished by internally generated goodwill.”

The committee said that the proposed treatment for purchased goodwill represents a significant departure from the historical cost model. In addition, the exposure draft fails to provide sufficient guidance in applying the reporting unit concept and requires costly business valuations for implementation of benchmark assessment and impairment tests.

While supporting the bulk of the most recent version of Statement on Auditing Standards No. 55, “Consideration of Internal Control in a Financial Statement Audit,” the Society has made certain recommendations to the American Institute of CPAs Auditing Standards Board in comments drafted by Bruce Nearon and Paul Warner. Several of the recommendations concern the wording of a number of paragraphs pertaining to the relationship between information technology (IT) accounting systems and auditors.

For example, the Auditing Standards and Procedures Committee believes SAS 55 should explicitly outline the risks involved in substantive testing when there is little knowledge of operating effectiveness. In the paragraph dealing with this issue, the committee amended the wording to read: “The auditor should also be aware that for some entities the use of IT may be so integral to the financial reporting system that if the auditor fails to obtain an understanding of the operating effectiveness of internal control he or she may fail to recognize that audit evidence collected through substantive tests may not be sufficient to support the audit opinion.”

NYSSCPA president P. Gerard Sokolski recently created two task forces to address important tax issues:

2001 Tax Policy Task Force, chaired by John Kearney and David A. Lifson, will consider various federal tax policy proposals and their effects on the economy.

The Education Aid System Task Force, chaired by Stephen Langowski, has been charged with identifying important factors related to education funding: distribution of education funding burdens, allocation of education funds, administration of allocated funds, and public awareness and engagement in education funding.