Accountancy Board Hears Regents Rule Proposal
State Board Makes Many Recommendations on Reportable Events
By Simon Eskow

ALBANY—The New York State Board for Public Accountancy recommended changes to a proposed Regents rule that would apply Sarbanes-Oxley–style restrictions on auditors of public companies, and that establishes a list of reportable events, among other strictures.

The board made its recommendations at a special meeting on May 28, a month after the New York State Education Department (SED) published the proposal to the consternation of some board members.

Those members were concerned that the SED issued its proposal before formally consulting with the board. But, with the special meeting called for the purpose of scrutinizing the proposal, the board was able to make a number of recommendations.

“The SED reviewed the proposal item by item,” member Ilene Persoff said. “They did the right thing by getting advice from the board. They knew there were a lot of issues.”

The biggest changes the board recommended were to the expansive list of reportable events posed in the New York State Board of Regents rule. But the board made no recommendations to the application of Sarbanes-Oxley restrictions, or a provision covering reporting of qualified peer reviews.

The board also recommended that prohibitions against receiving commissions or referral fees apply not only to a licensee but also to the licensee’s firm.

Expanding and Contracting Reportable Events

The board recommended that the SED delete, extend or alter its reportable events provisions, significantly regarding arbitration and civil suit settlements and awards. The SED proposal would require any settlement or award to be reported. One member said this would negatively impact a practitioner’s reputation, especially in cases where a CPA’s insurance carrier recommends an out-of-court settlement. The board recommended reporting only in cases where a CPA had to pay a settlement or award of $30,000 or more.

The board wanted to delete some aspects of the proposal, such as a “whistle-blower” provision that would require CPAs to report occurrences of reportable acts involving other CPAs. Also, Wells submissions presented by the Securities and Exchange Commission would not be reportable under the board’s recommendations.

The board, on the other hand, would extend some of the SED’s provisions. It recommended expanding reporting of restatements from certain specified classes of clients to all clients. To the SED’s requirement of reporting investigations by government bodies, the board recommended adding investigations by a “professional membership organization.”

Finally, the board recommended adding the category “other discipline” to the provision involving a suspension, revocation or cancellation of a license to practice as a reportable event.

Action-Reaction

Indications made during the meeting suggested the SED was inclined to delete the “whistle-blower” provision, although it was unclear what stance the department took on the other recommendations the board made.

“I felt the board was given the opportunity to voice their position on the various issues,” said Kevin McCoy, chair of the New York State Society of CPAs’ Legislative Task Force, who attended the meeting.

McCoy said the board also gave consideration to a letter drafted by the NYSS-CPA to the chancellor of the Regents about the Society’s concerns, copies of which had been distributed to the board.

If there are any substantial revisions to the original proposal, another notice of rulemaking will be published for a 30-day public comment period, along with the text of the revision, before final adoption of the new rule by the Regents.

The SED expects to present the rule to the Board of Regents at its September meeting, for possible adoption in November.

While the accountancy board avoided recommendations on the application of Sarbanes-Oxley, some members cautioned against New York paraphrasing the act, and against prejudging what the SEC or the Public Company Accounting Oversight Board will do in their rules.

Representatives of the SED said it wanted that provision (the application of Sarbanes-Oxley restrictions) in order to act independently against a licensee under the misconduct rule, as opposed to waiting for a sanction to be imposed by a federal agency of violations of the Sarbanes-Oxley Act.