SED Scrutinizes Accounting Reform Bill

By Jay Dismukes

NEW YORK—The New York State Board for Public Accountancy met in late June to discuss accounting reform legislation unanimously passed by the New York State Senate earlier in the month. Board Executive Secretary Daniel J. Dustin reported on the State Education Department’s (SED) concerns with the bill, S302-D.

Though Dustin noted that the legislation has only passed in one house of the state legislature, there appear to be only a limited number of objections by the SED. Among these is the new continuing professional education (CPE) provision that would eliminate the option for 24 hours of concentrated study in auditing, accounting or taxation during each year of the triennial registration. Instead the bill would require all New York state CPAs (including those in industry) to complete a minimum of 120 hours of CPE in the three-year period, earning a minimum of 20 hours in any year. Currently state law requires a minimum of 40 hours per year of CPE in recognized areas of study or 24 hours of concentrated study.

When asked at the conclusion of the meeting to clarify the SED’s objection to the bill’s CPE provision, Dustin referred to a multi-year education department study conducted between 1986 and 1990 and funded by the New York state legislature.

“(The study) found that if you take concentrated learning, the participant does not retain substantial additional knowledge above 24 hours, which…if there is nothing that suggests otherwise, why would we want to remove that provision?” Dustin said.

Additionally, and as stated on the state’s Office of the Profession’s website at www.op.nysed.gov/acctsurv24hr.htm, those opposed to the elimination of the 24-hour per year concentration also “believe that ultimately the cost of 120 hours of mandatory continuing education will be passed on to the public through increased billings.”

The board also addressed S302-D’s provision regarding mandatory peer review. Under the bill, the roster of qualified peer reviewers would be established by statewide or national professional accounting organizations.

“We believe the SED should establish the roster of qualified reviewers,” Dustin said of the provision.

When asked about the section of the bill that states that peer reviewers on the roster would have to possess “qualifications as established by the department,” Dustin took issue with a roster that he said would be created by a “third party that would include everyone who is eligible to conduct a peer review when participants on that roster may not even be members of that statewide or national body.” He added, “So you are essentially requiring people to contact a third party in order to conduct peer reviews in New York.”

The meeting also revealed that the SED objects to the provision that would deem equivalent to New York’s peer review, those inspections and peer reviews conducted in accordance with the SED, the Public Company Accounting Oversight Board, or the General Accounting Office.

The SED also has concerns about S302-D’s failure to prohibit a commission or referral fee solely for the referral of a client to the products or services of a third party; to provide details and timing on the written disclosure provided to a client with respect to a commission; and to exempt the purchase of an accounting firm, or retirement payments to individuals presently or formerly in the practice of public accountancy or payments to their heirs or estates.

According to Dustin, the SED is concerned with the part of the bill that would limit the state Board of Regents’ rule-making powers by requiring that the Regents’ standards of practice for attest and compilation services “…not conflict with any applicable standard adopted pursuant to federal law, and in the development and establishment of such standard of practice, the board shall consider applicable federal and professional standards for attest and compilation services.” 

The SED further feels that the timelines for the disciplinary process are too stringent.

Dustin concluded his report by noting that the SED also is concerned about the ability to fund many of the provisions in the bill.

“Here we have a crisis in the accounting profession and a bill that seeks to modernize but fails to include resources to accomplish those goals,” Dustin said.