August 2001

Society Tackles Exposure Drafts, Makes Recommendations to AICPA and GAO

As hot button accounting issues like the model UAA bill, the proposed global credential and the recent MDP ruling continue to steal the spotlight, the New York State Society of CPAs believes that its membership should also be kept abreast of Society initiatives that take place behind the scenes. Through the efforts of its membership at every level—chapters, committees, conferences, publications and website—these initiatives attempt to reflect the views of the Society’s 30,000 members.

In April, The Trusted Professional published a synopsis of NYSSCPA endeavors to help “keep the lines of communication open” between its members and governmental, regulatory and standard setting bodies that affect the accounting practice. To ensure members stay informed of the work that is conducted on their behalf, The Trusted Professional will continue to publish the latest Society projects and activities. And as always, the Society welcomes and strongly encourages member feedback and tries to address all concerns and interests accordingly.

Recent NYSSCPA Initiatives

• In late June, the Auditing Standards and Procedure Committee, chaired by William Stocker, submitted comments on the exposure draft, “Generally Accepted Auditing Standards (to Supersede Statement on Auditing Standards No. 1, ‘Codification of Auditing Standards and Procedures, AU Section 150, Generally Accepted Auditing Standards,’)” to the Auditing Standards Board (ASB) of the American Institute of CPAs. The committee informed the ASB that it should address whether there is an order of importance among the three interpretive publications—Auditing Interpretations of the SASs, AICPA Audit and Accounting Guides, and AICPA Auditing Statements of Position—listed in the exposure draft. The committee also encouraged the board to reconsider its treatment of other auditing publications noted in the draft, disagreeing with the idea that certain AICPA publications cleared by the AICPA Audit and Attest Standards staff “have a greater presumption of appropriateness than non-AICPA publications.”
• In July, the Auditing Standards and Procedures Committee as well as the Professional Ethics Committee, chaired by Rona L. Cherno, submitted comments on the exposure draft, “Omnibus AICPA Proposal of Professional Ethics Division Interpretations and Rulings,” to the AICPA’s Professional Ethics Division (PED). The two committees suggested the PED weigh more carefully the differences in practice between AICPA independence rules and rules of governmental agencies like the Securities and Exchange Commission, General Accounting Office and Federal Deposit of Insurance Corporation.

The committees also called on the PED to address implementation strategies that could ensure all individuals working on an engagement are monitored for independence. These strategies would take into account specialists and support staff brought into the engagement on an ad hoc basis.

The committees indicated their support for the exposure draft’s rescinding of Ethics Interpretation 101-9 that established the principles of APB 18 as the guidance for the significant influence test for investments in affiliates of audit clients and reconstituting those principles as a defined term. They also asked the PED to address the materiality of an investor’s dollar amount of ownership interest in an attest client in relation to the investor’s ownership percentage of the entity.

• The Professional Ethics Committee also joined forces with the Not-for-Profit Committee in July, submitting comments on the exposure draft on revisions to Government Auditing Standards relating to auditor independence to the General Accounting Office. In their comments, the committees expressed their reservations over the increased number of rules surrounding auditor independence, where different organizations create rules addressing the same topic but with different language and approaches.

“Government Auditing Standards currently require auditors to follow the AICPA code of professional conduct…We do not believe that Government Auditing Standards should adopt additional rules covering conduct already addressed by the AICPA,” the committees stated. Specifically, the committees believe SEC and ISB rules do not apply to Yellow Book audits, which typically concern government entities and not-for-profit organizations.