November 2000

Commentary

The New York State Board of Regents Conference on the Professions, the first of its kind since 1977, focused on the interference with professional practices, including accounting practices, caused by corporate ownership.

The conference, held on October 2 in New York City, was sponsored by the Office of the Professions of the State Education Department. It brought together about 200 individuals—including practitioners of the 38 licensed professions, state board members, and legislators—to address issues that impact many professions.

Based on the tenor of the comments at the conference, some attendees may have come away from the event with a diminished respect for the CPA profession.

In discussing the impact of corporate ownership on various professions, accounting was criticized for the practice of having audits performed by shell firms, which have a name but no employees or assets, and all of whose personnel are employees of the parent corporate entity.

SEC Chief Accountant Lynn Turner criticized the inadequacy of the CPA profession’s self-governance and self-discipline, especially the well publicized recent violations of the “don’t invest in your client” rule and, more importantly, the profession’s opposition to investigation of these incidents.

Turner also saw the increasing frequency of financial restatements as diminishing public confidence in the CPA’s work, to the point where some might view the CPA as meaning “certified public accomplice.” Finally, the role of audit partners in cross-selling other corporate services was viewed as impairing independence and further damaging the CPA’s professionalism.

Assemblyman Edward Sullivan, in his comments on maintaining and increasing the integrity of New York state licensure, chided the profession whose representatives came to him saying, “Our national association has worked out all the issues, and here’s a new regulation law we have written for you to pass.” He opined that New York should lead in licensing standards, rather than move downward to the national mean.