November 1999

AICPA Member Ballot to Call for Peer Review for CPAs Performing Compilations

Vote Tied to Council Action Regarding CPA Employees at Non-CPA Firms

By James A. Woehlke, CPA

AICPA Council at its October meeting authorized a membership ballot on changes it approved to its bylaws to require peer review for individual CPAs who perform compilations. Council's action continues its move to amend Rule 505, Form of Organization and Name, to permit CPAs employed by non-CPA firms to issue SSARS compilations provided that CPAs sign their reports individually and not in their employer's name.

A motion at last spring's Council meeting in May amended the proposed change to Rule 505 to add mandated peer review for CPAs performing compilations. Since peer review requirements are set forth in AICPA bylaws, any change requires a membership vote. AICPA bylaw section 2.2 currently imposes the peer review requirement only on firms, not on the work of individual members. The requirement states that AICPA members engaged in the practice of public accounting must be associated with a firm (as a partner, shareholder, or employee) that is enrolled in an AICPA-approved practice monitoring program.

States Need to Act

Council's action and the proposed bylaw change, even if approved by AICPA members, do not, however, change the regulatory status quo. States and other licensing jurisdictions must make conforming changes in their accountancy statutes. The most recent revision to the Uniform Accountancy Act jointly proposed by the AICPA and the National Association of State Boards of Accountancy includes model language that would enable CPAs in non-CPA firms to issue compilations provided that the reports are subject to peer review. The recent UAA revisions also remove compilations from the definition of attest services.

The NYSSCPA has endorsed many of the UAA's provisions and has worked to have these changes incorporated into an accountancy act reform bill now before the New York State Legislature. The recent revisions on compilations and peer review, however, are not part of any bill currently before the Legislature. In addition, the Society opposed the removal of compilations from the definition of "attest" in its comments on the UAA revisions.

Florida Objects

At the October Council meeting, the Florida delegation had hoped to stop the authorization of the vote on the bylaw revision on the grounds that the AICPA has proposed too many related changes from too many directions. The delegation called for more debate and was especially concerned about the removal of compilations from the definition of attest services.

In a letter to then AICPA Chair Olivia Kirtley, Jeffrey Greene, president of the Florida Institute of CPAs, called for more deliberation on the issue and proposed an alternative approach--eliminating the peer review requirement for the compilation service altogether.

"We believe that such an alternative would make it absolutely clear to the public that compilations do not provide a level of assurance," Greene said in the letter, which the AICPA distributed to all Council members

In her response to Greene, a letter also distributed to all Council members, Kirtley said that recent events in the profession, including legal challenges by non-CPA firms and the Florida Legislature's passage of a law that created a fourth level of service, have forced the issue.

"[I]t became clear that CPAs working for non-CPA firm entities would have to be permitted to issue some type of financial statements. Some states have chosen to permit CPAs outside of CPA firms to issue compilations," Kirtley said.

Despite Florida's objections, Council proceeded with its actions and overwhelmingly voted to approve the proposed bylaw change. The AICPA will mail the ballot to members in late January. Watch http://www.nysscpa.org and future issues of The Trusted Professional for updates. *

James L. Craig, Jr., CPA, also contributed to this article.