By Jay Dismukes

NEW YORK—The New York State Department of Education currently is drafting a new accounting reform bill that is expected to be submitted during the next legislative session, state officials announced last month.

In addition to the bill, the department is “moving forward with rule changes that are consistent with Sarbanes-Oxley,” stated Daniel J. Dustin, executive secretary of the New York State Board for Public Accountancy, on Nov. 13 during a state board meeting in Manhattan. The state board serves as an advisory body to the state education department and the New York State Board of Regents.

Dustin said the bill would focus on the registration of all individual CPAs and CPA firms; firm inspections by the state education department and enhanced peer review; and the establishment of a public accounting task force. Further, it would modify the 24-hour-per-year CPE concentration requirement, currently limited to accounting, taxation and auditing, to include any area of recognized study; require CPE for all CPAs (currently, CPAs who are not in public practice are exempt); change the CPE year to a calendar basis; and increase fines and penalties for professional misconduct by individual licensees and firms.

According to Dustin, the bill also would take a “broader brush” approach and expand the grounds for revocation of a firm’s registration, as well as expand the regulated scope of practice, which currently is confined to audit and attest service.

As the state education department drafts the bill, it also will propose changes to the Rules of the Board of Regents regarding auditors of publicly traded companies. Dustin said those changes likely will include: a prohibition on certain nonaudit services to a publicly traded audit client; required rotation of the audit partner and reviewing partner of a publicly traded audit client every five consecutive years; and a “cooling-off” period that would prohibit a firm from auditing a publicly traded audit client whose chief executive, CFO, controller or equivalent was on the firm’s audit team in the past year.

The rule changes are very similar to certain provisions in the Sarbanes-Oxley Act of 2002 that affect CPAs and CPA firms auditing publicly traded companies. Sarbanes-Oxley does not cover privately held companies.

Members of the board discussed the possibility of bifurcation of rules governing professional ethics to cover CPAs auditing publicly traded companies and those working with private entities. Board Chair Charles J. Schoff asked whether the profession is headed toward a “dual practice” with “special license(s)” for CPAs who handle SEC clients and for those who handle nonpublic companies.

Other members observed that the issue should take into account such considerations as the fact that there are private institutions and companies with public interests just as there are companies that are not publicly traded.

Members of the board also expressed concern over the final impact of the Sarbanes-Oxley Act. State board member Samuel P. Gunther remarked that there could be “real problems” if the Public Company Accounting Oversight Board created under the law establishes new standards that encroach on the American Institute of CPAs’ auditing standards. The effect could be numerous interpretations of the standards by states across the country, Gunther said.

The next New York State Board for Public Accountancy meeting will take place on Jan. 29 in New York City.