Thank you for inviting me here today to explore the issue of non-CPA ownership of a CPA firm as seen by someone who has practiced for over 50 years, been active in the profession both at the State Society level,...where I served as President of the NYSSCPA and at the National level where I served the AICPA as a member of Council for 7 years, was a member of the AICPA/State Society Coordinating Committee and have been re-appointed to the Joint Trial Board for an additional 3 years. I have served on a sub-committee of the State Board that investigated MCE. I have managed a substantial CPA firm.

How did all this happen?

During the debate on form of practice at the AICPA council it was made very clear that ownership of a firm would be restricted to CPA's. This was stated in the literature that accompanied the required vote. Please note that this issue was sent to a membership vote.

I know of no single practitioner who needs non-CPA ownership.

How did the AICPA achieve making non-CPA ownership an issue?

Through deception, manipulation and a complete subjugation to the wishes of the large firms and a disregard of the small firms. THIS ISSUE WAS NEVER BROUGHT TO A VOTE OF THE MEMBERSHIP.

Let's take a look at the statistics. In 1994, when council approved non-CPA ownership:

-- 81.3% of non-CPA owners were in the Big 6 or Group B

-- 267 out of 6,805 SEC division members had non-CPA owner-less than 4%

-- less than 3% of firms with 10 or less had non-CPA ownership

-- there were 79,080 CPA's in the division for firms, 1,700 non-CPA members

-- 29,050 owners and 1,774 non-CPA owners. If you back out the Big 6, leaving Group B, you are left with 453 non-CPA owners, which is less than 6/10 of 1 %.

And they are still going on, until the very integrity of the leadership of the AICPA must be questioned. Having had council agree to a 66% CPA ownership rule, they then went to a simple majority stating that once you let go of 100% anything else was arbitrary. Except what happens when some CPA's don't vote. How can you call a firm Certified Public Accountants when 49% are not? Outrageous!

What are the main proposed rules for non-CPA ownership?

A majority 51% of the ownership in term of financial interests and voting rights must belong to CPA's.

The non-CPA owner would have to be actively engaged as a firm member providing services. But suppose that the non-CPA owner is an auditor. How do you control this? You can't take a license away from a non license person.

What happens if the firm is financially unable to pay out a departed non-CPA's capital?

Non-CPA owners could not assume ultimate responsibility for attest services. There must be a CPA who has this ultimate responsibility. How does this work? It doesn't. The non-CPA owner would still be responsible to the client he controls. Non-CPA owners would have to have a baccalaureate degree and obtain 150 hours of higher education by the year 2010.

Non-CPA owners could use the title of principal, owner, officer, member, shareholder, etc. But could not hold themselves out as a CPA. By implication this is not possible. Someone who has a financial or voting interest in a CPA firm is assumed to be a CPA. Non-CPA owners would have to abide by the AICPA code of ethics. CPA owners would be responsible for acts of co--owners.

Who gets disciplined?

You can't take the license away from someone who doesn't have it. You can't suspend or remove from membership someone who is not a member.

Do you perform these censors on someone because a partner performs an unauthorized act not known to Mr. Responsible?

The simple truth is that the state is being asked to turn over responsibilities to the AICPA. None of the rules are susceptible to supervision or control by any state. If a non-CPA attracts a client or becomes dominant in the relationship how do you stop his participation in the attest function? How do you insure that his desire to assist a client, not necessarily as an independent, will not be compromised? Non-CPA ownership will strain the perception of professional independence because of the pressures the non-CPA would place on the firm's basic services. The public would perceive the firm as not acting in the public interest but being profit motivated and not maintaining integrity, objectivity and independence. The CPA license will be less prestigious and desirable. CPA owners will become figureheads behind whom non-CPA owners conduct other business activities.

Permitting non-CPA owners grants them all the benefits of the profession without requiring the professional qualifications or obligations. If a non-CPA owner leaves the firm there may be no way to enforce the confidentiality rules. It is not in the public interest to have less qualified people in a position of serious influence over a professional product.

The greatest protection of the public and the capital markets is the audit, which must be performed by CPA's who are trained to perform this service independently, certainly without internal influence. The cry I hear the most is: Let them become CPA's. The inability to attract proper help is a fallacy. CPA firms have hired specialists for years without having to give up one iota of control. There is no need. Non-CPA's do not have to be partners.

How does the State control the non-CPA owner?

I don't know. There is no question in my mind that this state, any state, will lose control of this profession because you are now asked to deal with a non-licensed owner. You can't take away a license from someone who doesn't have one.

This State cannot abdicate its responsibilities to a trade association. The only policing that will be done will be by the AICPA. Basically, States are being told that they may only be concerned with 51 % of the ownership of CPA firms. Although I stated before that it is a fallacy to state that you can't attract people, it certainly will become more difficult to attract new CPA's. The general aura of public trust will evaporate and the perceived status of the CPA will disappear. Illinois has already seen a drop of 20% in first time takers of the CPA exam.

How does a State protect the public by helping the public to lose a valuable resource offering integrity and competence?

What we have here is an assault by non-professionals seeking to share in the pie without accepting the responsibilities and demands of a trusted profession.

How do you discipline a non-professional owner who has taken an active roll in the audit?

You can't.

How do you discipline a non-professional who intimates that he is a CPA?

You can't.

How do you discipline a non-licensee who has bent the ethics, objectivity and independence standards of the profession?

You can't.

Your recourse is to the CPA owner in the firm. This is a subjugation of the state's duties to, again, the trade association. I believe that the public has a right to believe that all partners in a law firm are lawyers, all members of a medical group are doctors and all owners of a CPA firm are CPAs.

The definition of a profession is:

• a body of specialized knowledge

• a formal education process

• standards governing admission

• a code of ethics

• a recognized status indicated by a license or a special designation

• public interest in the work that we perform

• recognition of a public social obligation

We are a profession and must remain as pure as we can be.

For over a century we have labored to become a learned profession. We have made the letters CPA synonymous with integrity, independence, skill and objectivity. There are a certain few who would give all this up because of pure greed. There is no need to emasculate the State authority, the very reason for being of the State board. That is wrong and should not be permitted to happen.