The National Conference of CPA Practitioners (NCCPAP) has been in existence for twenty years. Since our organization in 1979 we have been both adversarial as well as pro-active in the accounting profession but, at no time did we ever lose the tenets that we live by: objectivity, integrity and independence. We remain steadfast to our basic principles and policies:

1. To be sensitive and responsive to NCCPA_P's importance to the profession, and to the special needs of individual CPA practice units and local and regional CPA firms.

2. To encourage a commitment to quality, integrity, and public responsibility within the public accounting profession.

3. To enhance the status of the Certified Public Accountant, and make commitments to further excellence as a profession as we move toward the twenty first century.

Our membership is made up of firms nationwide with a large concentration in New York State where we have four chapters. They are located in Nassau County on Long Island, Suffolk County on Eastern Long Island, New York City and in the Westchester/Rockland area.

NCCPAP has been in disagreement with the AICPA and the New York State Society since certain elements of the Uniform Accountancy Act (UAA) were proposed. We were appalled at the clandestine meetings of the AICPA and the National Association of the State Boards of Accountancy (NASBA) who together formulated the current proposed law. Our organization has always opposed the concept of Non-CPA ownership and we circulated a petition to force a vote of the membership at the AICPA on this issue. Our position is that all areas of accounting, consulting and financial matters should be performed by a CPA, in a firm which is owned only by practicing CPAs. The CPAs are licensed by their state, having passed a rigorous examination and having acquired valuable experience while working for at least two years for a CPA firm. The local and regional practicing CPA firms work with the public each day gaining their trust and at the same time, solving their problems. We understand the needs and react to them. The knowing public has always had the utmost respect for a CPA because the public correctly feels they will receive fair, honest, objective answers to tough questions regarding all phases of their individual and business lives.

Survey after survey, the CPA profession is rated third in overall respect by the public in the United States. Only the clergy and educators have a higher rating. Our predecessors have worked diligently for the past 100 years to attain this distinction. The public looks upon us as the ultimate decision-makers for them in their financial lives.

This respect will be eroded immeasurably (if not completely) if the section of the UAA on non-CPA ownership is enacted by New York State.

Non-CPA Ownership of Practicing CPA Firms (Majori1y Ownership)

A client who deals with a practicing CPA firm (which includes individual proprietors) expects the utmost service as well as independence, objectivity and integrity and no conflict of interest. A practicing CPA firm not only performs regulatory and traditional work but also does different types of consulting.

Let us not lose sight of the fact that CPAs have been doing consulting, business valuations, litigation support and other non-attest functions for their clients for many years. No one seemed to mind that these firms were 100% owned by CPAs and that their clients were pleased with the final product. Third parties relying upon the information gathered were satisfied that a CPA performed this work and were content knowing that integrity, objectivity, and independence were always present. Why change this? Why allow a non-CPA minority owner to possibly sway the thinking in a firm. Will a firm that is 51 % owned by CPAs whose billings are less than their 49% non-CPA owners truly control the thinking and the performance of the firm or will the minority ownership prevail? Will a non-CPA partner always be satisfied with 49% ownership or will they want to become equal or greater. Who eventually will win the battle and control the actual management in this practicing CPA firm?

It seems clear to me that this is not a good situation.

If the need arose, local firms have always outsourced their computer or pension consulting work to non-CPA firms to help the CPA in satisfying a client. In past years, as well as today, there are no problems with this system. Most outside consulting firms want to remain 100% owned by themselves and do not want to merge.

Another statement that is heard frequently is "we have to be competitive". CPAs have always been competitive with non-CPA firms performing financial planning, business valuations, litigation support, computer consulting and much more. Yet, we remain 100% owned by CPAs.

We also hear "that in order to keep the great non-CPAs in your firm you must give them equity". NCCPAP is of the belief that the 150 hour rule coming to New York State will accomplish the above by teaching the subjects necessary for the students to gain the education for the talents needed to become "modem CPAs". Therefore, the marketplace will have enough talented CPAs to perform every function the public needs in the environment of a 100% owned firm by CPAs.

Let us also keep in mind that the AICPA and the NYS Society are made up of individual members and are not firms as NCCPAP is. Consequently, the members of these organizations are from CPAs in education, industry, government, large firms and smaller ones and those already retired. No other group is affected with the ownership problem except the public accounting members who deal with the public every day. Therefore, when the other members vote, the thinking may be skewed.

NCCPAP is comprised solely of "local" and regional firms. One firm, one vote. We have a common interest to give the public the best representation we can. The larger firms want this law passed because they will finally legalize what they have been doing for years. No other profession has given away its ownership. Why should CPAs? Obviously, the other professions refuse to undermine what they have established over many years of trust by the public and believe that they can survive while being 100% owned.

EXPERIENCE REQUIREMENT

To become a CPA today, a candidate must work for a practicing CPA firm for two years and spend at least 75% of his or her time in performing audit and reviews. With the advent of the 150 hour rule commencing approximately in the year 2005, all potential CPAs will be required to work for one year for a practicing CPA firm with the same restriction for auditing and reviews. Under the new proposed "Society" Bills, the law would immediately be changed to a one year internship but not necessarily with a practicing CPA firm. The law would allow a CPA candidate to gain experience in a non-practicing CPA firm, but under the tutelage of a qualified CPA. This would deprive a candidate of very important involvement in traditional accounting work such as auditing and reviews (attest function).

There are many problems in this proposed law. The public whom we represent will never understand the differences between a practicing CPA who has been schooled, trained and licensed by the State of New York to perform the attest function and a CPA who has not been schooled, trained and licensed by the State of New York to perform the attest function. How are they to know which CPA they are dealing with? Will the CPA wear a sign stating "I am not qualified."

After speaking to bankers with whom we have an on-going relationship and in explaining this proposed section of the UAA, they are expressing concern about the financial statements they will be receiving if the UAA is enacted. Will the CPA presenting the financial statements be licensed and qualified to perform this function.

COMMISSIONS

Our organization has not taken a position on the acceptance of commissions by the practicing CPAs as proposed in the UAA. There are reasons for this indecision. Many of our members come from states who have already passed the commission rule allowing commissions to be paid to practicing CPAs in certain circumstances. Some of our members also believe that since CPAs do most of the work to produce the commissionable product they should be able to receive a value fee worth more than an hourly rate. They also believe there are situations in which they can remove themselves from the conflicts of interests that will arise when a commissionable transaction comes forth. On the other hand other members feel that we have taken an oath of protection to the public and that it would be difficult and very subjective to decide if a transaction is independent of the attest function or not.

Commissions have become a very important issue since American Express and others began buying accounting firms and splitting their firms into attest and non-attest work. Once again, many of NCCPAP's members believe "that the clients' feelings will change once they know the CPA is receiving a commission". Yet, clients dealing with their CPA for years will believe "They have no problem with a commission since they trust their CPA".

Will it be important enough for a client to ask the questions: Do I really need this insurance? Is this a good investment? Is the building worth buying? Is this being recommended to me for my good or does it enhance the net worth of my CPA? Almost daily, we receive telephone calls and mail from brokers or insurance agents hoping to make commission deals with us because of our reputation and our client base. The final question that NCCPAP has asked itself is, "Will accepting commissions erode the confidence that the public has in us today as practicing CPAs and look at us as purveyors of products?"

SCOPE OF PRACTICE

Our organization believes that the proposed UAA rule under Assembly Bill A8600 and the Senate Bill of 4402 should not be the position that should be passed by the New York State legislature. In order to be a CPA in New York State one should be responsible for more than the attest function in maintaining his or her license. CPAs must be totally responsible for whatever service they perform and the definition that the State Education Department has put forth in their pending bill is acceptable to our organization. There has to be a higher authority to hold a CPA responsible in its dealings with the public.

CONCLUSION

Where will the CPA profession be in 15 years? Will our license be as important in the years to come or are we witnessing the demise of our great profession? Will a CPA have the same standing in the community 15 years from now as he or she has today? Will a CPA 15 years from now be as knowledgeable in all areas of finance as he or she is today and at the same time be objective and independent?

Why would anyone want to go to college to become a CPA? We have lost many potential CPAs to other industries today and a downside effect with the 150 hour rule will surely be that we will lose many more who will not want to take accounting in college because of the additional cost of education and the lack of assurance of higher compensation upon graduation. Fifteen years hence, you will not need to be a CPA to perform the non-attest functions. American Express and other consolidators have already and will continue to abuse our initials because they know the esteem we have in the community. Once the honeymoon period is over, the CPA Certificate will no longer be necessary. What will happen to the public and the profession they were once able to go to satisfy all their financial needs and expect our objectivity, integrity and independence? Who takes on this role? Is the public in jeopardy of losing their last bastion of hope, their last line of defense?

Our organization, NCCPAP, is deeply concerned with these issues. Again, we are an organization representing the practicing CPA firms who serve the public every day and we worry about the confusion which will abound if the sections on majority owned CPA firms and the lack of the proper experience requirement are passed as proposed in the "Society" Bills. We are also concerned with the pros and cons of commission and we want to tighten the rules as to the scope of how we practice. Therefore, we support the provision of the State Education Department bill on scope of practice and ask you to reject the items in the "Society Bills" mentioned above. As our State legislators in our great State of New York, the role of being the last bastion in protecting the public interest has now fallen unto you. We implore you to consider all the facts very carefully in making your decision as New York State has always been a leader and not a follower.

I would like to thank you for allowing me to speak today as NCCPAP's representative. If we can be of any additional assistance to you, please call upon us.

Herbert Schoenfeld, CPA Issues Committee Chair and Past President