December 1999


At its fall meeting, AICPA Council authorized a membership vote to change the AICPA's bylaws to require that CPAs working for non-CPA firms that issue compilation reports participate in a peer review program. At its spring meeting, Council had voted to change the form of practice rules to permit CPAs working in non-CPA firms to issue compilation reports in their own names, provided that such reports were subject to peer review.

The AICPA member vote will have no immediate effect on who can issue compilation reports, because that authority depends upon state licensing laws. In the meantime, however, the AICPA and NASBA will revise the third edition of the Uniform Accountancy Act to conform with the AICPA rules. The expectation is that over time state licensing boards will revise their statutes and rules to conform with the UAA.

In the minds of many, the change to permit CPAs working for non-CPA firms to issue compilation reports was initiated in order to provide a basis for Florida to repeal its legislation that created a fourth level of service, called an assembly. Florida law, in response to legal battles with American Express Tax & Business Services, permits all CPAs--including those working in non-CPA firms--to issue assembly reports. The problem is that "assembly" does not exist under AICPA professional standards; AICPA members issuing assembly reports in Florida violate the AICPA's Code of Conduct. It was expected that by changing the AICPA's rules, Florida could abandon the assembly approach.

In an op-ed piece in the October Practical Accountant, Lloyd "Buddy" Turman, executive director of the Florida Institute of CPAs, questioned the AICPA's decision to allow CPAs in non-CPA firms to issue compilations. Following the latest Council action, Turman told The CPA Journal that, at the moment, the Florida Institute does not have any plans to seek repeal of the assembly statutes. He stated that, after the coming tax season, consideration would be given to what is best for Florida.

"Florida wants its local licensing laws to conform to the AICPA Code of Conduct," Turman said.

Tax Executive Committee Given Authority to Set Professional Standards

AICPA Council also voted to give the Tax Executive Committee (TEC), a senior AICPA technical committee, the authority to issue technical standards, just as the Accounting Standards Executive Committee has. To date, the Institute's Tax Division has issued eight Statements of Responsibility in Tax Practice (SRTPs), which are considered nonauthoritative and educational. Nevertheless, plaintiffs have on occasion introduced the SRTPs in malpractice litigation, and it is generally felt that by making them authoritative, CPAs will be more likely to use them in a way that will reduce their liability exposure. It is expected that TEC will seek to make the existing SRTPs enforceable standards--which will require that they be subject to an exposure period and the usual due process.

Financial Accounting Standards Advisory Board

AICPA Council also voted to revise Rule 203 of the Code of Conduct to make accounting standards established by the Federal Accounting Standards Advisory Board (FASAB) part of generally accepted accounting principles. The financial statements of the Federal government are prepared in accordance with those standards. Because the process followed by FASAB does not meet the definition of due process in AICPA professional standards, without the change to Rule 203 an AICPA member could not give an opinion that the Federal government's financial statements were prepared in accordance with generally accepted accounting principles. FASB and GASB were not in favor of making this change. *

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