The CPA Journal

Lots of interesting material has come across my desk in the past month. Here is a sampling of that material and how I see it progressing into print in the Journal.

Independence

The SEC hearing room was standing room only for the final vote on the auditor independence rules. The mantra for Chairman Arthur Levitt, reiterated by both Chief Accountant Lynn Turner and Chief Counsel David Becker, was “public encouragement for a private sector solution,” referring to corporate audit committees’ prominent position under the practical implementation of the new rules. Audit committees will bear the load of determining whether the provision of nonaudit services by the auditor unacceptably affects the appearance of independence in the mind of a reasonable investor.

Certainly, the SEC rules, along with the November 27 concept statement issued by the Independence Standards Board (ISB), will sweep through the CPA profession in the next few years and lead to significant changes in the fundamental concept of independence. The ISB conceptual framework, the result of considerable thought and effort, deserves careful consideration. It is a candid, thoughtful, and crisp statement, grounded in the realities of practice and business, which articulates fundamental concepts such as the independence continuum, risks to independence, and countervailing safeguards.

Developments in independence issues will continue during the coming months. Dan Goldwasser will analyze the SEC independence rules and their effect on the ISB and other regulatory bodies. William T. Allen and Arthur Siegel from the ISB will join me in a roundtable discussion on their activities with the SEC.

UAA

This year, the New York State Assembly and Senate will again consider the Uniform Accountancy Act bill that would change entry requirements for CPAs, promote substantial equivalency, extend CPA firm ownership opportunities to non-CPAs, and promote a broader scope of CPA firm service. The model act was developed jointly by the National Association of State Boards of Accountancy (NASBA) and the AICPA. NASBA President David Costello will join us to discuss the UAA, its importance, and the opposition that it has faced.

Plain Paper Financial Statements

The November 2000 Journal carried an article by Andrew Cohen about the SSARS 8 revision to SSARS 1, which identifies the circumstances when “management-use-only” financial statements can be submitted. SSARS 8 requires an engagement letter sent to management and the fulfillment of specified responsibilities by the CPA. An online survey at www.nysscpa.org for practitioners will be analyzed for a Journal article on SSARS 8 implementation issues. If you perform compilations, please take a few minutes to complete the questionnaire.

New AICPA International Designation

Sometimes referred to as Cognitor, this AICPA initiative to create a new, unregulated international credential for CPAs and other professionals will take off during the spring. The AICPA has already committed significant resources to the concept’s early development, and their pursuit of such a certification venture will affect the future of accounting immensely. Please try to find out all you can about the XYZ—it may become the subject of a full AICPA membership vote. There is an XYZ or Cognitor information center at www.nysscpa.org, and you can find information at www.aicpa.org.

Accounting Issues

Will there finally be closure on FASB’s business combinations project? Will Congress intervene if certain powerful constituents dislike the direction FASB is headed? Will the dot-com merger and acquisition frenzy be over and the strident urgency of the issue fade? We have been debating the purchase vs. pooling methods for long enough to resolve this one.

The U.S. Senate held hearings in October 2000 on a myriad of issues dealing with the development, measurement, and reporting of investments in various intangible assets. The gist of those hearings is that we do a poor job managing, recognizing, and measuring intangibles with fuzzy property rights that do not trade in well-organized markets, leading to significant misallocation of capital. On the other hand, we do a good job with those intangibles like patents and copyrights that have defined property rights and well-organized markets. Testimony at the hearings urged Congress to set up a center for the study of the management and reporting of intangibles.

Taxes

The IRS has published audit guides as part of the Market Segment Specialization Program (MSSP) to improve the quality of voluntary compliance with the tax codes. The Journal will be following the MSSP and will publish an analysis of the audit guides for the alternative minimum tax, garden supplies, and gas retailers.

What’s in a Name?

Thanks to all those who sent in suggestions for the name of this column. The selection committee informed me that there were at least a dozen submissions—including one that suggested it should have no name—and returned no selection. Please, keep sending your submissions for a few more months. We would like a larger group from which to choose! Exercise your creative side before the busy season sets in and send me your thoughts at rhcolson@nysscpa.org.

ON THE HORIZON