The real MDP question: Who’s the boss?

The CPA Journal has covered multidisciplinary practice (MDP) before, but it is a good choice for this month’s cover story because it remains the most controversial issue in the profession.

Professions evolve curiously, generally creating their own standards before government steps in to formalize and validate the regulations. The accounting profession began to be formalized in the United States in the late 19th century, at which time there was no IRS or SEC, let alone computers. But everyone knew which profession did what. CPAs certified financial information, attorneys were advocates for clients in the courts, and doctors practiced medicine. Their common denominator has always been serving the public interest.

No one imagined we would reach the point where the professions are sliding into each other—or that serving the public interest would include providing one-stop shopping within a single professional firm, a concept that is inherently neither good nor bad. Within the accounting profession, many CPAs have branched out into more nonaccounting services. As this trend has developed, the accounting profession has generally continued to set its own standards, and protecting the public interest has remained a cornerstone.

But the flip side of regulation aimed at maintaining high standards in the public interest is the tendency to raise the barrier of entry to the profession, even to the point of being exclusionary or limiting the number of practitioners. This tendency has created walls, such as “CPA firms must be 100% owned by CPAs.” Although the category of “principals” solves that problem to a degree, some principals now want more of the benefits that historically have been limited to partners. The legal profession, though its regulations prohibit fee-splitting, eventually found a way to solve this problem without discarding the underlying principle.

I hope that the MDP discussion will evolve similarly, with attorneys and accountants realizing that they and their clients have much to gain and little to lose by finding a way to make MDP a reality in the United States. The current draft of the Uniform Accountancy Act (UAA) would allow majority ownership of a firm by CPAs and minority ownership by non-CPAs, as long as the non-CPAs are actively involved in the business. Although the ABA has opposed ownership of law firms by nonattorneys, the New York State Bar Association has opened the door to MDPs that are wholly owned by attorneys. That’s encouraging progress.

Other issues remain to be resolved. For example, confidentiality rules and auditor independence, traits that define the two professions. But many services—such as taxes and estate planning—fall into a gray area where the idea that only an individual with a particular credential can perform a certain function is less clear.

Don’t misunderstand me: I am not proposing that CPAs could or should be able to write contracts, or attorneys conduct audits. Where the discussion revolves so vehemently around firm ownership, maybe the answer to the question “Who’s the boss?” should depend less on the person or firm providing the service than on the services themselves, and the important question is not who owns whom, but who does what.

The CPA Journal is broadly recognized as an outstanding, technical-refereed publication aimed at public practitioners, management, educators, and other accounting professionals. It is edited by CPAs for CPAs. Our goal is to provide CPAs and other accounting professionals with the information and news to enable them to be successful accountants, managers, and executives in today's practice environments.