April 2003

Keeping Priorities Straight

The New York State legislature has begun working on the 2003/2004 budget, and as usual we are concerned about what major cuts will be made before the final budget receives Governor George Pataki’s approval. Some people say that the state’s current fiscal woes are a passing problem, attributable to a recession that is hopefully ending, to an overreaction to Enron, and, at least partly, to our collective anxiety as the nation enters into war.

I recognize that during wartime, updating the New York State legislation that governs the practice of accountancy will not register on most people’s radar. We should also recognize, however, that life, and legislation, continue in wartime. For example, the newly formed Public Company Accounting Oversight Board (PCAOB) is aggressively pursuing its mission, as its acting chair, Charles Neimeier, attests to in his interview on page 18. In the same way, anyone connected with the practice of accountancy in New York should keep his mind on what the NYSSCPA is trying to accomplish and remember that serving the public trust remains our top priority.

The New York State statute that governs oversight of the accounting profession, first enacted in the 1890s, has not been amended since 1947. It now falls glaringly short in giving CPAs a comprehensive or even adequate framework within which to practice. We need to work with Governor Pataki and the legislature in moving forward, and strongly oppose any delays that might make this situation worse.

At the core of this discussion is the New York State Board for Accountancy, which falls under the aegis of the Office of the Professions of the New York State Education Department. During the last two years the NYSSCPA has determined that in order to fulfill its mission on behalf of the people of New York, the board needs better resources and staffing. Furthermore, the professional regulations should be changed to include mandatory peer review for any CPA doing attest work. Also, every CPA, not just CPAs in public practice, should be required to take CPE. Furthermore, the due process for disciplinary actions should be clear, concise, and user-friendly, so that the parties to an ethics complaint can move on once the complaint is resolved; under the current system they too often spend months or years in limbo.

Fostering a Dialogue

The federal Sarbanes-Oxley Act, which established the PCAOB, has drastically altered the regulatory terrain at both the national and state levels. The provisions of the Sarbanes-Oxley Act are designed to improve the checks and balances for audits of public companies. They should not, however, be extended to the private sector. The Sarbanes-Oxley Act’s provisions do not make sense for private companies, because there are no shareholders to protect. Forcing the provisions of the Sarbanes-Oxley Act onto private companies might actually inhibit small businesses from being audited if the audits were not more beneficial and useful, but rather more onerous.

Some are responding to the federal accounting legislation with the argument that nothing should change at the state legislative level, in order to avoid affecting small CPA firms that audit small companies. Knowing that “all or nothing” positions are usually counterproductive—as well as keeping in mind the potentially disastrous consequences of getting what one wishes for—I say we should be very specific in expressing support and opposition.

The profession does not need to be an adversary of those in favor of legislative solutions. We could resist change to the point of obstinacy, adamantly asserting that no one outside the profession should be allowed to regulate it, refusing to admit that self-regulation doesn’t work, or claiming that all is well with the status quo when quite clearly all is not well. To “just say no,” however, is irresponsible. Moreover, it isn’t enough; we should say: “These particular points are a problem from our perspective, and you may not realize all of the potential consequences. Can we discuss alternatives?”

That type of discussion can develop into a dialogue that will show, among other things, that we are not thinking only of ourselves, we are thinking of the consequences for businesses throughout New York. From that point, we and the legislature can move forward in creating regulation that serves both the professional community and the public interest.

Louis Grumet
Publisher, The CPA Journal
Executive Director, NYSSCPA

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