For Accounting Reform, Think Globally, Act Locally

The grassroots motto, “Think globally, act locally,” has become relevant to the accounting profession. The newly established Public Company Accounting Oversight Board (PCAOB) is unlike most other auditing standards-setting bodies because it is expected to solicit proposals from state and local governments and accounting organizations below the national level. With this open environment for comment and input, discussions in New York are more likely to be heard at the federal level.

The New York State Legislature is currently discussing ideas that may revolutionize how CPAs do business. Many of these changes are connected to concerns about preventing the pervasive and massive financial frauds that led to the federal Sarbanes-Oxley Act, which established the PCAOB.

Various proposals circulating in Albany involve the operations of the New York State Board for Public Accountancy; scope of practice; peer review; CPE requirements; and the application of certain Sarbanes-Oxley provisions, including mandatory auditor rotation, to the private sector.

It’s significant that the last major legislative or regulatory changes in the practice of public accountancy in New York State occurred more than 50 years ago. We need legislative action to modernize public accountancy. The NYSSCPA has identified as a priority the restructuring of the board from an advisory body to one with greater authority and independence and the resources to pursue meaningful disciplinary actions against CPAs who violate professional and ethical standards of practice.

Specifically, the NYSSCPA proposes changing the board’s structure and composition to make it more independent of the State Education Department (SED) and establishing a dedicated fund of CPA and firm registration fees that would enable the board to carry out its new responsibilities. We also want the board to have authority to initiate and conduct its own investigations and disciplinary proceedings and to hire its own staff.

The NYSSCPA has also proposed limiting the State Board of Regents’ authority so that it cannot adopt regulations on standards of practice or independence that are inconsistent with regulations from the SEC, PCAOB, or GAO, for CPAs who practice within the jurisdiction of those entities.

Furthermore, because an increasingly large proportion of CPAs are employed in private industry (a significant development over the last half-century), the NYSSCPA proposes the legislature extend its regulatory jurisdiction to all CPAs, including those working in industry, who would then be required to register with the state and to complete CPE.

The NYSSCPA has also proposed allowing the Board of Regents to establish a code of ethics for all services performed by a CPA while holding oneself out to the public with that title, and to establish actual standards of practice for attest and compilation services. We also want legislation passed to clarify when CPAs can collect commissions for nonattest services to nonattest clients.

The NYSSCPA has proposed that the Board for Public Accountancy conduct the investigatory and advisory hearings in the Board of Regents’ disciplinary process, and be allowed to refer investigations to the disciplinary body of a professional association.

The NYSSCPA wants the state to require peer reviews and public filing of peer review results for all firms that provide audits, reviews, and compilations. (Although many proposals address peer review, it is encouraging that they share a degree of consensus.) The Society also wants the Board for Public Accountancy to have the option of referring administration of peer review to a recognized professional accounting organization.

As a direct result of the Sarbanes-Oxley Act, New York State Attorney General Eliot Spitzer has presented six bills affecting corporate governance. Of particular interest to CPAs are one dealing with the nonprofit sector and one dealing with accounting in the for-profit sector that requires auditor rotation. The NYSSCPA Board of Directors is strongly opposed to any auditor rotation requirement, and has opposed such bills introduced in the legislature.

Regardless of whether you agree with the Society’s current proposals, individual participation in the legislative process is something I encourage. To have an impact, contact your state senators and assemblymen and explain your position. Letters (not e-mail), telephone calls, and especially face-to-face meetings are ideal.

The best way to meet with your representatives face-to-face is when they’re in your home district, either by making an appointment at their district office or by talking to them at an event. Regardless of how you communicate with a legislator, focus on what media professionals call a single overriding communication objective (SOCO): a concise, lucid, and persuasive delivery of your key points. When communicating with legislators, it’s important to be very specific about how you foresee a particular proposal affecting local businesses.

Don’t underestimate the importance of communicating with the legislator’s key person responsible for the issue that interests you. State legislators are inundated with information. Delivering your message to the person responsible for researching and analyzing issues, filtering information, and to some degree developing proposals or positions, can be crucial. After you talk to legislators or their staff, send a note that concisely repeats your message and expresses your appreciation for the legislator’s time and attention.

If you don’t know your current state senators and assemblymen, log on to the Membership Data Center at www.nysscpa.org and enter your membership number. You can find your representatives’ names and contact information. If you have questions, contact NYSSCPA Governmental Affairs Director Dennis O’Leary at (800) 633-6320 x418 or doleary@nysscpa.org.

Always remember that what our legislature does will not only affect the practice of public accountancy in New York, it may affect thinking and action regarding the accounting profession in Washington. So think globally, act locally.

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.