| Council Proceeds With Sweeping |
A t its spring meeting in Washington, D.C., the American Institute of CPAs council overwhelmingly approved the Final Report From the AICPA/NASBA Joint Committee on Regulation of the Profession . Moreover, the National Association of State Boards of Accountancy board of directors also voted to support the report at its May meeting. The report will now be codified in a revised Uniform Accountancy Act (UAA). Some of the changes to the UAA that will be made during the process, however, are already part of AICPA regulations.
The way CPAs practice
Client fee arrangements . "Changes in the UAA would allow CPAs to accept contingent fees and commissions from clients for whom they do not perform attest services," said Mednick, "In fact, the proposed UAA regulations are exactly the same as those already in place in AICPA Professional Standards ." Contingent fees are covered in ET section 302 and commissions in ET section 503. "This will help CPAs get into new service lines," continued Mednick. "In certain services, clients demand these fee arrangements, but about half the states still prohibit CPAs from accepting such payments today."
Ownership of a firm . The current UAA requires that a CPA firm be 100% owned by CPAs. However, the AICPA council agreed several years ago to a 66% ownership requirement and now, with the Washington vote, to simple majority ownership by CPAs. (The managing partner must still be a CPA, however.) "There are probably some who still believe in the 100% rule, but I think theyre a small minority," said Mednick. "Once you let go of the 100% rule, anything but a simple majority is just arbitrary.
"What is the purpose of the regulation anyway? To protect the public interest. However, quite frankly, I think the 100% and 66% rules were counter to the public interest." Mednick said that in todays complex business world, even the auditthe CPA service in which the protection of the public interest is of greatest importanceoften requires the skills and knowledge of non-CPAs. "And in order to get the most qualified individuals, non-CPAs need to have the ability to acquire equity ownership. The skills these people bring to an audit can actually add to the quality of an engagement and the protection of the public interest." For example, in todays computer-driven world, information technology experts who may not be CPAs may need to be a key part of a complex audit engagement.
Other highlights . Mednick said the report had three overriding objectives. The first was to enhance the mobility of CPAs. "They are practicing in a global economy marked by electronic commerce; borders are becoming meaningless in such an environment." (See "NASBA and AICPA Open the Borders," JofA, Apr.97, for more details.) Second, the report will help focus practitioners on the marketplace and regulators on services where the public interest is greatest, such as attest services. "The third is in the title of the UAA itself: uniform , making these provisions standard throughout the United States."
Of course, regulation is up to the states, and each state can adopt some, all or none of the UAA provisions no matter what the AICPA or NASBA decides. However, Mednick is optimistic. "I think approval will come, not overnight and not without a concerted effort, but I feel confident we can and will get the job done." He compared the effort to drum up support for the UAA to the creation of limited liability companies and partnerships (LLCs and LLPs) for CPAs. "They were highly desirable, but they didnt just happennothing happens in a political environment without hard work. Grass-roots support is essential." Mednick said the joint committee had formed a legislative strategy task force that was recommending the organization of local steering committees to, among other things, reach out to individual CPAs for their support.
Mednick summed up his philosophy of regulation briefly: "It is never an end in itself but a means to assure quality of work and commitment to the public interest."
The final report, including a lengthy "Q&A" section that clarifies many of the issues, is available on AICPA Online, http://www.aicpa.org. Hard copies are available by calling the AICPA faxback system at 201-938-3787 and selecting document 2000.