Meeting of the Board of Regents | January 2009
THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW YORK / ALBANY, NY 12234
Update on the Public Accountancy Practice Act
December 23, 2008
Issue for Discussion
The purpose of this item is to update the Professional Practice Committee on the key elements of the Public Accountancy Practice Act that, if enacted, would substantially impact on the public accountancy profession.
Reason(s) for Consideration
For Information and Advice.
This discussion will take place at the January 2009 meeting of the Professional Practice Committee.
The Public Accountancy Practice Act was passed by the Assembly in June 2008 and by the Senate in December 2008. The bill will be forwarded to the Governor for approval in the coming days. The legislation updates and modernizes the accountancy statute that hadn’t been significantly amended since 1947. Since then, professional services provided by certified public accountants (CPAs) and public accountants (PAs) have evolved to include many peripheral functions including tax preparation and advisory services, management consulting, financial planning and advisory services, estate planning and computer consulting. None of these services are regulated under the existing Education Law.
The regulation of the practice of public accountancy by the Board of Regents has been limited to professional services in the areas of audits and attestation services. If the recently passed legislation becomes law, the Board of Regents will be responsible for the oversight of an expanded scope of professional services rendered by CPAs and PAs.
For ten years, the Department has actively worked with other stakeholders in an effort to seek reform to the Public Accountancy Practice Act. For the past six years, the Regents have made public accountancy reform legislation a part of the Regents priority legislative agenda. Several key provisions of the Regents priority legislation served as the basis of elements contained in the recently passed legislation.
Key Elements of the Bill
- Specifies that offering to perform or performing attest and compilation services and incidental professional services relating to accounting concepts and the recording, presentation, or certification of financial information or data are within the scope of practice. These services are at the core of the attest and compilation services performed by CPAs and PAs.
- Expands the scope of practice to include the types of services that involve the use of professional skills and competencies in matters related to accounting concepts, the recording of financial data or information, or the preparation or presentation of financial statements, including but not limited to management advisory, financial advisory, and tax preparation and advisory services. The law clarifies that such professional services rendered for one's employer are within the scope of practice of public accountancy.
- Provides that only a person licensed or otherwise authorized to practice may practice pubic accountancy or use the CPA or PA professional titles.
- Modifies the education requirement for licensure to include the recognition of foreign equivalent education.
- Provides greater clarity regarding the issuance of limited permits based on credentials issued by a foreign country.
- Allows a CPA who is licensed by another state that the Board of Regents has determined to have significantly comparable CPA licensure requirements and who is in good standing to apply for a temporary practice permit to provide attest and compilation services. The permit would be valid for up to 180 days during a 12-month period and could be renewed a maximum of four times. Any CPA practicing under a temporary practice permit and any firm employing such a CPA to perform services in New York would be required to consent to be subject to the disciplinary authority of the Board of Regents.
- Permits out-of-state licensed CPAs to provide management advisory, financial advisory, and tax preparation and advisory services in this state without a temporary practice permit so long as the CPA agrees to be subject to the jurisdiction and disciplinary authority of the Board of Regents, to comply with the laws, rules and regulations of New York, and to cease practice in New York if his/her license to practice is no longer valid in his/her principal place of business.
- Provides language that must be used by non-licensed individuals and entities when preparing financial statements. This language would be distinct from the standard reporting language used by CPAs so the public can differentiate between licensed and non-licensed practice.
- Requires all firm types to register with SED. Requires sole proprietorships or any other form of organization that performs attestation or compilation services or uses the title “CPA firm” or “PA firm” to register with the Department. Public accounting firms created to provide tax or consulting services may register with the Department under the Act.
- Requires firms to provide annual notification to the Department of the revocation of their registration or other disciplinary action for cause and requires firms to notify the Department of any change in the number or location of their offices within the state, including any change in the identity of the persons in charge of such office.
- Provides that the Board of Regents may revoke a firm’s registration or take other disciplinary action against a firm to the same extent as against an individual licensee, or pursuant to a settlement in which the firm neither admits nor denies the allegations of professional misconduct, or based on other grounds including failure to undergo the required quality review every three years.
- Mandates participation in mandatory continuing education for all CPAs, even if employed in private industry, government or academia and changes the requirement for complying with mandatory continuing education from a registration year to a calendar year.
- Expands the recognized areas of continuing education study to those that contribute to professional practice and growth in professional knowledge, professional competence and ethics.
- Requires accounting firms that provide attestation services to undergo an independent quality review of the firm’s administrative controls over those services at least every 3 years. The law exempts sole proprietorship firms and firms with two or fewer owners from the quality review requirement. However, the exemption does not apply to any firm that performs attestation services for any New York State governmental entity.
Timetable for Implementation
If the bill is signed into law, there will be extensive discussions with legislators, legislative staff, professional associations, and others concerning the implementation of the law, and rules and regulations implementing the law will be brought to the Board of Regents for discussion and possible action later this year.