New York tightens standards on CPAs
by AccountingWEB on
If you’re a New York CPA or you perform accounting services in New York, you should know… the rules have changed. Even if you work for industry or government or are retired but sit on a not-for-profit board, or prepare tax returns for your friends, the new rules apply to you. New York State has always been ahead of the rest of the pack when it comes to the accounting profession. They were the first state to require licensing way back in 1897. But even in this innovative state, not a lot has changed since then, when it comes to regulating the profession. For a solid decade now, the New York State Society of CPAs (NYSSCPA) has been lobbying for reform, and, thanks to their persistence, they've finally achieved it. In January of this year, Governor David Paterson signed into law sweeping reforms that, with very limited exceptions, will affect all New York CPAs. Do the changes apply to you? In the words of the NYSSCPA: “If you are asking this question, the answer is probably: YES”
The NYSSCPA goes on to say, “The law expands the definition of public accountancy to include CPAs who provide tax, management and financial advisory services; and CPAs working in industry, academia and government.
Why the change? NYSSCPA President David Moynihan says it has to do mainly with ethical black holes like Bernard Madoff. The majority of business owners say that their number one most trusted advisor is their accountant, and the NYSSCPA believes that should mean something. CPAs as a whole have always been somewhat of a self-policing group. They value the trust placed in them and are motivated to earn it, and to see that their peers also maintain high ethical standards. That’s why the NYSSCPA has adopted new rules that CPAs needs to know about.
Here is a summary of the major changes:
· Every licensed CPA who does any work at all that requires the abilities of a CPA is required to register with the State Education Department. The deadline for registration has just passed, on July 26,2009. The penalty for failure to register is a misdemeanor for unprofessional conduct. According to Moynihan, there are still a large number of CPAs who have not registered, though coming up with a reasonable estimate is hard. “Many licensed accountants who work in industry no longer think of themselves as practicing CPAs and don’t realize they have to register. But,” he adds, “very few CPAs would willingly fail to follow the law.” The NYSSCPA says there are some instances when a CPA does not have to register, and according to Moynihan, they are very limited. “We consider it a skills and competencies test. If you are not using your CPA designation, you might be exempt, such as a retired individual who does no accounting, not even preparing friends’ tax returns. If you’re in doubt, you should register.”
· All CPAs are now required to take Continuing Professional Education courses. Previously, only CPAs who performed attest work had to get yearly CPE credits. Now all registered CPAs and Pas must obtain a minimum of 24 hours of CPE each year in a specific concentration, such as tax, or a minimum of 40 hours of education in other disciplines. CPAs and PAs must complete four hours of Ethics CPE during each registration period.
· Peer review. This requirement does not take effect till 2012, but it is a major change. Peer review has been voluntary in New York, since only members of the AICPA or the NYSSCPA must participate, and membership in either organization is optional. Once this law becomes effective, all CPAs performing attest services will be required to participate in peer review every three years. They call it “auditing the auditors.” There is an exception for firms with only one or two CPAs.
· Scope of services. Among the changes the NYSSCPA is instituting is that they are “expanding the scope of services,” says Moynihan. CPA candidates will no longer have to get 75 percent of their experience requirement doing audit work. “Essentially if you work under a licensed CPA in any number of areas, your experience could qualify you” to become a licensed CPA, assuming you meet the other requirements.
· Out- of- state CPAs. Those whose principal place of business is New York must be licensed in New York. But, an out-of-state CPA whose principal place of business is not New York, and who practices non-attest services in New York state does not need to be registered or licensed in New York, but is subject to disciplinary authority by the New York State Board of Regents. And, in the interest of public protection, out-of-state CPAs who do provide attest and compilation services in New York State must obtain a temporary practice permit.
The new law, says Moynihan, is very broad-based. It’s about protecting the public from individuals who may be highly competent in one area of accounting but who also perform services for which they have significantly less expertise. The public puts a lot of trust in CPAs, and may assume that because they are licensed, CPAs have vast experience in all things related to accounting. Moynihan urges anyone interested in learning more about the New York state reforms to visit the NYSSCPA Web site.