Academic journal article Journal of Accountancy

Council Proceeds with Sweeping Regulation Reform

Academic journal article Journal of Accountancy

Council Proceeds with Sweeping Regulation Reform

Article excerpt

At 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

As more states adopt provisions in the revised UAA, the implications for the profession could be wide-ranging. Robert Mednick, AICPA board chairman and a member of the joint committee, spoke with the Journal about some of the key changes.

Client fee arrangements. "Changes in the UAA would allow CPAs to accept contingent fees and com. missions 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 they're 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 today's complex business world, even the audit the CPA service in which the protection of the public interest is of greatest importance often 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. …

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