Counterpoint.

Although the AICPA's Voluntary Tax Practice Review (VTPR) program was first introduced over four years ago, no available statistics on the program exist. The absence of such data is due to the fact that the program is truly voluntary and confidential. The AICPA does not maintain any records of firms that undergo a tax practice review, nor does it ever learn the results of either a self-assessed or peer review In addition, the reviewer firm in a peer review keeps only the engagement letter. In other words, all records relating to the decision to undergo a tax practice review and the scope and results thereof are the property of the reviewed firm.

This approach to documentation is in keeping with the objective of the VTPR program, both as it existed on introduction in late 1990 and today: to provide a flexible, wholly voluntary, completely private program of tax practice review that is both beneficial and practical for local practitioners. The program, the foundation for which is set out in the AICPA publication, Guidelines for Voluntary Tax Practice Review, helps practitioners to identify and chart their own path to improved tax practice methods. The consultation-oriented program is not a tool to regulate tax practices.

Despite discussions by individuals and NON-AICPA groups about the possibility (or to many, the threat) of a mandatory review program, such a step is not the intent of the AICPA or the committees that are responsible for the VTPR program. This position is not expected to change, even as the AICPA looks to establish uniform quality control standards covering all aspects of a CPA firm's practice.

At its October 1994 meeting, the AICPA Board of Directors approved formation of a task force, the Special Committee on Quality Control Standards, that is charged with developing uniform standards. The AICPA has stated, however, that in its search for joint quality controls, it is not looking to establish mandatory practice monitoring in nonauditing and nonaccounting. portions of a CPA firm's practice. In addition, any recommendations that the task force does develop will be nonbinding "standards" for practitioners. Thus, the AICPA's effort to establish uniform quality control standards will not jeopardize its long-standing position that the VTPR program should be voluntary.

This article discusses some of the pros and cons of the AICPA's VTPR program, including its voluntary nature and the role it serves. The authors deal strictly with a hypothetical scenario in terms of the call for a mandatory program. The AICPA and the committees responsible for the VTPR program continue to stand by their conclusion that the program best serves the needs of the local practitioner only if it remains voluntary and confidential.

The VTPR program should be shelved without AICPA effort to mandate, update or publicize. The Tax Practice Management Committee oversight should be suspended and the program placed on indefinite "hiatus." I applaud the efforts and good intentions of the parties involved; however, the program is ill-conceived, ill-timed and does a disservice to the AICPA membership.

Why oppose an entirely voluntary program? VTPR can only meet its apparent goals by becoming mandatory. Moreover, as the program was developed under the auspices of the AICPA, the VTPR program may create standards of tax practice, although remaining a voluntary program. The AICPA membership must be made aware that the benefits and risks of VTPR should be debated before an informed decision about the future of the program can be made.

The VTPR program has been pushed by some members of the AICPA as filling a gap in peer review. The argument is that peer review covers only the audit and accounting practice, which may encompass only a portion of a member firm's practice activities. The tax and management advisory services (MAS) activities are not peer reviewed, creating a gap. Under this theory, VTPR is designed to raise the portion of firm activities subject to peer review, and this underlying goal can only be met with a mandatory program.

There are two flaws in the above argument. First, MAS may encompass many activities that do not fall under audit and accounting or tax practice reviews (e.g., helping a client obtain financing or valuing a closely held business). Second, the audit Peer Review program was a response to an outside constituency consisting of congressional hearings on audit failures, SEC review, and threats of an outside oversight board with control over the audit and accounting practice. The CPA community responded with the Peer Review program to help address these outside forces and keep control of this aspect of practice. If the attempt to provide some standards of practice in this area had failed, many of the changes would have been forced on CPAs by outside interests.

Unlike the audit practice, in which a CPA certificate is required to attest to the financial statements, CPAs are not the only practitioners in the tax area. Virtually anyone can prepare tax returns, and enrolled agents and attorneys may also practice before the IRS. The VTPR program acts only to raise the practice standards for CPA practitioners, not for the remaining tax practitioner community. To avoid the expense of peer review, a number of firms doing a relatively small number of audits stopped doing audit work. With tax practice accounting for a much higher percentage of the practice for most CPA firms, this is not a viable alternative. The only real choice for such firms will be tax practice peer review, or resignation from the AICPA to avoid the peer review requirement. As there exists no outside constituency calling for a peer review program for CPA tax practitioners, VTPR is not meeting a public need, but an ill-conceived internal need that may be harmful to practitioners and the AICPA.

An additional point promulgated by advocates of the VTPR program is that it will create a marketing tool for firms that have been peer reviewed. The flaw here is that there is little public understanding of the difference between CPA firms that have been peer reviewed and those that have not. In other words, the AICPA would have to have a program of public education promoting VTPR firms, and downgrade the tax practice of CPA practitioners who had not gone through the program. This distinction would have to be created to establish a marketing tool. Such a program would not raise the level of public confidence in the CPA certificate as a whole, and the AICPA needs to refrain from being involved in such a situation. Peer review was forced on audit and accounting practitioners, and should not be forced on tax practitioners; nor should practitioners voluntarily undertake such a program. The VTPR program will not create or meet a marketing need of member firms or raise the overall public satisfaction with the CPA certificate; therefore, in pursuing the program, the AICPA should not rely on this argument.

Advocates of the VTPR program make the strongest case for its support in arguing that the program does not attempt to mandate tax practice methods and procedures, but rather, is a practice management tool. The program is designed to allow self -assessment and to be "consultation-oriented." The preamble states that "the program charts a path to improved tax practice methods."

The VTPR program is designed as a systematic assessment of tax practice methods and has significant flexibility built into it. The flaw is that regardless of the level of tax practice, there are certain standardized procedures, techniques or review standards that must be addressed by the practitioner. These minimum standards, implicit in the VTPR concept, cause me to consider whether it is appropriate for the program to, in effect, designate certain practice techniques as necessary for a quality practice.

The fact that the program acts to review one's tax practice policies, procedures and techniques against a sliding scale determined by one's "tax practice quality control document" does not reassure me. If the program becomes mandatory, there will need to be minimum standards against which one's practice is to be judged. Moreover, the VTPR review questionnaires could become the standards against which practitioners are judged in the event of litigation.

The VTPR program follows significantly the AICPA Statement on Quality Control Standards #1, System of Quality Control for a CPA Firm. The nine elements put forward are virtually the same, with the exception that "independence" is replaced by "advocacy and integrity." The remaining standards consist of assigning personnel to engagements, consultation, supervision, hiring, professional development, advancement, acceptance and continuation of clients and inspection.

The practice standards that are outlined in the VTPR program are all valid, and it is difficult to argue that outlining strategies for quality tax practice in the VTPR program is a bad idea. Many members, however, have attended practice management programs in an effort to glean ideas. The ideas are available and presented in many different programs, and attendees adopt those that best suit their practice and needs. The difference is that the VTPR program attempts to package these ideas in a form that can be viewed as standards of practice. Despite the preamble's admonition that "there is no set of objective tax practice standards by which a practitioner must conduct his or her practice," the program does act as a first step in quantifying those objective tax practice standards by which a practitioner may be evaluated by an independent third party, in litigation or by peers in an ethics review.

The VTPR program appears to be a first step to codify tax practice standards which, in and of themselves, may be good, helpful and unassailable. However, the codification of these standards by the VTPR program and, indirectly, by the AICPA, may create unintended consequences. The legal environment has significantly changed. There are still practitioners who feel that if they maintain a high-quality practice, they have little to fear from litigation. This is wrong. Regardless of the merits of many claims, and prior to the determination of liability, insurance premiums are consumed by legal fees, and time is wasted in the discovery process.

Recent statistics indicate that tax malpractice claims are the fastest growing source of liability claims, accounting for about 45% of total claims today, as opposed to 20% of all claims in 1986 (see "Essential Information About Legal Liability--and How Local CPA Firms Can Cope," 17 The Practicing CPA 8 (July 1993)). With the growth in tax malpractice claims at this time, the VTPR program could well become a road map for litigators in suing accountants.

This need not be the case. The VTPR program is not being mandated by outsiders and CPAs may already be holding themselves to standards higher than those of other tax preparers. While the VTPR program's standards are laudable, the program is ill-conceived and ill-timed in an era when negligence and fault are no longer the issues, but rather, the mere appearance of negligence or impropriety seems to be key. Such appearances are much easier to demonstrate with an expanded laundry list of practice standards, such as that presented by the VTPR program.

There are those that argue that fear of litigation due to the VTPR program is ill-founded. I disagree. Although the data will be difficult to compile, it has become standard practice for litigators to review recent continuing education courses attended by CPAs to provide ammunition for their discovery questions. The VTPR program will become the "mother-lode" for these attorneys.

It has also been said that the AICPA cannot afford to suspend efforts to enhance public practice until adequate liability reforms are implemented. However, there must be balance. When aircraft manufacturers were faced with lawsuits that threatened their existence in the early 1980s, the main producers of single-engine light aircraft in the U.S. virtually ceased their production. This cessation has continued for approximately 10 years, and only this year has Congress passed a statute of limitations for aircraft manufacturers to entice them back into the industry.

The point is that the manufacturers changed their actions in response to their environment. They did not choose to attempt the impossible by building a "crash-proof" aircraft to avoid lawsuits, but recognized the problem was the legal environment, not the product. The AICPA must also change its actions in response to the environment. CPAs cannot voluntarily move ahead in areas that increase exposure to lawsuits until there are liability reforms.

At this time, the VTPR program does not meet an expressed public or internal need. While the goals are laudable, they tend to expose CPAs to higher standards of practice than other tax practitioners. This would simply increase CPAs' exposure to lawsuits at a time when CPAs are clamoring for some relief. While there are those who view shelving the VTPR program as stifling innovation, there are many examples of companies faced with litigation that refocused their energies and efforts in light of the legal environment. The risks in tax practice are substantial, but they will not be relieved by the VTPR program, and may well be aggravated.