CLAMP - a mnemonic to remember.
Mnemonic is a hard word to spell. It is derived from the Greek language and signifies a device or code to assist the memory or to improve the memory. Mnemonics differ from acronyms, where a word is formed from the initial letter of the parts (ERTA and TEFRA, for example).
CLAMP is a transitive verb which means to hold tightly. As a noun, a CLAMP is an instrument or device having parts which are brought together for the purpose of holding or compressing an object. Since a CLAMP must have at least two parts to compress an object, you might look upon one part as AICPA, the other part as NASBA and the object being compressed as the independent, unlicensed accountant. Such symbolic representation of CLAMP contains more truth than fiction.
But let's get back to mnemonics. CLAMP is a useful device to describe the circumstances under which unlicensed accountants in many states conduct their practices and what can and should be done to ease or eliminate the painful compression.
The C in CLAMP
The C in CLAMP means CENTRALIZATION. This has to do with the autonomy of the state regulatory board. An autonomous board is an independent, self-contained, self-sufficient board and is described as decentralized. While there are variations, a centralized board is one in which another state agency may have authority over the board for various board functions, such as budget, personnel and certain disciplinary activities. Generally, but not always, centralization of the board means less regulation.
For all practical purposes, "centralization" and "deregulation" are synonymous. However, there are exceptions, and several states which have adopted a centralized board structure have not curtailed the autonomous power of the boards.
The objective of deregulation is to enhance competition in the free market, thus ensuring the public of goods and services at a fair, competitive price. Accordingly, NSPA affiliated state organizations should utilize their resources and keep up the pressure for CENTRALIZATION -- that is, deregulation or less regulation.
The L in CLAMP
The L stands for LOBBYING THE LEGISLATURE. Each year over 130,000 bills are introduced in the state legislatures. About one in every five becomes law, and some of these have an adverse effect on the practice of the unlicensed accountant.
The affiliated state organization has a stake in the political process, namely, to produce a positive impact on what laws the legislature passes. In short, favorable accountancy bills should be encouraged. Those bills that are negative and increase the pressure of the clamp should be vigorously opposed.
Affiliated state organizations impact upon the political decision-making process of their state legislature through the process of LOBBYING. It is immaterial whether the process of lobbying is carried out by a paid lobbyist (or legislative adviser) or whether it is maintained by personal contact with the legislator as his constituents. Both methods are effective.
Many affiliated state organizations overlook the fact that their clients are also constituents of the legislators. After all, legislators occupy their elective offices to represent the people and to look into the matters which affect their constituents' interest. Legislators who don't represent the interests of their constituents don't remain in office very long.
Accordingly, lobbying the legislature includes more than hiring a lobbyist or writing letters to legislators. The opportunities to effect coalitions with clients and the clients' business organizations should not be overlooked. We are often surprised at the amount of political muscle clients muster. The client deserves a place on your legislative team.
The A in CLAMP
The A in CLAMP stands for ATTEST or ASSURANCES. AICPA and NASBA legislative policies make no bones about defining the attest function broadly enough to prevent the use of conventional forms of language, such as disclaimers, by unlicensed accountants.
Reports containing assurance, either explicit or implied, are considered within the purview of the attest function and therefore, according to AICPA/NASBA doctrine, must be restricted to licensed practitioners.
The extension of the audit (certification) function to professional services, such as compilation or review which do not strictly constitute an audit, tightens the CLAMP. Unlicensed persons are prohibited from using any forms of language that suggest licensure, convey assurances or demonstrate competence.
It is immaterial that the language is used to describe an unaudited statement on which there are no assurances, either express or implicit. The arrogant position of the AICPA/NASBA legislative policy is to restrict the compilation report (the lowest class of accountant's reports) to licenses only by defining the audit function, not in terms of the work done, but in terms of what can be said in a report. Look out for the terms "attest" or "assurances" where they appear in an accountancy bill or in the board's regulations.
The M in CLAMP
The M means MONITORING THE BOARD. M also means look out for the joint AICPA/NASBA model bill. Failure to heed the foregoing precaution is sure to tighten the CLAMP further.
State accountancy boards issue many regulations. Despite sunset and regulatory review boards, state accountancy boards are issuing more regulations than ever.
Seventy-five percent of all regulatory proposals by accounting boards are eventually finalized. Compare that with the 20% of all legislation introduced that is ever enacted into law.
On the average, regulatory proposals are more comprehensive, more complex and farther reaching than legislation.
Events in the regulatory arena move at a definable rate of speed compared to the legislative process, which is sporadic and unpredictable.
Monitoring the state board is the most significant action an affiliated state organization can take. The intangible benefits are just not measurable. Most certainly, a state board should not make crucial decisions that affect you without having your input. You can't provide input, however, unless you are current with what the board is doing.
The board has a duty to regulate in the public interest. That being so, the board should have access to all points of view and a wide range of information. As a member of the affected public, is your state organization monitoring the board and informing the board of your interest and concerns?
The P in CLAMP
P signifies PROTECTION OF THE PUBLIC. The protection-of-the-public argument in favor of regulation of unlicensed accountants is probably the most overworked of all state board arguments. When all else fails, "protection of the public" is thrust forward to persuade the consumer of accounting services that many dire events will certainly befall him (or her) unless the board casts its veil of protection.
Carl Warren, former president and legislative chairman of NSPA's affiliate, the Washington Association of Accountants, said in a 1982 newspaper interview: "The opposition has tooted the public-protection horn ever since the issue began. But is it really an issue? We don't have an unsuspecting public wanting our services. These are people with knowledge of using financial statements."
Warren hits the nail on the head. Despite the pieties of the protection-of-the-public argument, it has never been conclusively shown that the public needs protection from unlicensed accountants. Rather, the protection which the investor-public requires arises through the need for audited financial statements of firms issuing securities to the public. The independent accountant with his small business clients has no interest whatever to compete with CPAs on that level.
Thus, when the spurious protection-of-the-public argument arises, gently ask:
1) Where and how has it been
shown that the public needs
protection? 2) If the public needs
protection, then from whom should
it be protected?
Perhaps one way that CPAs believe they protect the public is by limiting the opportunity to become a CPA. Restriction into the CPA fraternity is far more serious than we think.
The demand for accounting graduates by CPA firms is dramatically smaller than the number of graduates. What happens to those graduates for whom there is no demand for CPA employment?
Many will seek employment in private companies as internal auditors, cost accountants, etc. Many will be employed by federal, state or local governments. Many of those who do not go with private companies or government will go into public practice as noncertified (that is, unlicensed) accountants. Even if some of the public practice group pass the CPA examination, it is unlikely that they will get a CPA certificate because they cannot meet the experience requirement unless they apprentice under a CPA.
We can therefore look to more well-qualified and well-educated unlicensed accountants in the future because there is simply no demand for their employment in a CPA firm. That's the litmus test! Without the required term of work under a CPA, they are destined to remain unlicensed. Welcome to the CLAMP!
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|Author:||Sager, William H.|
|Publication:||The National Public Accountant|
|Date:||Jun 1, 1990|
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