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Connecticut tightens noose on unlicensed accountants.

Unlicensed accountants have never been popular in the state of Connecticut -- the state that takes pride by referring to itself as the Constitution state. Connecticut unlicensed practitioners of accounting have long been severely restricted in their practice and in the descriptive terms they use to describe themselves and their practice. They have been subjected to constant harassment by the State Board of Accountancy for the slightest, inadvertent infringement of restrictive accountancy laws. With the enactment of the 1992 Connecticut accountancy law to become effective on October 1, 1992, unlicensed accountants can look forward to continuous, and more intensive harassment. The Constitution state has enacted restrictive laws whose constitutionality is subject to question.

Connecticut's accountancy law prior to 1992 restricted the use of the "A" word by unlicensed practitioners. The 1992 law, following Section 14(i) of the proposed AICPA/NASBA Uniform Accountancy Act almost word for word, prohibits the use of the "A" word in connection with any other language, including the language of a report, that implies that such person (or firm) holds a permit or has special competence as an accountant or auditor. To our best knowledge only the state of Massachusetts has adopted a similar provision (Section 87D(i) of the Massachusetts accountancy law). In Massachusetts, an unlicensed accountant (who is also an NSPA member) is challenging the validity of Section 87D(i) in a legal proceeding that has been joined by more than a hundred unlicensed accountants who are tired and weary of the Board's harassment.

What is the purpose and intent of the restrictive Connecticut amendment or of Massachusetts Section 87D(i)? As stated in the Uniform Accountancy Act commentary, the purpose of UAA Section 14 is to make the prohibition against the issuance by unlicensed persons of reports on audits, reviews and compilations as tight and difficult to evade as possible and to prohibit the use of the "A" word by unlicensed individuals.

At a time when the U.S. economy has been deeply concerned with audit failures in the savings and loan industry, and in the banking and insurance industry, we see the Connecticut legislature concerned with prohibitions and restrictions on the practice of unlicensed accountants, who have nothing whatever to do with accounting frauds and failures in the industries that acutely affect American consumers and small businesses. It is suggested that if the Connecticut legislature and the State Board of Accountancy want to protect the public interest and promote the reliability of financial information, more attention should be directed and exercised to regulating and disciplining the licensees who create economic harm, rather than by restricting unlicensed accountants who are competitors of licensees for the same small business clients.

Instead of protecting the public from licensees who create havoc and disservice by their audit failures, the 1992 Connecticut accountancy law purports to protect the public by providing the State Board of Accountancy the authority to impose a civil penalty of one thousand dollars ($1,000.) against an unlicensed accountant who uses the "A" word. The law also provides that a person who knowingly violates the "A" word prohibition may be imprisoned for not more than a year, in addition to the fine of one thousand dollars. This additional harassment of unlicensed accountants cannot be justified on any rational grounds. The threat of a year's imprisonment is sufficient to chill the most stout-hearted who wish to challenge the law prohibiting use of the "A" word.

Unquestionably, certified public accountants and licensed public accountants (both licensees of the Board of Accountancy) compete with unlicensed accountants for the non-audit accounting services required by individuals and small business entities. The licensees are at a disadvantage in such competition because the charges by the unlicensed practitioner are substantially less than those of the licensee.

Consumers of accounting services should not be required to pay for services they don't need, not to pay an increased amount to a Board licensee when the identical services can be provided at a lower cost by a non-licensee. The legislature (and the Board) limit the competition for its licensees for non-audit services by prohibiting the unlicensed person from advertising the use of the "A" word, under penalty of fine and imprisonment. Such restrictive laws harm the public interest rather than protect it.

Clearly, as argued in the amicus brief submitted by NSPA to the California court in the Bonnie Moore case, the "A" word has generic meanings that extend beyond the practice of licensed practitioners. Legislative efforts to restrict the use of such generic terms to licensed practitioners (especially when those efforts are encouraged and supported by the licensed members of the profession, i.e., the state CPA society), should be treated in the same fashion as efforts to claim property rights in words that have been appropriated by the public.

The phrase in the Connecticut and Massachusetts law "in connection with any other language" has never been judicially construed. As stated earlier, the Connecticut and Massachusetts sections of the law are copied almost verbatim from the AICPA/NASBA draft of the Uniform Accountancy Act. (In the case of Massachusetts who adopted its revised accountancy law in 1985, Massachusetts Section 87D(i) comes from Section 14(i) of the 1984 AICPA/NASBA Joint Model Accountancy Bill. It should be noted that Section 14 (i) is identical in both the 1984 joint model and the 1991 draft of the Uniform Accountancy Act).

However, the Massachusetts law is the subject of litigation in Volin v. Board of Public Accountancy (Berkshire Superior C.A., No. 910359) and when that case is finally tried and decided, there may be judicial interpretation or guidance regarding the meaning of the phrase "in connection with any other language."

Disregarding the danger signals from its neighboring state, the Connecticut legislature forged ahead at the insistence and support of the state CPA Society, and included the phrase in its 1992 section of the law. Connecticut has now joined with the Commonwealth of Massachusetts in restricting the rights of its citizens to pursue a lawful occupation without hindrance or harassment. When the Massachusetts provision is held to be invalid, and its invalidity is almost a certainty based on the U.S. Supreme Court's opinion in Peel and the California Supreme Court's opinion in Bonnie Moore, both states will have to revert to the drawing board to think up new measures to harass unlicensed accountants.
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Article Details
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Title Annotation:Washington Comment; accounting practice
Author:Sager, William H.
Publication:The National Public Accountant
Article Type:Column
Date:Oct 1, 1992
Previous Article:Health care and the tax law.
Next Article:Bush, Clinton and small business.

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