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More on the proposed Uniform Accountancy Act.

More on the Proposed Uniform Accountancy Act

Comments on the December 2, 1990, exposure draft of the proposed Uniform Accountancy Act (UAA), (see "Washington Comment," National Public Accountant, February 1991) continue to be solicited from state accountancy boards, state accountancy societies and interested individuals and firms.

The UAA exposure draft was prepared by AICPA's State Legislation Committee's Model Bill Task Force, NASBA's Model Bill and Model Rules Committee and the Conference Committee on Uniformity of Regulation of the Accounting Professional Model Bill Task Force. The purpose of the exposure draft is to update the October 1984 AICPA/NASBA Joint Model Public Accountancy Bill. The 1984 model was the achievement of the joint effort by AICPA and NASBA to draft a single public accountancy bill to replace the model bills that each organization then sponsored.

We have previously criticized the proposed title "Uniform Accountancy Act." If the act is adaptable to piecemeal adoption by the states, it is not a uniform act, and calling it a uniform act will not make it so. Uniform acts do not readily submit to piecemeal adoption. In such event, the goal of uniformity is not achievable. Accordingly, the drafters of the so-called Uniform Accountancy Act should seriously consider a return to the 1984 title and call the revisions the 1991 Model Accountancy Bill, for that is precisely what the draft document is - a model bill that the drafters hope the state legislatures will find worthy of imitation, even though altered or modified.

A number of areas do exist where uniformity of states' accountancy laws might eliminate bothersome variations in state laws that impede the free access of the board of accountancy's licensees to cross state lines. However, the situation is no worse with regard to the profession of accountancy than with other professions, such as medicine, law, engineering, architecture, etc. Wherever a profession is regulated by the process of licensure, states have a selfish interest in keeping out unwanted licensees to protect the domestic practitioner as much as possible.

All licensed professions possess characteristics that promote uniformity of state laws. The requirements for education to enter the profession, for internship prior to licensure, for continuing professional education and peer review to maintain licensure all have characteristics that promote the concept of uniformity. If the state legislatures were persuaded to adopt similar laws regarding the foregoing requirements, the uniformity of state law would be promoted and the migration of professionals from one jurisdiction to another would be enhanced.

However, the proposed Uniform Accountancy Act (like its predecessor, the 1984 joint AICPA/NASBA Model Accountancy Bill) has exceeded the promotion of uniformity and has trespassed upon the rights of non-certified accountants to practice their profession and make a living.

NSPA President Richard L. Garlock, in his comments to AICPA and NASBA on the proposed Uniform Accountancy Act, listed no less than a dozen sections that trespass upon the rights of non-certified and unlicensed accountants. NSPA vigorously objected to provisions in the UAA exposure draft that extend the audit function to include reports on compilations and reviews, thus prohibiting an unlicensed accountant from providing any type of report or transmittal on a compilation or review. It is not at all settled that the audit function with its specific characteristics can be extended (by reference) to the accounting functions of compilation and review, which have their own characteristics dissimilar to those of the audit function. The Colorado State Board of Accountancy discovered this when the Colorado Court of Appeals invalidated the board's regulations to prohibit unlicensed accountants from performing reviews. The board, by regulation, had defined the term "audit" to include a review. The court, however, struck down this extension of the term. The objectionable section of the proposed UAA attempts to do the same thing that the Colorado board was prohibited from doing.

In its comments, NSPA also objected that the UAA draft did not contain any provision for reciprocity of licensed accountants. Licensed (or registered) public accountants possess all of the rights, duties, obligations and responsibilities of certified public accountants. A limited number of states now provide for reciprocity for public accountants. The UAA draft does not. Thus, the UAA draft introduces a significant departure from equal treatment of accounting licensees. If you are licensed as a CPA, the UAA draft provides for reciprocity. If you are licensed as a PA, reciprocity doesn't apply. The proposed UAA draft is clearly unequal in its treatment and outstanding in its professional discrimination of another classification of licensee.

Additionally, NSPA registered vigorous objection to Section 8 of the proposed UAA which repeals the licensing of public accountants in perpetuity. Nine states continue to license PAs in perpetuity, and such licensing would be terminated those states adopt the UAA.

Another flaw in the proposed UAA is Section 3(g) which defines the practice or practicing of public accountancy. The definition includes the phrase "by a person or firm holding itself out to the public as a licensee," but nowhere in the proposed UAA is there a definition or clarification of what "holding out" as a licensee means. The concept of holding out is a significant one, but the proposed UAA leaves it up to the board of accountancy to define by rule the actions and circumstances that shall be deemed to constitute holding oneself out as a licensee. The sought-after objective of uniformity will certainly not be achieved if each board by regulations defines "holding out" to suit itself.

Several federal agencies, among them the Small Business Administration, accept an unlicensed accountant's financial statements for individuals and entities under certain circumstances. The proposed UAA prohibits an unlicensed accountant from issuing a report or financial statement on an individual or entity. This gives rise to a conflict of state and federal law. In effect, the proposed UAA would impose penalties on the unlicensed accountant who prepared a permissible accounting statement under federal law. This is analogous to a state law that would permit only licensees of the board of accountancy to prepare federal income tax returns. It is unlikely that the courts would allow such a state law to preempt a federal law.

Section 14(i) of the proposed UAA precludes an unlicensed individual from using the title "accountant" and the term "accounting." The wording of Section 14(i) is vague and ambiguous because the terms "accountant" and "accounting" may not be used "in connection with any other language (including the language of a report)" that implies that the individual holds a permit or has special competence as an accountant. If NSPA's affiliate, the California Association of Independent Accountants, is rewarded with the victory that it seeks in the Supreme Court of California permitting the use of the title "accountant" by California unlicensed accountants, the prohibitions in proposed Section 14(i) may require substantial revision.

Finally, the proposed UAA would prohibit the use of the initials "EA" by unlicensed persons including those who are enrolled to practice before the IRS. NSPA, in its comments, strongly suggested an exception to the prohibition on the use of the initials "EA" when used by an individual currently enrolled to practice before the IRS. The accountancy laws of several states now provide an exception from the prohibition on the use of the initials "EA" when used by an enrolled agent. The proposed UAA should logically provide a similar exception.

No state has adopted the 1984 joint AICPA/NASBA model accountancy bill in its entirety. Massachusetts is closer to enacting more unchanged sections of the 1984 model than any other jurisdiction. The state boards, however, have adopted various sections of the 1984 model in their regulations, in many instances word-for-word. Thus, some of the provisions in the 1984 model became law through the board's administrative process rather than legislatively.

As we said previously, the proposed UAA is a model that is nothing more than an update of the 1984 model. If it walks like a model bill, talks and squawks like a model bill, then by George it must be a model bill, and calling it a uniform act won't change it one bit.
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Title Annotation:Washington Comment
Author:Sager, William H.
Publication:The National Public Accountant
Article Type:column
Date:Aug 1, 1991
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