Printer Friendly

Non-CPA partners in CPA firms.

Non-CPA Partners in CPA Firms

Two years ago - during the state legislative sessions of 1989 - NSPA's affiliate, the Independent Accountants Society of Missouri (IASM), sponsored House Bill 216 which would permit a Missouri certified public accountant to form an accounting business partnership with a person who actively practices accounting but is neither certified nor holds a permit from the Missouri State Board of Accountancy. The bill provided also that a CPA may become an employee of or a contractor with a corporation not registered with the state board.

The purpose of H.B 216 (and companion Senate Bill 182) was to enable young CPAs to work for an independent practicing non-certified accountant, to be able to hang their permits and CPA certificates on the wall and to be responsible for their signatures as CPAs on the accounting work they perform. Under H.B. 216, a CPA could buy the practice of an unlicensed accountant, retain the name of the selling firm and even enable the selling unlicensed accountant to become a partner with the buying CPA. Likewise, the bill would have permitted an unlicensed independent practicing accountant to buy out a CPA firm retain his/her own name or be able to become a partner with the selling CPA.

IASM's main arguments in support of H. B. 216 (and, subsequently, House Committee Substitute for H. B. 216) was that the bill represented an opportunity for CPAs and unlicensed independent practicing accountants to practice together as employees or as partners in an accounting firm. To protect the public the bill would: 1. Not allow firms composed of

CPAs and non-CPA principals

to call themselves a CPA

firm; 2. Not change the current law

that called for all principals

of registered CPA firms to be

CPAs; 3. Not weaken the competency

standards set for CPAs under

state law; 4. Not enable the unlicensed

independent practicing accountant

to exercise the attest

function (however, the

association of a CPA and a

non-CPA would not cause the

CPA to forfeit the right to

attest to his/her own work.

This is no different than the

case of a surgeon who is a

partner in a medical clinic

with other non-surgeon

medical practitioners. The

surgeon is still able to perform

surgery); 5. Not cause any loss of control

by the state board of accountancy

over CPAs in public


H.B. 216 (and its successor House Committee Substitute for H.B. 216) raised the hackles of the leadership of the Missouri Society of Certified Public Accountants (MSCPA) who came out in force attacking the bill as a "hybrid partnership of non-licensed accountants and CPAs," particularly dangerous and misleading to the public. What MSCPA feared most was not the hybrid partnership but that registration of the hybrid partnership with the state board of accountancy would result ultimately in the licensing of an additional class of accountants in Missouri.

H.B. 216 rolled along in the Missouri legislature until its third reading, gathering intense MSCPA opposition in the process. In fact, MSCPA's communications director described their work opposing H.B. 216 as "fast and furious" because "it would have been the first step toward recognizing unlicensed accountants in the same breath as CPAs." (Journal of Accountancy, July 1989, page 16)

Six months after the demise of H.B. 216 in Missouri, an adhoc committee chaired by Jerome Schine (a member of the Florida State Board of Accountancy and a past president of the National Association of State Boards of Accountancy) drafted a report on the "Structure of CPA Firms" containing recommendations and plans for admitting non-CPAs into partnership with CPA firms. While the response to the Schine recommendations has been largely negative, describing them as "destructive of the ethical fabric of the public accounting profession," the issue of non-CPA ownership of CPA firms is still very much alive and well. It was debated at the AICPA/NASBA Conference on State Regulation of the Profession in Dallas on December 3, 1990, by Mr. Schine as a proponent for permitting non-CPAS as partners and by Robert Gray, executive director of the New York State Society of CPAs, who vociferously opposes the concept.

The Schine recommendations differed significantly from IASM's House Bill 216, even though each would permit partnerships between CPAs and non-CPAs. The non-CPAs that Schine endorses for CPA partnership eligibility are specialists in some field related to accountancy, such as marketing or data processing, and not practicing non-certified accountants. Under the Schine recommendations, a non-CPA who is an unlicensed accountant would not qualify for partnership in a CPA firm. That is the fundamental difference between IASM's House Bill 216 and the report of the ad-hoc committee that Schine chaired on "Structure of the CPA firm."

One more point that must be mentioned. Every state has in its accountancy law a prohibition against a licensee of the board maintaining a partnership with a non-CPA. This was a major argument of the Missouri Society of CPAs in their intensive lobbying against H.B. 216. MSCPA maintained that no law prevented a CPA from being a partner with a non-CPA as long as the CPA was not a licensee of the board of accountancy and not identified as a licensed CPA. The state CPA lobby, being intensive and zealous in the protection of its turf, can be relied upon to lobby vigorously against any amendment to state accountancy laws that permits non-CPAs (whether accountants or data processing types) as partners in the CPA firm.

There is a fourth interested party to the issue of non-CPA partners in CPA firms in addition to CPAs - non-CPAs and state accountancy boards. The Federal Trade Commission (FTC), which after two years finally concluded and ratified its settlement stipulation with AICPA regarding AICPA's ethical rules on members' acceptance of commissions and contingent fees, has an interest in curtailing ethical rules or state laws that restrict competition in any of the professions. If there is a regulation or law that restricts competitive pricing of accountant's services, the FTC is interested. As demonstrated by the August 1990 AICPA/FTC settlement, where competition in the profession is unrestricted, more services are offered to the consumer at a more competitive price. Hence, it is possible that restrictions on partnership eligibility might be viewed by the FTC as restriction on competition.

The FTC has a pretty good record at imposing its will on voluntary professional associations and state administrative agencies. If laws regarding non-CPAs as partners are amended or repealed, will such action decrease the costs and increase the types of services that the large clients have come to expect from their providers of accounting services? If so, the FTC is bound to express its interest since the existence of non-CPA partners will tend to enhance competition within the profession and decrease costs to the consumers.

The National Association of State Boards of Accountancy (NASBA) has gone on record to the effect that its role will be limited to monitoring developments as they occur. The National Conference of CPA Practitioners (NCCPAP) opposes any movement that would dilute the prestige of the title "certified public accountant," which would surely occur if non-CPAs become partners in CPA firms, and has made its position known to the state boards of accountancy. Until the matter has settled and we know the direction in which the FTC is heading, the National Society of Public Accountants should adopt a neutral posture on the issue. Like NASBA, the recommended position of NSPA at this particular juncture should be limited to monitoring developments as they occur.
COPYRIGHT 1991 National Society of Public Accountants
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Certified Public Accountant
Author:Sager, William H.
Publication:The National Public Accountant
Article Type:column
Date:Mar 1, 1991
Previous Article:Taking inventory for floor stocks tax.
Next Article:The consumption tax - to be or not to be.

Related Articles
There's no accounting how far the Board of Accountancy will go.
Council approves non-CPA ownership, accreditation proposals.
The case for non-CPA ownership: a roundup of practitioners' opinions on why change is needed.
An American CPA in Tokyo.
Holding out: the Court of Appeals reaches a decision.
Future alliances.
David Cottrell named Alaska Small-Business Person of the Year.
Many small firms remain on the fence.
More regulations ahead.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters