Santa Fe, N.M. (Feb. 28, 2003) -- In the latest drawback for state level accounting reform legislation inspired by the national Sarbanes-Oxley law regulating public company audits, a legislative bill in New Mexico that would ban practitioners from providing non-audit services to public and privately-held audit clients has failed to make it to a committee for further consideration. .

Failure to make it to committee means the bill "will be heard of no further this legislative session," said Gari Fails, president of the New Mexico Society of CPAs. The bill, proposed by a Sante Fe Democrat , would prohibit licensed public accountants from performing audit services for a client if the firm, or an affiliate of the firm, had performed consulting services for the same client within the past three years.

In other drawbacks in the state-based accounting reform movement, an Assemblyman in New Jersey in mid-February withdrew his bill that would have barred accountants in that state from providing virtually all non-audit services to audit clients. In Pennsylvania, six separate bills proposed last year all failed to make it to committee, according to William R. Lazor, president-elect of the Pennsylvania Institute of CPAs.

The Pennsylvania bills call for limiting the scope of services that CPAs could provide to public and privately-held audit clients, and requiring CPAs to report "wrongdoing" by clients. A separate bill would establish defenses for CPAs who file those reports.

However, Lazor, noted, "Just because a bill dies, doesn't mean it can't be introduced again." Both the Pennsylvania Institute and New Mexico Society are conducting campaigns to educate legislators and the public about the negative consequences in overzealous reform of accounting practices.

In addition to hurting accountants, applying state laws that replicate Sarbanes-Oxley to accountants' work with small, privately-held businesses can drive up costs for those businesses and make it difficult for some to obtain needed services, say accounting profession advocates. An American Institute of CPAs' Web page, dedicated to the Sarbanes-Oxley issue, http://www.aicpa.org/Sarbanes/index.asp , includes a link with position papers that describe the potential impacts of far-reaching state reform laws.

For a more detailed report on state level accounting reform measures and the accounting industry's efforts to deal with them, read the March 17 edition of Accounting Today.

-- John M. Covaleski

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