The American Institute of CPAs is keeping a close watch on financial reform legislation as the Senate is expected to begin debate on the bill within the next week.

The Senate bill introduced by Banking Committee Chairman Christopher Dodd, D-Conn., exempts CPAs from regulation by the Consumer Financial Protection Bureau, similar to language in the version of the bill passed by the House last December. However, as the Senate debates possible amendments, there could be provisions introduced that might affect Sarbanes-Oxley 404 audits of the internal controls at smaller public companies, as well as liability provisions that might affect CPAs.

“The House version had a $75 million market cap exemption for public companies that are not going to be subject to 404(b), and there will be some debate on the Senate floor related to that, we would expect,” said AICPA president and CEO Barry Melancon in an interview. “In this environment, while there are not expansive liability regimes in the bill that is now on the Senate floor, and it’s not in the House bill either, there could be some attempts on the Senate floor to expand liability regimes, give shareholders greater liability access and things of that nature.”

Melancon also sees the possibility of changes in the broker-dealer provisions that could affect CPAs, as there was debate in the House on those provisions.  The biggest “wild card,” as he sees it, would occur if the Supreme Court were to rule the Public Company Accounting Oversight Board unconstitutional, especially while the financial regulatory reform bill were under debate. The profession is awaiting a decision in the Free Enterprise Fund and Beckstead & Watts v. the PCAOB case, which the court is expected to hand down within the next two months.

AICPA chairman Robert Harris worries about the effects of over-regulation. “No amount of regulation can ever constrain everything,” he noted.

Melancon and Harris are also keeping a close eye on the IRS’s proposal for companies to disclose their uncertain tax positions. The AICPA is preparing a detailed comment letter on the proposal.

“We think that proposal has some serious concerns,” said Melancon. “The comment period is not yet due on that, but we expect to submit a fairly extensive set of data points to the IRS. What has been contemplated has some real serious issues of how it would work. What we would expect to have in that letter, and what we have informally communicated, is that unless this magnitude of issues were fixed, we would be opposed to that particular provision. I think the IRS has shown a pretty strong willingness to listen to those concerns and find the right answer to that.”

Among the issues is the threshold level of companies subject to reporting their uncertain tax positions. “They have said this would apply to companies with $10 million or more of assets,” said Melancon. “We think if there’s going to be something like this, that threshold, from a cost-benefit perspective, needs to be much, much, much higher.”

Harris worries about clients being reluctant to disclose information to their tax preparers. “If it were put into place as it stands today, I think it’s going to lead to a situation between clients and CPAs where CPAs may know even less about what’s going on,” said Harris. “If your client’s doing something … and your client realizes you are going to have to report that, they are not going to share it with you, and you’re not going to have an opportunity to influence them to do what may be the right thing.”

The AICPA is also working with the IRS on expanding the capabilities of Extensible Business Reporting Language, or XBRL, to encompass tax returns, as it did with XBRL US and the Financial Accounting Standards Board on the XBRL taxonomy for U.S. GAAP. Melancon said he was on a conference call with the IRS last Friday about XBRL use in taxes, and how it might include “see attached” types of supporting documents.

Melancon described several of the AICPA’s other recent initiatives, including the Blue-Ribbon Panel on Standard Setting for Private Companies, which the institute is working on with the Financial Accounting Foundation and the National Association of State Boards of Accountancy. That is one of the major initiatives in the months ahead (see Panel Looks to Improve GAAP for Private Companies).

The AICPA also has been testing a new and improved Web site, and it will probably launch publicly around May. It will include new video features, known as AICPA TV, for communicating with members.

Melancon said the institute will also offer more Software as a Service, or SaaS, products to members. In addition, the AICPA plans to launch a learning management system that he believes will “be at the very beginning of revolutionizing CPE and changing the dynamics of CPE.” The institute will be working with state CPA societies on that initiative.

Melancon also talked about the use of social media sites like Facebook by CPAs, but expressed concern about their effect on productivity. However, he did see value in LinkedIn as a networking tool. The AICPA’s CPA2Biz arm recently launched a Trusted Business Advisors Solution Group on LinkedIn to help CPAs stay on top of the latest developments in practice management and technology.

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