by Seth Fineberg
Boston - Since the passage of the Sarbanes-Oxley Act of 2002, and in some cases even before, many states’ CPAs have not exactly sat idly by just because the legislation does not yet affect privately held companies.
Now Massachusetts’ CPAs have joined in too.
In late March, Massachusetts CPAs began an effort to pre-empt any cascade effects from Sarbanes-Oxley legislation, ensuring that their colleagues and state lawmakers are properly educated about the ramifications such rules could have on privately held businesses and on the profession.
It is a move that some have said was overdue.
Neal Harte, a partner at Boston-based Vitale Caturano & Co. - the state’s largest firm -and a member of the American Institute of CPAs’ State Regulation Committee, was one of the leaders in the effort, along with Massachusetts Society of CPAs’ executive director Ted Flynn.
“We’ve just never felt like our political force was as strong as it could be, and so we thought we ought to start talking to firms, presenting them with what could affect them at the state level,” Harte said. “We also needed to encourage CPAs to be politically active in trying to protect issues we think are important to the accounting profession.”
And though there are currently no bills in the Massachusetts State Legislature that CPAs or small businesses would deem threatening, they want to keep it that way.
The primary fear among CPAs auditing privately held clients is that legislation would restrict their scope of services to audit clients, cause unnecessary firm rotation, create a lack of uniformity (50 different states with 50 different laws), or make audits too expensive.
The first part of the effort was to have the top 10 firms in the state contact the remaining top 40 and make sure that they felt properly aware of the issues. These CPAs were also asked to voice their concerns to state legislators and ensure that they, too, were properly educated about the potential affects of Sarbanes-Oxley rules in the state.
Harte said that, so far, firms have been receptive to the loosely laid plans and have reacted with a, “Let me know what I can do.”
That attitude was evident in many of the calls that Harte has made to CPAs in his state, such as Bill Rucci, managing partner of Malden, Mass.-based Rucci, Bardaro & Barrett. His firm may not be one of the largest in the state, but Rucci still feels he has a voice in getting others educated and affecting change.
“In my calls I’m finding other firms are just as sensitive to the issues as we are,” Rucci said. “This [initiative] is really about anytime you are out, you discuss the issues with fellow members. I was asked to help rally the troops and be proactive in meeting the challenges as opposed to sitting back and letting something happen.”
Rucci also said that his clients, who are predominantly privately held companies, have not expressed concerns over a potential cascade of Sarbanes-Oxley rules, but he wants his staff to be prepared if they do.
The MSCPA’s Flynn doesn’t want his membership to get complacent either, just because there are no bills in the state legislature.
He has held a few managing partner summits over the past couple of months and a special leadership session at the society’s annual meeting in May. There, CPAs continued to discuss the issue and gave updates on where their efforts stand.
Flynn said that he was confident that things were going well, and made the membership aware of his upcoming meeting with Massachusetts Attorney General Tom Reilly. “The most important thing about this effort is that it is pre-emptive and it seems a lot of the potentially damaging activity is coming from state attorney general offices,” Flynn said. “This is a live issue and you can easily wrap the concept of a grassroots effort into what we are doing.”
The AICPA’s director of state society regulatory affairs, Sheri Bango, has been pleased with the activity that CPAs in many states have undertaken, and claims that education is the most effective way to get their message across. “The greatest concern is that there is still a large gap between what the majority of members believe and the reality of what is happening at the state level,” Bango said. “Cascade is a very real possibility and you have to explain the impact for clients and legislators. The time to do it is now, not when it’s headed to the [state] government.”
Bango identified several states that, through their efforts, have thwarted Sarbanes-Oxley-type bills from getting passed or even written. Some of these include Maryland, Florida, California, Utah, Washington, New Mexico and Michigan.
Maryland CPAs’ efforts in particular have successfully killed legislation this year.
In February, the state proposed the Maryland Accountability Act of 2003, which would have severely limited the scope of services that CPAs can provide. That bill was overwhelmingly defeated, thanks to member testimony and a white paper that state CPAs produced in conjunction with the Maryland Chamber of Commerce, attorneys and private companies about the potential impact such bills would have on small businesses.
Tom Hood, executive director of the Maryland Society of CPAs, said that there are still many concerns. “Too many CPAs I have encountered think the impact of Sarbanes-Oxley is done. That is grossly underestimating what could happen,” Hood said. “We’re not saying we are opposed to any legislation, but we can’t have state legislators just picking up the newspapers and making bills. Which has happened.”
