Until I attended the New York State Society of CPAs' "Future of SEC Practice After Enron" conference this week, I was sure that accounting industry leaders' warnings about the federal corporate reform law trickling down to states and even firms with non-public clients was just scare-mongering. Now I’m convinced that they were right.
The new federal law contains a provision, initially overlooked by many analysts, which allows information gathered by the new independent accounting oversight board to be shared with the states.
That tiny provision is already being used as a foot in the door for legislators in California and New York to craft their own reform laws, in an attempt to assuage the public’s anger at a profession which is believed partly, or mostly responsible for the current sorry state of corporate America.
NYSSCPA executive director Lou Grumet drew a grim picture of the political landscape in New York, and how accounting legislation is certain to be a priority when the state legislature reconvenes in Albany. Why? Try Adelphia Communications and Xerox. Both accounting scandal-scarred companies are either based, or have large operations, in western New York (Adelphia in Buffalo, Xerox in Rochester). These companies once injected life and revenue into formerly depressed towns and Grumet warned that local, out-of-work residents whose dreams and livelihoods have been smashed, are boiling for revenge.
Coincidentally, the Empire state will be electing a governor this year, and there’s nothing that politicians like more than a juicy scandal (that doesn’t involve them) which can be turned into an issue that helps get them elected. The Democratic contenders for office have already worked accounting issues into their platforms, and it’s sure to be a hot-button issue on campaign stops in upstate New York.
New York isn’t the only state considering more legislation for accountants. California is also mulling some new laws, and other states are sure to follow.
As NYSSCPA president Jo Ann Golden noted, "States aren’t going to sit idly by and let (the Sarbanes-Oxley) law apply only to SEC registrants."
States have no obligation to reign in their enthusiasm for accounting industry reform by hewing to the letter of the Sarbanes-Oxley bill, and it’s not too far-fetched to say that a year from now, a small New York CPA firm that never dreamed of auditing a public company will be forced to curtail its tax consulting work for the non-profit it’s been advising for the last 10 years.
Grumet urged local CPAs – and CPAs nationwide should take heed, too – to contact their local legislators, work on their state society legislative committees, get vocal, get active, and make sure that any knee-jerk legislation that is currently being envisioned never comes to pass.
And those who think that the efforts of a few can’t make a difference should remember this quote from Dwight D. Eisenhower: "What counts is not necessarily the size of the dog in the fight - it's the size of the fight in the dog."
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