This past week has seen a slew of rules adopted by the SEC to fulfill its mandate under the Sarbanes-Oxley Act. New York and other states are now considering adopting some of Sarbanes-Oxley-like provisions. This follows the fierce fight in California's last legislative session by CPAs in California and the state society there in particular, to limit the adverse impact on accountants of the three bills that were eventually enacted into law.
What practitioners have to understand is that the landscape is in a process of change, and there will undoubtedly be a number of battles before the final setting is determined. There will be victories, partial victories and even losses.
I am sure that accountants were quite happy with the SEC's position with regard to tax advisory services. Many had been worried that the SEC would designate it a prohibited service, so that auditors couldn't perform for audit clients. Listening to reasoning, the SEC didn't go where many feared. However, I am sure some accountants are not too happy with the SEC's rules on auditor rotation. A similar partial victory occurred with respect to the California legislation.
So what is happening? Many firms are conducting a little scenario planning at partner meetings, investigating the alternatives based on what they think will be the possible eventual landscapes they may face. In fact, there are a number who are actively lobbying legislative representatives at the state level.
Be certain, it will take some time to play out; but rest assured the final landscape will be much different for CPAs than the one that existed pre-Sarbanes-Oxley, Enron, WorldCom, and Andersen. For some firms, this might mean giving up the auditing of public companies and while for others, it might mean the divesting of business units on the closing down of practice areas.
