The latest American Institute of CPAs' Statement on Standards for Tax Services has some practitioners upset that it could hurt smaller firms that are primarily engaged in tax preparation.SSTS 9, available on the AICPA Tax Center Web site, was released a year ago in proposed form and is slated to go into effect on June 30, 2007. It "sets forth the applicable standards for members concerning the obligation to have a system of quality control for their tax practice (public practice) or function (nonpublic practice)."

The statement requires that a member's firm or employer establish a system of quality control that includes five elements: integrity and objectivity, personnel management, acceptance and continuance of clients and engagements (public practice only), performance of professional services, and monitoring and inspection.

It states that, "A member providing tax services is encouraged to practice in a firm or work for an employer that has established and maintains an adequate system of quality control for its tax practice or function. However, it is the responsibility of the member(s)-in-charge of such tax practice or function to ensure an appropriate system of tax practice quality control is implemented."

The statement suggested that member firms or employers document, "where appropriate, compliance with policies and procedures relating to integrity and objectivity."


Some comments questioned the need for additional guidelines for tax practices.

"There's nothing new here," said Jerry Burchfield, chairman of the Arkansas Society of CPAs Taxation Committee. "We already have standards."

In his letter on behalf of the Arkansas society, Burchfield suggested that the statement's wording implies the establishment of another level of peer review. He noted that the IRS estimates that there are approximately 1.2 million tax return preparers in the United States, about half of whom are CPAs, attorneys and registered agents.

"For every professional preparer who is discouraged by additional oversight and cost burdens, there is a non-professional preparer ready and willing to handle his customers," he stated. "Our older members who maintain tax practices, many of whom are nearing retirement, really have no need of their CPA certificate or membership in order to retain their clientele ... . In fact, several respondents to our inquiries regarding the proposed standard simply stated that if it is instituted, they would relinquish their certificates and/or memberships in the AICPA."

The proposal generated 60 comment letters, according to Ed Karl, director of the AICPA Tax Division. "That's a very small number in terms of our membership, but quite a few in the history of tax standards," he said. "In general, people felt that quality control is important, but they don't want to see an enforceable standard. They felt it would put CPAs at a competitive disadvantage."

He added, "Some said it was not clear enough, because it was designed with flexibility as to how you could implement it in terms of size of firm. So they say it is not clear on what you have to do to meet the standard."

"Although some people thought we were headed toward peer review, we didn't contemplate that," said Karl.

Nevertheless, said Burchfield, "The wording is scary ... . If I have to, I can practice tax without the AICPA or my CPA credential - it's the Internal Revenue Service that governs how to practice tax."

In her comment for the Texas Society of CPAs, Allyson B. Baumeister said that the proposed statement "establishes standards which are redundant with the existing standards;" that "existing governmental bodies charged with overseeing the compliance with tax laws have adequate authority to regulate the quality of the end result of tax practice by CPAs;" and that "the recommendations encompassed in the proposed standard are vague, and therefore possibly misleading."


However, the real concern should be how to apply the standards to members who aren't in public practice, according to Janice M. Johnson, CPA, a New York-based hedge fund consultant and a member of the New York State Society of CPAs' Tax Division Oversight Committee and the AICPA Tax Executive Committee. "For example," she said, "the tax director of a corporation needs to live up to those standards, but how do you do this when you're in an environment that is so different from public practice?"

Gerry Sokolski, consultant to Rochester, N.Y.-based Mengel Metzger Barr & Co. LLP and past president of the New York State Society of CPAs, agreed. "If you're a tax manager in an industrial firm, you might not have the same control over the people who work for you as in a public accounting firm," he said. "It's good to have guidance, and important to have procedures that ensure quality tax practices. But I'm not sure that SSTS 9 is the magic elixir to this issue."

Dayton, N.J.-based practitioner Martin Davidoff, a CPA and tax liaison chair of the American Association of Attorney-CPAs, noted that the proposal states that firms should undertake "only those engagements that can be completed with professional competence, and appropriately consider the risks associated with providing professional services in the particular circumstances."

"However," he said, "it also requires firms to establish procedures that set this forth. Should it not be enough to just have as a policy that firms will only handle engagements that they will complete professionally and competently?"

"Overall, these are good concepts," said Davidoff. "They should be taught to all accounting majors before they graduate so they are part of their psyche. But to require firms to continuously document what they know is right is just more unproductive paper work, and steals time from professionals."

In response, Karl said that the standard clearly would not be implemented on June 30.

"We have formed a task force to look at the comments in more detail," he said. "We want the task force to analyze the comments with the view to see what pluses and negatives there are to enforceability, and what other options there are. It may make a recommendation not to have an enforceable standard, or to have an enforceable standard at a later date."

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