Some accountants in Illinois are feeling the impact of Sarbanes-Oxley even though they don't have any public companies as clients, because of a recent amendment to the Illinois Public Accounting Act by Public Act 93-683.
CPAs in Illinois are now prohibited from providing the non-auditing services referenced in Sarbanes-Oxley to a private company if the CPA or CPA firm is contemporaneously providing auditing services to the client, and that client has annual revenues exceeding $50 million, or more than 500 employees. An exception is made if, prior to the commencement of the engagement, the CPA provides a prescribed written notice to the company and the president or CEO of the company signs an acknowledgement that the company is aware of this and agrees to it. Summaries of Public Act 93-683 are found at www.icpas.org and www.cpai.com.
This type of state legislation shouldn't surprise us. As soon as Sarbanes-Oxley was enacted, accountants expressed concern over how the delivery of auditing services to private companies would be impacted.
In order to comply, at the very least, it makes extra work for CPAs in Illinois. But more importantly, how many CPAs will now have to justify to why they should be permitted to provide both set of services to a client? I also wonder how many companies will be uncomfortable with the same CPA firm providing both the audit service and the prohibited non-audit services, and decide to hire another CPA firm for the prohibited non-audit services.
The trickle-down effect of Sarbanes-Oxley is taking many forms, but this Illinois law shows what will probably be the ultimate impact on most for CPA firms. Unlike Sarbanes-Oxley, which provided more work for these firms with regard to public companies, the trickle-down state legislation and regulatory actions will directly reduce the firm's revenue.
Sarbanes-Oxley was intended in large part to protect third parties, investors in public companies, and employees whose retirement savings was mostly funded with the employer's public company stock. That can't be said for the Illinois legislation. But I expect that won't stop other states from following the lead of Illinois.
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