Least isn’t always best

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Insofar as the United States can be said to have a philosophy, it rests on a handful of commonly held dictums. Some, like “All men are created equal,” are explicit and widely agreed-upon; others are implicit, and perhaps more open to disagreement. One of the latter — “That government is best which governs least,” which is most famously associated with Henry David Thoreau, though it didn’t originate with him — should be of particular interest to accountants right now.

I mention it because the American Institute of CPAs and the National Association of State Boards of Accountancy recently announced a joint initiative called the Alliance for Responsible Professional Licensing, which aims to protect the CPA license from an ongoing movement to diminish government licensing of all professions, particularly at the state level. The movement’s goal is to lower barriers to entry, eliminate red tape, and reduce, as much as possible, government regulation of occupations. It has everything in its sights, from hair braiders to auctioneers to — you guessed it — accountants.

At first blush, the goal might seem to be very much in keeping with Thoreau’s idea of governing least. Why, they ask, does the government have to get involved? To borrow an argument from a different debate, isn’t it ridiculous that barbers have to have a license, but the person who prepares your taxes doesn’t?

The problem is that both parts of that argument are true: It is ridiculous that barbers have to be licensed — and it’s also ridiculous that tax preparers don’t have to be. No matter how bad a haircut is, it will not cause an economic crisis, or significantly impair government revenue. A corps of professional tax preparers who aren’t all that professional, on the other hand, can help contribute to rampant identity theft and a tax gap of over $400 billion.

The tax laws are infinitely more complex than they were in Thoreau’s day — as are our economy and our markets. If tax returns are complicated enough and important enough to require that their preparers be properly vetted and licensed, then so are financial statements and audit reports (as we learned in 1929) and that means government testing, government requirements, and government licensure.

Thoreau’s dictum is the product of an earlier time, when we were comfortable requiring no more regulation of a bank or a hospital than of a barbershop. That is no longer the case: While it’s not unreasonable to say we should take a light hand with, say, hair braiders, it’s also eminently reasonable to require those who handle critical functions of our economy — and who are, largely, handling compliance with government regulations — to be skilled, educated and provably competent.

It’s worth noting at this point that the modern accounting profession is a child of regulation, its calendar determined by compliance deadlines, its work product shaped to the specifications of regulators and standard-setters, its clients driven by government mandates. Embracing advisory services may change that to some degree, but compliance with government regulations and standards will long remain embedded in what accountants do.

And with that in mind, it’s worth it to the profession to stand up for those very licensing and regulatory regimes, and to defend the need to require demonstrable skill, knowledge and expertise on the part of those who help implement them.

You can and should feel free, obviously, to hate any individual regulation or accounting standard or section of the Tax Code — or all of them, for that matter — but the notion that complex subjects that are of interest to us all should be left to anything but qualified professionals simply doesn’t fly. While it may be true elsewhere, in this instance, least is definitely not best.

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