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New York StateAccountancy Law Reform

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•Summary of Public Accountancy Law Changes

•Becoming a CPA

•Maintaining a CPA

Overview

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•Broadens the definition of Public Accountancy

•Expands disciplinary authority to all CPAs

•Provides recognition of foreign equivalent education as a basis for licensure

Summary of Changes

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•Removes the exemption from mandatory CPE for individuals in private industry, government, and academia

•Changes the CPE period from state fiscal year (9/1 – 8/31) to calendar year

•Requires all public accounting firms to register with the state if they perform attest or compilation services and requires peer reviews every three years

Summary of Changes

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Bill signed into Law by Governor Patterson on January 27, 2009.

Effective July 26, 2009:•CPA’s whose principal place of business is in NYS must be registered and comply with the CPE requirements

•CPA firms doing business in NYS must be registered

Effective January 1, 2012:•CPA firms must submit a copy of its most recently completed Quality Review Report (Peer Review) with its application for re-registration

Effective Dates

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Enhance public protection

Update law to reflect current profession

Prevent confusion from inconsistent standards

Align law with public perception of CPA designation

Require CPA’s in industry, government, university,

and non-profit to apply ethics to their jobs

Why was the law reformed?

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Accounting Scandals …

WorldCom – CFO was a CPA from NYS and wasn’t found to have broken any state laws because they didn’t apply because he was not practicing public accountancy.

According to an SED memorandum …

“ …Approximately 45 percent of all discipline referrals to the SEC between 1991 and 2001 were related to incidents of alleged misconduct by NY CPAs that fell outside the Regents regulatory authority …”

Why is it important for all CPA’s to be regulated?

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Old definition1. Performing attest and or compilation services;

New definition adds the following1. Performing professional services for clients, in any or all

matters relating to accounting concepts and to the recording, presentation, or certification of financial information or data;

2. Performing for others one or more of the following services including but not limited to Accounting, Management Advisory, Financial advisory, and Tax, involving the use of professional skills or competencies of a CPA.

Definition of Public Accountancy

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Application of Accounting Skills• Preparation of financial statements & note disclosures• Analysis of the effects of transactions on account balances• Analysis of account balances• Calculation of key financial ratios and interpretation of the

results• Application of GAAP in practice

Application of Transaction Processing Cycles and the Control Environment

• Preparing flow charts to explain transaction processing cycles• Identification of potential weaknesses in the internal control

structure

Professional Skills & Competencies

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Application of Auditing Procedures• Evaluation of statements or representations made by

management & others• Application of appropriate current generally accepted auditing

standards• Identification of potential violations of ethical behavior• Fraud detection & deterrence

Application of Tax Law• Application of federal or state tax laws for individuals or

businesses• Calculation of payroll taxes

Professional Skills & Competencies

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Job Functions• Preparing financial reports for internal purposes• Preparing budgets, forecasts, and variance analysis• Performing ratio analysis and other financial analytics• Conducting internal audits• Preparing or approving financial transactions• Preparing financial statements• Preparing 990 and other tax returns• Evaluation of investment opportunities using discounted cash

flow, net present value, and risk analysis

Practice of Public Accountancy in the Cornell Environment

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Other Examples of the Practice of Public Accountancy

• Retired CPA who provides free accounting services for their church

• Retired CPA who prepares tax returns for relatives for free Yes, if they sign the return as preparer No, if they do not sign the return as preparer

• Retired CPA who sits on a Board of Directors Yes, if they are on the Audit Committee, Finance Committee,

Budget Committee, or other similar committee No, if they do not serve on any of the above committees

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1. Be of good moral character and at least 21 years old

2. Education

3. Exam

4. Experience

Becoming a CPA

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Education• New requirements effective August 1, 2009• 150 credit hours

33 hours accounting 36 hours general business Must include components of communication, ethics, and

research• Program must be registered OR accredited OR deemed

equivalent by the DOE.• Must meet education requirements to sit for exam.

Becoming a CPA

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Exam• NY recognizes the four-part computerized exam

administered by the AICPA.1. Auditing & Attestation 2. Financial Accounting and Reporting 3. Regulation 4. Business Environment and Concepts

• Passing score is 75.• If all or part of the exam is taken outside New York State,

scores must be officially “exchanged” with New York.• Each exam part may be taken individually ONCE during a

calendar year and ALL must be passed during one 18 month window of time.

Becoming a CPA

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Experience• Formerly, individuals needed 2 years of auditing experience

to attain licensure.• 1 year of experience could be waived if an individual had a

masters (150 hour requirement).• As of the August 1, 2009 change, all new CPA candidates

must meet the 150 hour requirement and thereafter attain 1 year of qualify experience.

• “The amendment broadens acceptable experience for licensure to include providing any type of service or advice involving the use of accounting, attest, compilation, management advisory, financial advisory, tax or consulting skills … in public practice, government, industry, or educational institutions.”

Becoming a CPA

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Must keep registration active ($290 for 3yrs)

Must comply with annual CPE requirements

Can no longer claim “inactive” status

Are subject to disciplinary authority of NYSED

Failure to comply may result in charges of unprofessional conduct and can lead to revocation of one’s CPA license.

How does this affect CPA’s in industry?

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How do I check my current status?

The New York State Department of Education - Office of the Professions has an on-line professional license verification system.

The verification system can be found at the following address:

http://www.op.nysed.gov/opsearches.htm

The online verification will show your:CPA License numberDate of licensureCurrent Status (registered, not registered, inactive)Date current registration expires

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Out of state CPAs whose principal place of business is NYS

must become licensed and registered in New York.

Out of state CPAs whose principal place of business is not

NYS but provide attest or compilation services in NYS for a

short period of time may obtain temporary practice permits.

How does this affect those with a license from another state?

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If you have a CPA license from another state with significantly comparable licensure requirements you can apply for “Licensure by Endorsement”.

To qualify you must have four years of experience under the supervision of a U.S. licensed CPA since your initial license was issued and within the last ten years and provide evidence of:

Passing the CPA examCompletion of education requirementsExperience historyLicensure in good standing for each state

Licensure by Endorsement

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The State Board for Public Accountancy may accept evidence of five years of acceptable public accounting experience following initial licensure and within the ten years immediately preceding your application for licensure in New York State if, at the time of licensure in the other jurisdiction:

the licensing standards were not fully equivalent to the current New York State standards or,

you passed an acceptable examination but under conditions not acceptable to New York State (for example, not passing two or more parts together prior to passing parts singly or not completing the examination within a three year period)

Licensure by Endorsement

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•40 hours of general studies or 24 hours of concentrated study in one recognized area of study during each calendar reporting year.

•Must complete 4 hours of professional ethics CPE during triennial registration period.

•New licensees are exempt during their first triennial registration period.

Bonus: Instructors may claim an additional 2 hours of CPE for each hour taught.

What are the CPE requirements?

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Recognized areas of study

•Accounting•Attest•Auditing•Taxation•Advisory services•Specialized knowledge and applications related to specialized industries

What are the CPE requirements?

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Since the CPE period changed from the state fiscal year (9/1 to 8/31) to a calendar year, we have an additional four months to complete CPE this year.

For this year only all CPE earned between September 1, 2008 and December 31, 2009 count towards the CPE requirement (40 hours general studies or 24 hours of concentrated study)

CPE requirements Cont.

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Licensees who are not performing any type of accounting, tax, financial or management advisory work in NYS May request “inactive status” by filing a written statement with NYS containing the following:

Statement that you are familiar with the requirements of the new law and that you believe you are eligible for inactive status

Current job title and employer name and location with a brief explanation of why you are eligible for waiver of CPE (e.g. explanation of job duties)

Inactive Status

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People who are currently not registered or are returning to active status must:

First complete 24 hours of CPE within the 12 month period prior to returning to active status;

Notify the SED and provide documentation supporting the 24 hours of CPE; and

Following re-entry complete a pro rata portion of CPE for the remainder of the calendar year

Returning from Inactive to Active Status

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For a limited time only …

You can return to active status without first completing 24 hours of CPE in the preceding 12 month period …

If you submit an application to reactivate your registration between February 1, 2009 and July 31, 2010.

Returning from Inactive to Active Status

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•Existing CPAs•How does this effect existing CPAs at the university?•Do we have a comprehensive list of who these individuals are and where they are employed?•Does the Audit Office need to coordinate their CPE or licensing needs?•Is the university at risk under the new regulations if an employed CPA fails to meet the state’s new regulations?

Implications for Cornell

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•Potential CPAs•Increased mentoring opportunities for current staff to promote licensure•Formerly only available in Audit Office

Implications for Cornell

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Make sure you are registered

Complete CPE requirements by December 31, 2009

Spread the word

Coordinate CPE training so others can benefit

Wrap Up

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NYSED – Office of the Professions:

http://www.op.nysed.gov/cpa.htm

New York State Society of CPA’s:

http://www.nysscpa.org/

Phone or email questions to NYS Board of Public Accountancy:

Phone: 518-474-3817 ext.160Email: cpabd@mail.nysed.gov

Where can I get more information?