(3) The practice of professional accountancy should ultimately be restricted to certified public accountants who have demonstrated competency by passing the Uniform CPA Examination, by fulfilling educational and other requirements and by continuing to meet professional standards. State boards of accountancy entrusted with the administration of public accountancy laws should be comprised of certified public accountants who are qualified to assess the performance of other certified public accountants.

(4) The enactment of a regulatory accountancy law is not intended to deprive persons who are practicing public accounting as principals at the time of passage of the law of their means of livelihood, and they should be permitted to register as public accountants and become subject to regulation. All further registration or licensing to practice public accountancy should be limited to persons demonstrating their competence as certified public accoun

tants.

(5) The accounting profession serves a broad public interest as evidenced by the similarity of accounting needs in all political jurisdictions. In order that it may serve this interest, uniform licensing and regulatory requirements should be established, and unnecessary restrictions of a local character should be avoided. It can be readily seen that the AICPA policy would favor a dying class for every type of accounting practitioner other than certified public accountants, and that the regulation of the profession of accountancy would be in the hands of certified public accountants to the exclusion of all other practicing accountants, or the public.

Public interest in the regulation of the practice of May 1974

public accountancy has grown with the increasing regulation of financial and business activities by Federal, state and local government agencies. The public interest aspects of public accountancy have been consistently recognized in a long line of cases, starting with the Wisconsin Supreme Court in 1930, when it said:

The field of accountancy has become greatly enlarged and much more important than formerly We now have income tax laws, state and inheritance tax laws, legislation on the sale of securities, blue sky laws, social security legislation, and unemployment insurance with payroll taxes, bank legislation, real estate brokers laws, unfair trade practice acts, besides all of the work being done by accountants in the field of rate regulation, insurance practice, public utility rates, sales of secu rities, largely resting upon the reputation of the accountants who do the accounting, and many other aspects of the matter which make the whole subject of public accounting a proper field for the exercise of police power in the interest of the public welfare.

It is interesting to note that the court spoke of "the whole subject of public accounting as being a proper field for the exercise of police power in the interest of the public welfare". It is also interesting to contrast the court's view with the first two points of the AICPA legislative policy, which imply that only the rendering of opinions on financial statements (the so-called attest function) is sufficiently involved with the public interest to warrant licensing and regu lation of those performing such functions But the point has been well made that there are other aspects of public accounting which are sufficiently imbued with the public interest to warrant the licensing and regulation of persons performing these services

Former NSPA President Stuart W. Frankford stated: "The rendering of services to the public such as auditing, accounting, bookkeeping and tax return preparation does affect the public interest, in that these services are directly related to significant financial decisions and their subsequent use in determining Federal and local taxes."

An inconsistency in the official AICPA position is best illustrated by the fact that-according to the results of a national survey reported in the January, 1972, issue of the Journal of Accountancy—a majority of CPA's responding indicated that the public interest is involved in virtually all aspects of accounting. Some 200 persons-consisting of members of the AICPA Council, state societies, state boards of accountancy and the National Association of State Boards of Accountancy-responded as follows to the question: "Is the public interest involved in-"

Another inconsistency is further illustrated by the fact that most CPA's themselves spend most of their time doing accounting work other than rendering opinions on financial statements. According to surveys focusing mainly on individual CPA practitioners, as reported in the Journal of Accountancy, most CPA's spend as much as three quarters of their time doing tax work, write-ups and the preparation of unaudited financial statements. The public interest in various aspects of accounting practice is inherent in the work itself, not in whether the person who does it is a certified public accountant or a public accountant. The AICPA itself recognized this by giving credit for continuing education purposes to a wide variety of accounting courses dealing with all aspects of accounting. These include such subjects as taxation, management services, communications art, economics and administrative practice.

One important part of protecting the public interest is to see that the public need for qualified accounting services is met. It has been shown that public accountants have an unique role in serving the needs of small businessmen-a vital segment of our economy threatened not only by business competition from large enterprise but by the increasing complexity and amount of government regulation. In addition, there are geographic dimensions to the problem of meeting the public need. Surveys show that the great majority of certified public accountants tend to be clustered in large metropolitan areas; whereas the distribution of public accountants is more even, thereby meeting the needs for ac

counting services in rural as well as urban areas.

This diversity in the need for accounting services by the public has been recognized in the many different types of public accountancy laws among the different states. The legislative policy of NSPA calls for the licensing of all persons rendering all levels of accounting services because of the public interest inherent therein. It clearly recognizes that the public need for responsible accounting services cannot be met by licensing only a single class of accountants, which is not itself equipped to meet the total public demand for accounting services.

The NSPA legislative policy derives from the fundamental belief that the purpose of legislation to regulate the practice of public accountancy is to protect the public interest by insuring the competence and integrity of the accounting profession and the practitioners which comprise it. Therefore, it does not seek to advance the interest of one particular class of accountants at the expense of the profession as a whole or the public. It provides for truly comprehensive accounting legislation because it takes into consideration the public interest inherent in all aspects of the practice of public accountancy. On this point, the principles of accountancy legislation of NSPA state:

It is in the interest of the public and all members of the accounting profession that legislation be adopted to regulate and license those persons who, in addition to Certified Public Accountants and Licensed Public Accountants, offer or perform accounting services for the public.

Accountancy legislation should not only grant a title to persons licensed under the continuing licensing program, but more importantly the law should regulate and control the "functions" or "services" offered or performed by such persons to the public.

This last point demonstrates that the legislative principles of NSPA are founded on a concern for the public interest, and not simply to obtain a professional title to enhance the members, nor to monopolize a particular accounting function for a particular class of accountants. Rather, NSPA recognizes that the stature of the accounting profession is measured only by its dedication to the public interest and the performance of those who comprise the profession. The differences between NSPA and AICPA are founded on contrasting attitudes about the accounting profession and the public interest. NSPA believes that the accounting profession should be a unified profession and that the public interest should be protected by the continuing licensing of all persons rendering accounting services. AICPA's new legislative policy, on the other hand, seeks advantage for a particular class of accountants without regard for the public interest inherent in the regulation of all accounting functions. The advancement of the private self-interest of a group at the expense of the public welfare is an idea whose time has gone.

THE NATIONAL PUBLIC ACCOUNTANT

RESS RESPONSE

In October, 1974, a guest editorial by Warren L. Ress, CPA, President of the New Jersey Society of Certified Public Accountants, appeared in The CPA Journal, published by the New York State Society of Certified Public Accountants.

The subject of the Ress article was "Regulatory Legislation: A Challenge to the Public Interest", and much of the article was devoted to comments about the National Society of Public Accountants and NSPA legislative philosophy. NSPA sought the right to reply to Mr. Ress and was initially granted permission to respond. Upon receipt of the response, which complied with all requirements established by The CPA Journal, NSPA was informed that the response would have to be cut in half and that Mr. Ress would be given another opportunity, prior to publication, to review the NSPA statement and that his additional remarks would be printed simultaneously.

As is apparent from the last letter sent to The CPA Journal, NSPA asked for reconsideration of this decision. As of this date, no reply whatever has been received.

We believe that readers of THE NATIONAL PUBLIC ACCOUNTANT will be interested in the original materials and the attendant correspondence. This is an example of NSPA attempts to clarify and correct erroneous information which may be produced, intentionally or unintentionally, about the accounting profession and the National Society of Public Accountants.

-The Editors July 10, 1975

Regulatory legislation: A challenge to the public interest. (Reprinted with permission from The CPA Journal, October, 1974)

Under the guise of protecting the public interest, several states are creating a tremendous problem for the accounting profession.

In recent years, states have enacted regulatory legislation creating second-and third-class practitioners in the profession. In a great many of these states, some of these classes are permitted by law to practice all-or almost all-public accounting functions. As a result, we have licensed practitioners, with various backgrounds in required education, experience, and examination, certified by a state to hold themselves to be practicing accountants. This has brought confusion to the public mind; the public interest has suffered instead of being protected.

If this growing trend is not stopped soon, the public will be faced with so many classes of accountant practitioners, with no guide for inferring the nuances their different designations are intended to reflect, that the term Certified Public Accountant will become meaningless.

This increasing confusion has been furthered by the National Society of Public Accountants (NSPA) and its state affiliates-a small, determined group which is attempting to have states enact legislation creating continuing classes of accounting practitioners and, if possible, public accountants. The policy is to concentrate upon the less populous states; if successful there, the inevitable ripple effect created by the authorization of two or more continuing classes of accountants in smaller states may well affect legislation in all other states, including the

THE NATIONAL PUBLIC ACCOUNTANT

more populous ones.

The result will be that the public will be misled about the qualifications of those calling themselves professionals and performing almost the same public accounting services. If the concept of two or more continuing classes of public accountants gains a foothold, a major problem will exist. For example, third parties who rely on the opinion of auditors who are public accountants (but not Certified Public Accountants), would be relying on individuals who had not-perhaps, because of lack of educational background, could not have-taken the Uniform Certified Public Accounting Examination, or who had been unable to pass this examination.

The NSPA not only is applying political pressure to state legislative bodies, it also is applying pressure on the General Accounting Office of the Federal Government. The NSPA is seeking to have the GAO alter its 1970 decision which would restrict governmentrequired audits conducted after December 31, 1975 only to Certified Public Accountants and those public accountants who were practicing on or before December 31, 1970. Success here could be used to Support NSPA proposals to license two or more continuing classes before state legislatures.

The NSPA also has recently inaugurated an accreditation program. While such a program may have potential benefits, the initial requirements are almost meaningless. The key requirement consists of a takehome, open-book examination which includes one practice problem and a set of true-false questions. If he passes, the practitioner receives a certificate attesting to his achievement. This could leave an uninformed observer with the impression that this certificate is the equivalent of the certificate held by the Certified Public Accountant.

September 1975

Throughout the United States and its possessions there are 54 jurisdictions which license the practice of accounting. Of these, 10 are "permissive," that is, they license and regulate Certified Public Accountants only. Of the remaining 44, 15 license a class of accountants in addition to Certified Public Accountants on a continuing basis. (NOTE: Eleven license "public accountants" and 4 license "accounting practitioners.") Of these 44, 29 provide for a "dying class" of noncertified public accountants.

Of the 15 jurisdictions which provide for continuous licensing of public accountants or accounting practitioners, 6 require only a high school education or its equivalent, while 5 do not require any experience. One state requires no written examination at all, and the remaining 14 require varying degrees of examination, such as parts of the Uniform CPA Examination, the NSPA examination (an examination of unproven reliability which is being used in three states), or a special written examination given by the State Board. Yet those persons who are licensed as public accountants in 11 of the 15 jurisdictions are able to perform the same services as Certified Public Accountants.

A summary of regulatory laws, by jurisdiction, is presented below: