If there were some way to help the accounting profession to develop a United States Institute of Certified Public Accountants as a viable alternative to the present Institute, this would be a constructive step.

Any accounting firm that has offices in more than one state, and employs more than a minimum staff and partner group, say over 500 professionals, or bills more than $15,000,000 annually, should report publicly and be supervised nationally rather than weakly in one state or a few.

Government employees in bureaus or departments that check on or deal with clients of accounting firms should not be permitted to accept employment directly or indirectly through or with accounting firms, or their clients, nor should accounting firms dealing with federal matters be permitted to arrange such employment.

It should be a punishable offense for any financial institution or its officers or employees to bring pressure on or compel a customer to change auditors to a specified firm, or to require a customer to change to any of the firms subject to national supervision and reporting.

It is most important for Congress and the public to understand that as in all other professions, there are varying degrees of competence and capabilities in the accounting profession. Mere firm size has no bearing on these qualities

or on true professionalism.

In point of fact, a good small CPA firm or practi

tioner is probably more valuable and more economical to most clients than these large accounting conglomerates.

I thank you for this opportunity to present to you my understanding of what has been happening in the accounting profession, and my suggestions for

Mr. Satin?

TESTIMONY OF ROBERT A. SATIN, C.P.A. LOCAL PRACTITIONERS ACTION FORUM, BEVERLY HILLS, CALIF.

Mr. SATIN. Senator Metcalf, this report is submitted to you on behalf not of myself as a practicing accountant, but of a nonprofit corporation called the Local Practitioners Action Form-LPAF-& group comprised of some 100 small, local accounting firms representing some 300 C.P.A.'s and mainly located in southern California.

We formed in mid-1976 for the singular purpose of wanting to be more involved in the processes of the profession that provides our livelihood. One, I might add, of which I am very proud.

Our specific aim is to secure better representation for the local practitioner in the decisionmaking bodies of the local, State, and National accounting organizations.

The remarks that follow will generally be critical of the AICPA and they will also be critical of your recommendations. In both cases, however, there is a middle ground on which I will touch. I want to make you painfully aware that I have no intention of asking you, or helping you, to destroy the AICPA or any of its correlative organizations.

Rather, I have appeared on the groups' behalf with the express intent of wanting to find a way of making the AICPA more responsive to the needs of all of its members and thereby to the general public.

Our group believes that there is much of value in those organizations but a job of conscience raising must be implemented. Bigness in and of itself is not an evil. Misuse of the power that accompanies it is the force that must be rerouted.

To give you, gentlemen, a better view of our group, I have enclosed an article that I wrote for the Journal of Accountancy which was published in a somewhat abbreviated fashion, in the January 1977 edition.

The representation we seek is expected to be in the form of membership on as many committees and councils as possible. We want to become aware of what is happening in other committees at the formulative stage of new proposals, so that we might participate at that level, expose our membership to the new ideas, and supply their feedback to the committees.

We feel we must create this pipeline, because it generally does not exist until an exposure draft or ruling is promulgated and then time to respond is usually very short.

One of the early efforts of the LPAF was to send me to Philadelphia to attend the AICPA annual meeting in September 1976. There was a hope that I could attend the council meeting that was to take up the final vote on peer review, a subject in which we had a great deal of interest.

I had always assumed that these meetings were open to all members of the institute. I now find I should have probably been part of Ford

Motor Co.

I was shocked to learn in letters from the institute president that this was not the case [letters enclosed]. Only council members are

Aside from a 15-minute business meeting on one other day, there was no other business transacted. Every other event in the 3-day agenda was for seminars and discussion only. This is not the way to conduct open representation. For the institute to say that all proceedings are fully reported in publications, or that I should speak to my representative, does not give me an opportunity to see for myself firsthand if I am willing to put myself out to do so.

Classifying practice units for the express purpose of creating a line of communication between the individual member and the society hierarchy was developed by the institute in the form of groups A through

E.

Groups D and E are made up of accountants in private industry and academia. Group C is comprised of the largest 15 firms; group B the next 25; group A, which are presumably practice units of less than 50 members of the AICPA, totals approximately 16,960 such units representing 41,000 C.P.A.'s.

This idea is commendable, and members of LPAF met with group A to establish a rapport with them. When introductions were to be made we asked that each of the nine group A representatives in attendance identify themselves by stating the size of the professional staffs of their respective firms and the tabulation was as follows: 10, 14, 18, 24, 35, 58, 68, 85, 100.

This, once again, proves that what is on the surface cannot be taken as gospel. These men were all sincere in their reason for being there and they had, I am certain, grown from small firms but obviously some no longer could consider themselves either small or local. A recent AICPA survey indicated that 52.3 percent of its membership practiced in units of nine or less.

We pointed out to the committee that the geographic breakdown of the 15 group A representatives could be improved by being expanded. There was a heavy concentration of eastern members overbalancing a sparsity from the West. The Los Angeles Chapter of C.P.A.'s is the fourth or fifth largest organized body of C.P.A.'s in the United States, and it would seem appropriate if we had a representative.

This idea was rejected by the president of the AICPA and the chairman of group A. It will be interesting to see what the new committee will look like for the next administrative year. We were told that geography was not too important since our problems don't know State boundaries. This may be true, but we would like to feel that we are part of the solution.

We left the group A meeting feeling assured that the committee members had the very best intentions and would certainly do all they could. But they are only an advisory group, powerless to do anything but recommend. We have not heard from them since or seen any results of there being.

We have been told that local firm C.P.A.'s don't make good committee members or organization officers, because they can't devote the time to accomplish what is needed. We have informed all levels of the accounting organization that we will assist them in finding qualified, interested candidates.

We have not been asked as yet. Where we have made recommendations voluntarily, they have been ignored. We can do no more than

less time instead of using the same people on a number of committees. It is our feeling that there is a growing number of local firms that have grown to the 5- to 15-person professional staff size that will devote much time, given the opportunity. We only ask for the chance to put that theory to the test.

Being desirous of imputing views of local practitioners at the discussion level, we have, at times, requested status reports of a few specific committees from the institute.

What we have received is a letter outlining the committee's posture on an issue and telling us that exposure drafts will come out later on, or that conferences will be held later on, or that meetings around the country will be held later on. That is not responsive to our request or our announced intent.

I had another exchange of letters with the AICPA on order to carry this inquiry for information one step further. I saw a handbook for council members staating that one of the tools available to them, to make their job easier, was the highlights of committee meetings, and so forth, issued for internal use after each committee met. A copy of certain pages is enclosed.

Since this was what we had wanted and was previously told did not exist, I requested them. I received a reply informing me that it wouldn't be what I needed, they couldn't send it to everyone and to single out one person would be unfair. Copies of this correspondence are enclosed. What then is fair and what is available that I could use? We did request a breakdown of AICPA committee members by size of firm, since we were always told that the large firms don't dominate the committee structure, and we were informed that it had been requested from the computer center.

That was October 1976. It has yet to arrive. A breakdown of committee chairmanship might also be informative. Also, turnover by firm on committees might also prove enlightening. I have a feeling that in sensitive areas people might turn over, but certain firms don't.

At this juncture, I hasten to point out that I have not alluded to the Big Eight at any time. From where we sit, all of group C looks pretty big.

We finally come down to what we want of you. Why am I here? We see ourselves pushing against a barred door. We would like you to unlock it for us. Not tear it down or kick it in. It is hard to be more specific because we have yet to discover the inner workings of the institute.

To want to be a part just doesn't seem to be enough. The more we are around, the more we find out but that way will take forever and we could run out of steam. I am reasonably sure the AICPA has seen groups like ours come and go over the years.

Time is on their side and we recognize that. Help us to keep this from happening but don't be a friend by using legislative power. Invite the AICPA to change, prod them, but to do it with mandates backed by force of law would be to betray the very nature of what the Local Practitioners Action Forum stands for: a fully representative society able to formulate its own postulates, democratically arrived at through a true cross section of its population.

In preparation for my appearance here, I circulated our member

AICPA and this Senate subcommittee. Each of the letters I received is attached as an addendum to this report.

The feelings expressed in the main are rather uniform. They agree with your conclusion that the AICPA is a controlled organization. They, as members of the institute, are unhappy for a variety of particular reasons, such as displacement, specialization, peer review, overburdening paper shuffling, and so forth, but they are equally firm in stating that your recommendations are definitely not the proper solution. The answer lies other than in legislation.

Perhaps what is needed is some task force made up of AICPA members designated to seek an alternate structure for the AICPA to make it more responsive to all its members.

A committee picked to be very representative at the outset and not those presently or formerly in the power seat. We would clearly prefer to reshape what we have. It is understood and suggested by me, and the LPAF, that the big firms would of necessity have to play a major role in any structure.

Their manpower and financial resources are a great deal of what makes the organizations' wheels turn. To deny that would be foolhardy and unreal. We do, however, agree with the basic conclusion of your subcommittee that their control has gone too far and must be altered. Now, what will this do for you? It is my belief that if the AICPA was more democratic and its rules, principles, and standards were set by a broader representation of the accounting community you might find them less objectionable, more responsive and provide a better reporting system throughout.

In the public's interest and our clients, who are after all, one and the same, would be better served and that is what it is all about. Thank you. [The documents referred to follow :]