As of July 26, the state of New York rewrites its rules governing certified public accountants, greatly expanding the licensing requirements on CPAs and cracking open the door for qualified accountants in other states to practice on a limited basis.
It is only the second time in more than a century that New York has significantly altered its accounting laws, according to Louis Grumet, executive director of the New York State Society of CPAs. NYSSCPA has been holding information sessions throughout the year to ready accountants for the changes and estimates that the sessions have been attended by an even mix of New York CPAs, those from other states such as Connecticut and New Jersey, and those not currently practicing. Under the soon-to-expire regulations, inactive CPAs did not have to complete requirements for continuing education mandated for practicing CPAs, but that loophole will now be eliminated.
Whereas accountants had to maintain a CPA credential solely for traditional “attestation” services verifying financial statements and stiffer audits, they now must do so for taxation and other advisory services. CPA licensing requirements will also be greatly expanded to include professionals in academia, government and other arenas that have not been held to the same professional standards as traditional auditors.
The law signed in January by Gov. David M. Paterson also creates a temporary-permit process for out-of-state CPAs to practice in New York, with more than 40 states already offering a form of cross-border mobility of the profession.
After previous attempts in the state Assembly to push through an accounting bill that included cross-state mobility, co-sponsors including Assemblywoman Amy Paulin of New Rochelle, succeeded this time around with a compromise that establishes a sunset for such arrangements.
In late July, New York will begin awarding temporary CPA practice permits to professionals in good standing in their home states, with the permits valid for 180 days during a 12-month period and renewable on up to three occasions. In all, applicants can practice under a temporary permit no more than four years within a five-year period, at which point they would have to seek a permanent license and run the same continuing education gauntlet that New York”™s some 34,000 CPAs must undergo on an ongoing basis.
Out-of-state CPAs can currently perform non-attest services without need for a temporary permit.
That is a particularly momentous step for accounting firms in Fairfield County, Conn., whose customers regularly do business on both sides of the border. While many partners and associates at Fairfield firms already maintain CPA licenses in both states, a large number only do so in Connecticut.
The New York reform comes a year after Connecticut enacted its own law that allows accountants in other states to practice the profession here under rules the Connecticut Society of Certified Public Accountants likens to a “driver”™s license” approach to regulation.
Under the concept of “no notice, no fee, no escape,” CPAs can provide some financial review services without providing notice or fees to the Connecticut State Board of Accountancy. If they are accused of violating local statutes, however, the state board would refer the violation to their home-state regulators ”“ the “no escape” portion of the clause.
Such “foreign” firms must obtain a practice permit if they perform more rigorous attestation of finances through a formal audit.
Rhode Island has similar “practice mobility” rules in place, and New Jersey and Massachusetts have considered them. Until now, however, New York, has kept its barriers in place.
The reform comes just as CPA firms see daylight from the recession that has cost them some clients. In a survey by the American Institute of CPAs released last month, nearly half of those polled said they see the economic recovery beginning in earnest in the fourth quarter this year.
