Reform should pass the public interest test.

• Author: George, David L.
• Position: From the Chair - Accounting - Brief Article

Our profession is in the midst of a crisis. The turmoil isn't likely to go away soon, but as media hoopla and emotional energy surrounding the Enron collapse subside, we will enter a new phase that will require leadership from all of those who are realistic in their expectations for reform nationally and in California.

EMBRACING REFORM

CalCPA embraces professional reform where a demonstrated need exists. Public protection is--and should remain--our highest priority, but changes to accounting laws and regulations should be considered based on whether they meet the needs of all users and investors. At the same time, we should be mindful that reform should consider a system that is manageable and reasonable, not one that creates public confusion or unnecessary expense.

Currently there are more than 50 proposals on the table in Washington D.C. and many are expected in California. While most of these legislative and regulatory proposals are well-intentioned, it is crucial that we understand the details contained within each proposal, otherwise the result could be an unintended consequence.

NATIONAL AND UNIFORM

To begin with, reform should be national and uniform--as opposed to local and whimsical. While we recognize the well-intentioned efforts of our state and national legislators and regulators, we must caution them.

Their focus should remain on what is best for the public, as opposed to what may be perceived to be good or politically correct.

What is best for the public is national and uniform reform. A hodge-podge of state and federal regulations will create enormous public confusion that will not serve the public interest and will likely cause further negative impact to investor confidence.

Reform must recognize the fundamental differences in services delivered by CPAs to public companies and those rendered for private companies. A CPA who serves a privately held company is frequently the only accounting professional a client may know who has the skill set to advise them on complex transactions.

It also should be recognized that CPAs who work with private companies, work directly with stakeholders--banks, lenders, insurers and others--who are sophisticated enough to perform their own due diligence.

This is in sharp contrast to publicly held companies, where reports are filed in a public forum, and investors and shareholders often have no direct contact with the CPA. CPAs who work with public companies have a clear and distinct duty to...