It happened one night: members leave a mark in Sacramento - Government Relations - accounting regulation bill defeated - Brief Article

On Thursday night, May 30, something interesting happened in Sacramento--AB 1995 (Correa) failed on the Assembly floor.

The final vote was 23 yes, 31 no and 26 not voting. It wasn't even close.

Legislators weren't opposed to the author's stated purpose--to protect California shareholders from future Enrons. Instead, the legislation failed because legislators heard CaICPA members' message: "Meaningful reform must be legislated at the federal level."

That's the message Bakersfield CPA Patrick Paggi shared as he and hundreds of his CPA peers took to the halls of the Capitol just days before the Assembly's vote.

"I believe that our show of force made the legislators realize that the CPA profession is serious about what we do, and that the vast majority of CPAs are professional and of very high integrity," says Paggi.

CPAs Everywhere

Upon entering an elevator at the Capitol, Sacramento CPA Guy Wang was reminded instantly why he was there: "I ran into a woman who said, 'Boy, I'm having a bad day, but you guys are having a bad year.' That's why I participated. We as CPAs have gone from being the most trusted professional to a laughing stock--all because of a few bad apples."

But no one is laughing in Sacramento. Our members' presence at the Capitol, combined with the thousands of letters opposing AB 1995 and other legislation that already had been sent, made an impression on the Legislature.

AB 1995 would have severely restricted the services that CPAs performing audits of publicly traded companies could provide to their clients.

The measure would have put California out of step with every other state and increased confusion in the financial markets. It was not only unworkable and unenforceable, but it could have been ruled unconstitutional. Additionally, the SEC has historically determined that some non-audit services actually increase a firm's ability to dig deeper during an audit.

Restoring the Faith

CalCPA is committed to restoring America's faith in its financial markets and the CPA profession, but reforms must come at the national level and must comprehensively address the contributing factors to Enron. AB 1995 did not meet these criteria.

The CPA profession was able to persuade Assembly Member Correa to amend his bill to only apply to publicly traded companies. However, we were unsuccessful in persuading him to amend it further to match more closely the approach being considered by Congress, the SEC and the California Board of Accountancy.

AB 1995 was supported by the California Public Interest Research Group (CalPIRG), PIRGs were started by Ralph Nader; the Center for Public Interest Law, the trial lawyer group, including class action plaintiff attorney William Lerach; and another group, started by Nader, Consumers Union.

Far From Over

On June 4, the Bureau of National Affairs Inc., reported that Assembly Member Correa's staff anticipates reintroduction of all or part of AB 1995 in the next few weeks.

Other legislation impacting the profession includes SB 1527 (Burton) which contains a short list of permitted services that could be performed for publicly traded companies by a CPA firm that also provides them with any audit or review services.

SB 1527 passed the Senate in mid-June by a 21--13 vote and has moved to the Assembly.

Still a Threat

While Correa's bill never left its house of origin, several bills have passed from one house to the other and could detrimentally impact the profession and California businesses:

AB 2970 (Wayne)--Prohibits auditors from going to work for publicly traded companies for one year after they performed an audit.

AB 2873 (Frommer)--Sets stringent work paper retention and documentation requirements for all CPAs. The bill also establishes a rebuttable presumption, i.e., if the documentation standard is not met, the work was not performed, information was not obtained and pertinent conclusions were not reached.

SB 2023 (Figueroa)--Currently moves up the date for mandatory peer review from 2006 to 2004 and may be amended to increase the enforcement ability of the CBA.

AB 2834 (Midgen)--Requires CPAs to be on a state controller-approved list before performing school district audits.

For up-to-date information on these bills and how to contact your legislators, go to http://calcpa.iris1.com.

Ready to Respond

Threats to the CPA profession and California business continue and CPAs must be ready to respond. It is important that legislators hear from their constituents on issues of great importance to the profession. And you have shown that CPAs throughout California are willing to write to their legislators, attend CPA Day at the Capitol and talk about the real issues involved with Enron and the important services that CPAs provide.

"I was struck by the dedication and spirit of my CPA colleagues," says Loretta Doon an assistant executive director with the California Teachers Association. "The impact of our visits with legislators was tremendous. Grassroots lobbying works."

Bruce C. Allen is CalCPA's director of government relations.

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