RISCPA

May 2, 2008
AICPA ISSUES REVISED PEER REVIEW STANDARDS
NEW YORK (May 2, 2008) – The American Institute of Certified Public Accountants Peer Review Board has issued new standards for performing and reporting on peer reviews to promote quality in CPA firms’ accounting and auditing practices.

The new standards are intended to produce simpler more readable reports that will provide greater transparency to state boards of accountancy, federal agencies such as the Government Accountability Office, and the private sector.

“We have re-written the standards to be more principles-based,” said Susan Coffey, AICPA senior vice president for member quality and state regulation. “It results in less of a checklist-based process that is intended to be more robust. It focuses the report on the most important issues,” Coffey said.

A key difference in the new peer review standards is elimination of letters of comment and the old three-tier system of unmodified, modified and adverse grades given to firms by reviewers. The new standards require a simple pass, pass with deficiencies, or fail grade.

The new reports are designed to be more user-friendly by making it very clear whether a firm has satisfactorily designed a quality control system and is complying with that system. The reports will make clear whether a firm has deficiencies in that system, or whether it has no system at all.

“The AICPA's move to a principles-based and more transparent peer review process with simplified reporting is clearly a step in the right direction,” said David M. Walker, president and CEO of the Peter G. Peterson Foundation and former Comptroller General of the United States. “I look forward to additional improvements in the future in order to ensure audit quality.”

- more -

AICPA Issues Revised Peer Review Standards
Page 2 of 2

The AICPA is developing additional guidance for the approximately 30,000 accounting firms nationwide that will be subject to peer review under the new standards and the 2,000 peer reviewers who will apply the new literature. The new process is intended to guide reviewers to include significant concerns in their actual reports.

The accounting profession has conducted peer reviews as a means of self-policing the profession since the 1970s. Peer reviews became mandatory in the 1980s for AICPA members who do audit work. The new standards apply to firms that do audit work for private companies, government agencies, non-profit organizations and employee benefit plans. The new standards further apply to firms that do reviews, compilations, and other attest work.

Members’ firms currently enrolled in the Center for Public Company Audit Firms Peer Review Program are covered under this measure for their non-public work. Since the enactment of Sarbanes-Oxley, the Public Company Accounting Oversight Board conducts inspections of the firms’ public company audit practices.

The revised Standards and Interpretations are effective for peer reviews commencing on or after Jan. 1, 2009, and are available on the AICPA Peer Review Program and CPCAF Peer Review Program Web sites at www.aicpa.org/members/div/practmon/index.htm and www.aicpa.org/centerprp/index.htm, respectively.

April 17, 2008
U.S. House of Representatives Approves Two Provisions Important to CPAs
Bill Would Equalize Tax Preparer and Taxpayer Tax Return Reporting Standards and Remove Onerous Cell Phone Business Recordkeeping Requirements

Washington, DC (April 17, 2008) – The American Institute of Certified Public Accountants is pleased the U.S. House of Representatives passed two provisions the accounting profession has strongly urged Congress to adopt. One provision would restore the proper relationship between tax preparers and taxpayers by equalizing IRS disclosure standards. The other provision would free businesses from onerous recordkeeping requirements for cell phones.

The provisions are included in H.R. 5719, the “Taxpayer Assistance and Simplification Act of 2008,” passed by the House on April 15 “We are delighted that House members voted in favor of these two provisions that are so important to the CPA profession and business community,” Barry C. Melancon, president and chief executive officer of the AICPA, said. “We urge Congressional leaders to seek a solution to the unrelated, controversial provisions in the bill so that the legislation can move forward in the Senate.”

The bill faces a veto threat from the White House because of provisions the Bush administration says would impose new administrative burdens on trustees of Health Savings Accounts and would repeal IRS’s authority to use private debt collectors. The AICPA urges House and Senate leaders to find ways around these obstacles so that legislation equalizing the reporting standards between tax preparers and taxpayers – a top priority for the AICPA – can be passed by Congress and signed by the president.

Tom Ochsenschlager, AICPA vice president for taxation, said, “We believe legislation is the only way to correct the flawed law passed by Congress in May of 2007 that raised the tax return reporting standards for tax return preparers to a level higher than that required of taxpayers.” Ochsenschlager explained that these unequal thresholds create the potential for conflicts of interest between preparers and their clients, and consequently could affect the nature of taxpayers’ representation.

The cell phone provision of H.R. 5719 would remove cell phones and similar telecommunications equipment from the definition of “listed property” in the Internal Revenue Code. “Technology and business practices have changed significantly since cell phones were first introduced and required to be treated as “listed property,” Ochsenschlager said. “It’s time to lift these burdensome rules off taxpayers.”

“The CPA profession appreciates House Ways and Means Committee Chairman Charles Rangel’s leadership and support for including these two provisions in H.R. 5719,” Ochsenschlager said. “In addition, we want to thank Representative Joseph Crowley, a New York Democrat, and Representative Jim Ramstad, a Minnesota Republican, for introducing H.R. 4318 to equalize the tax return reporting standards, and Representative Sam Johnson, a Texas Republican, for introducing H.R. 5450 to remove cell phones from listed property.”

April 16, 2008
Two More States Pass Mobility Provisions
Congratulations to Minnesota and Colorado!
In a near unanimous vote on Monday, Minnesota passed mobility legislation consistent with the substantial equivalency provision in the UAA, Fifth Edition. The measure has been sent on to Governor Pawlenty.
More good news followed on Tuesday from Colorado as they obtained final passage of their mobility provision and sent the bill on to Governor Ritter for his approval.
After gaining gubernatorial signatures, Minnesota and Colorado will join Illinois, Indiana, Idaho, Kentucky, Louisiana, Maine, Mississippi, Missouri, New Mexico, Ohio, Rhode Island, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wisconsin.
These states are to be applauded for their efforts toward providing a national uniform mobility system.
Awaiting Gubernatorial Approval
Maryland, Iowa. Minnesota, Colorado
Ongoing Activity
Currently 12 states have mobility legislation pending: Alabama, Arizona, California, Connecticut, Delaware, Hawaii, Massachusetts, Michigan, New Jersey, Oklahoma, Pennsylvania and South Carolina.

April 2, 2008
TESTIMONY BEFORE HOUSE FINANCE COMMITTEE RE: H-7950
Mary F. Bernard, CPA
RI Society of CPA’s
Testimony before House Finance Committee Re: H-7950
March 26, 2008

I am here today on behalf of the RI Society of CPA’s and the Greater Providence Chamber of Commerce to oppose some significant sections of the proposed House Bill H - 7950.

One proposal included in this bill would establish a sales tax on 28 services. Establishing a sales tax on services puts a burden on all levels of society. Most of the service businesses listed are owned and operated primarily by small business entrepreneurs. These are the Mom & Pop operations so prevalent in the state. These are not big businesses. If these services become subject to sales tax, it would be very easy for their clients to go across the state line to Mass or Connecticut, where there would be no sales tax on the same service. RI has the advantage of having easy access to its neighboring states, unlike the South where it takes many hours to reach a state border. This proposal drives business out of state. These small businesses cannot compete with our neighbors when saddled with this additional tax burden.

This bill also proposes a gross receipts tax on accounting and legal services. Again, this only serves to drive business out of state. This tax will ultimately be imposed on the same small businesses that are already having financial concerns in this difficult economy. Connecticut attempted to impose a tax on similar professional services in 1991. After a brief period of confusion as to the logistics of the tax, - how to define, how to enforce, how to allocate, how to impose the use tax, - this tax was subsequently removed in order to “promote economic growth and competitiveness.” No other state in New England imposes a tax on services. In fact, only four states in the country uniformly subject services to a sales tax - HI, NM, Iowa, SD. It is too easy for businesses to seek services from out of state companies to save some money.

The bill also includes a proposal to eliminate the majority of tax credits for businesses currently on the books. This includes credits such as the R&D Credits, Investment Tax Credits, and Job Development Credits. This blanket approach does the state a great disservice. All of these credits were originally instated to promote a certain area of the economy or industry. Before they are eliminated, we suggest that each credit be thoroughly reviewed to determine its intended and resulting impacts on the state. A cost benefit analysis would indicate which credits are working and which should be eliminated. The Society and the Chamber would be happy to assist in this economic impact study before any action is taken to eliminate the positive effects of these credits.

Although the intent of many of the proposals included in this bill is to raise taxes, more explicitly raise taxes on the wealthy, the flight of this group of taxpayers out of the state could easily be provoked. Accountants serve as business advisors to their clients. We are constantly asked for advice on business matters such as where to locate businesses. These decisions are based on many factors, with tax implications being of primary concern. Bottom line – this state is becoming very unfriendly to businesses and individuals. This wealthy group of taxpayers which accounts for a large percentage of taxes paid in the state can easily relocate to a friendlier state that allows them to enjoy more of their earnings, while still living in a comfortable environment. It’s just too easy to cross state lines here – please think twice before you push them over the border.
FOR PATRICIA THOMPSON'S TESTIMONY, SEE FILE BELOW
File: THOMPSON TESTIMONY08.pdf