Owner's Box

Earlier this year, I moderated a panel for the New York State Society of CPAs regarding the often-polarizing subject of non-CPA ownership in the Empire State, which remains one of the few holdouts that prohibits any ownership of accounting firms by those without the CPA credential.

For those residing outside the borders of New York, that ongoing debate carries roughly the same Big Apple opponent-proponent ratio and intensity as which New York institution serves a better oversized pastrami sandwich – the Stage or the Carnegie Deli – two New York City landmarks.

This is hardly a new inter-profession imbroglio - and to be candid, less appetizing compared to the challenge of trying to ingest roughly a pound of carved meat with spicy mustard and a Dr. Brown’s soda from either of those dining staples - as 48 jurisdictions already permit some percentage of non-CPAs to become equity partners in an accounting practice, with the aforementioned New York along with Delaware and Connecticut in opposition.

But that soon may change as New York’s neighbor to the Northeast, Connecticut, has recently introduced a bill that has garnered the support of the Connecticut Society of CPAs as well as the State Board of Accountancy to allow non-CPA ownership in the Nutmeg State.

In the Connecticut bill, non-CPAs would be allowed to own up to 49 percent of firm equity.

Now there are cogent arguments to be made on both sides of this often thorny issue.

Opponents point to a “what if?” scenario should a non-CPA owner bring in the majority of revenue? Is it then really a true CPA firm? Or if a sole practitioner brings in a non-CPA partner, then it would be a 50-50 split in lieu of a simple majority ownership for the CPA. If a business development manager was also a shareholder, would his/ her mission of generating more revenues undermine the firm's commitment to establishing client trust? What happens if an engagement goes wrong and the errors stem from someone who is not a CPA?  To what degree would that firm’s reputation be irreparably damaged?

Conversely, supporters of the measure correctly argue that the accounting profession has gotten far more complex in terms of rules and processes and now even traditional services like audits require input from multidisciplinary channels. Don’t those folks deserve ownership opportunities?  If not, a firm’s recruiting and retention levels would likely suffer. The once-traditional avenues to entry of tax and audit for firm “newbies” have been supplanted to a degree by demand for those with backgrounds in marketing, law, engineering, IT and business development.

I’ll let far brighter minds than mine resolve this issue, but if the Connecticut bill sails through the House which many are predicting it will, then hard-core loyalists like New York may ultimately follow suit.

But on a positive note, they will still retain bragging rights to the best deli sandwiches.