The effect of the Sarbanes-Oxley Act on non-public Michigan companies and CPAs has been a big question mark since the law was passed in late 2002. That uncertainty cleared a bit at the MACPA Members Advisory Forum meeting held in Lansing, where more than 200 CPAs from around the state were among the first to hear how the Michigan State Board of Accountancy will officially respond to Sarbanes-Oxley.

State Board Chair Edward Kisscorni reviewed the recommendations, which resulted from more than a year of thorough study by the Board. “We carefully examined every section of Sarbanes-Oxley and asked, ‘Does this apply to CPAs in Michigan?’” he explained.

All through the process, Kisscorni noted, the State Board sought input from CPAs and business leaders. Another important consideration was to maintain uniformity with other states. Last June, in an effort to promote uniformity, the National Association of State Boards of Accountancy (NASBA) released guidelines for individual state board action based on input from NASBA members.

“While NASBA has no legislative authority in our state, its guidelines set the tone for uniformity between the states,” says Kisscorni. “The Michigan Board wanted to avoid the situation where CPAs practicing in more than one state would have multiple statutes to comply with.”

Standards, copycat CPAs, board make-up, record retention, firm registration and practice monitoring (peer review) are among the areas addressed by Board recommendations.

MACPA Chair of the Board Karen Wiltsie commended the State Board for its prudent approach, noting that some states rushed to adopt very restrictive legislation immediately following adoption of Sarbanes-Oxley.

“Our State Board has sought a balance between protecting public interest and suggesting only those changes that will have value for Michigan’s non-public companies and their CPAs,” said Karen. “As these recommendations are further refined, the MACPA will continue to serve as a resource and sounding board.”

The Proposed Recommendations

Significant among the State Board’s recommendations are the following:

• Rejects blanket adoption of all Sarbanes-Oxley provisions, excluding those that are not applicable to private companies and their CPAs.
• Requires enrollment in a “practice monitoring” program (peer review) for licensure of any firm performing attest services.
• Adds a third exception to the confidentiality provision of the Occupational Code to allow CPAs to report federal, state or local law violations.
• Recommends vigorous enforcement of unlicensed activity (copycat CPAs), plus raises the offense to a felony, punishable by a much larger fine and longer prison term.
• Mandates that one member of the Board, either professional or public, must be an accounting educator.
• Amends record retention rules, by reference, to standards of AICPA, PCAOB, GAO, DOL, etc.
• Incorporates, by reference, standards developed by the PCAOB and other appropriate national standard setting bodies.
• Requires registration of all firms, including sole practitioners, with registration fees based upon firm size.
• Increases fees for individual licensing and registration; and earmarks the funds from the increases for administrative and enforcement activities of the State Board.
• Mandates CPAs to self-report criminal convictions and disciplinary action and raises the civil fine limit to $25,000 per violation.
• Requires Department approval of the form and content of ethics courses, including some case studies, and requires reporting of all courses (not just hours).

In late May, the recommendations were approved by the Department of Labor and now will move toward implementation. Some of these recommendations require legislative action, while others simply call for a change in administrative rules. Both processes could take months. (See related article, Michigan Rule Making Processes Examined.)

“We’re probably looking at this time next year before legislation and rule changes are adopted,” predicts Kisscorni.

Top