Bill would clear limit on CPA partnerships
Look at the employee rosters of many Connecticut accounting firms and there will be plenty of job titles that lack a certified public accountant designation.
Whether it be MBAs, engineers, finance experts, or technology and valuation specialists, accounting firms are hiring a much more diverse set of professionals to boost the consulting, audit and tax side of their business.
But when it comes to making those non-CPA’s a partner in the firm, there’s a problem. Legally, it’s not allowed under Connecticut state law. If an employee isn’t a licensed certified public accountant in the state, that employee can’t become an equity partner within the firm.
Now the industry, led by the Big Four accounting firms, is looking to change that.
The state’s CPA firms are pushing a bill in the state legislature that would allow non-certified public accountants to become equity partners.
It’s a measure, industry officials say, that has already been adopted by 46 other states, putting Connecticut accounting firms at a major disadvantage when it comes to recruiting and retaining talent.
“We need to be on same playing field as other states,” said Art Renner, executive director of the Connecticut Society of Certified Public Accountants. “As businesses evolve, large CPA firms need to have the inherent knowledge to draw upon to evaluate their clients’ needs.”
Renner said the change is particularly important for Connecticut because of the predominance of insurance companies in the state.
Accounting firms that audit and consult for companies like The Hartford, Travelers, Aetna and Cigna need to employ a fair number of actuaries who can make sense of key parts of a financial statement unique to the insurance industry like measuring reserves.
But attracting and retaining actuaries can be a challenge if they can’t eventually take on partner status within the firm.
While non-CPA’s can be compensated with cash, having an equity interest provides greater financial opportunity and gives employees a vested interest in the long-term success of the firm, Renner said.
“They need these specialized skills in Hartford,” Renner said. “But why would a guy in Seattle come here if he can’t become an owner of the company?”
Besides actuarial work, Renner said, accounting firms need non-CPAs for tax work, personal financial planning, business advisory services, IT consulting, and forensic accounting.
Under the state legislative proposal, which has passed out of the Government and Elections Committee by a 14-0 margin, non-CPAs would be allowed to own up to 49 percent of a CPA firm, while CPAs would be required to maintain a simple majority of firm ownership.
The bill also requires non-CPA owners to be actively engaged in working for the firm, to protect against passive ownership.
The proposal has the support of Secretary of the State Denise Merrill and the state Board of Accountancy, which regulates Connecticut’s accounting industry.
Nationwide, the National Association of State Board of Accountancy and the American Institute of Certified Public Accountants have long supported the concept.
In the Northeast, only New York and Delaware bar non-CPAs from becoming equity partners in accounting firms.
There were no sources of opposition to the bill in Connecticut, which is now waiting for action in the House. Renner said regulators in other states have not reported issues with non-CPAs, nor has it become a compliance or enforcement issue.
However, concerns have been raised in the past about CPA firms being bought out by larger companies and used simply as an investment vehicle.
The Big 4 accounting firms — KPMG, Deloitte, Ernst & Young, PricewaterhouseCoopers — are the main drivers behind the Connecticut proposal.
It’s not surprising, because those firms compete on a national and international basis for talent. They also audit and provide consulting services to the large public companies in Connecticut. Deloitte, for example, has UnitedHealthcare and The Hartford as clients, while KPMG provides auditing services for Aetna. Cigna uses PricewaterhouseCoopers as its auditor. Multiple Big Four firms including Deloitte and PwC declined to comment on the story.
Most Recent
Most Recent
0 Comments