the CPA practice. This is because it would be impossible
for a CPA to have the breadth of education and skill sets
necessary to be an expert in every area and aspect of a
firm's and its clients' businesses.
work. Business has grown increasingly complex. Global
competition, the complexity of business structures and
transactions, innovative financial instruments and trans-
actions, and rapid technological breakthroughs are the
norm and not the exception.
ing audit standards and procedures, an auditor must fully
understand the nature of the client's business, its techni-
cal and other systems, and the nature of the marketplace
in which the business competes. Without this knowledge
an audit will be useless. As a result, individuals are need-
ed on audits who have a deep understanding about
finance (MBAs), engineering (CEs), technology, and valu-
ations, and who possess other skill sets.
far back as the 1970s, the profession recognized that
CPAs themselves needed a comprehensive education to
meet the challenges of complex businesses.
issued a paper, "Meeting the Needs of a Changing
World," noting that accounting firms must also have a
broad range of services and skill sets to not only serve
as a business advisor to clients, but the breadth of serv-
ices and skill sets "also helps strengthen the quality of
audit services" by enhancing the audit quality. "Auditing
large or small organizations is increasingly a sophisti-
cated challenge, requiring highly skilled professionals
who possess technical, industry, and general business
skills combined with the ability to use state-of-the-art
tools and methodologies."
and business complexities and transactions fully under-
stood. As far back as 1978, the "Cohen Commission"
observed in its report on the quality of auditing that "An
audit requires considerable knowledge about a company,
its operations, and its industry."
compensated. While non-CPAs could be compensated
solely with cash, having an equity interest in the entity not
only provides a greater financial opportunity, it vests in the
individual an interest in the success of the organization.
And, especially for smaller CPA firms who cannot com-
pete solely on a salary basis, the possibility of equity can
be a significant draw to highly talented individuals.
and the National Association of State Boards of
Accountancy (NASBA). The Uniform Accountancy Act
(UAA) has long contained a provision expressly allowing
non-CPA ownership provided that CPAs retain a majority
ownership. It is important that all states be consistent in
this regard, so that there is a level playing field in terms of
organizational structure for large and small firms across
reported issues with non-CPAs, nor has this become a
compliance or enforcement problem.
State Board's legal counsel has indicated that when individuals in a CPA firm hold themselves out as CPAs
or PAs, the firm must be 100 percent owned by the licensed individuals and shareholders within the firm.