Breakdown of Financial Regulation Bill and Accounting Issues and Statement

Although significant changes are not expected on the House and Senate floors, they're still possible. However, here is a quick list of six major issues and where the bill stands on them.

1. Consumer Financial Protection Agency: CPAs are exempt from the regulatory body when they provide usual and customary accounting services.

2. Aiding & abetting: The Waters amendment to broaden the reach of the trial attorneys was NOT included in the compromise bill, even after it was introduced in the House conference bill. The Senate removed the amendment that the profession didn't like, and added a GAO study of the effects of the aiding & abetting standard to the compromise bill.

3. Auditors of broker-dealers: In the compromise bill, the PCAOB has the flexibility to decide if and how it wants to regulate auditors of “introducing” broker-dealers (those who do not hold client money). The PCAOB will register and inspect the auditors of “custodial” broker-dealers (those who hold client funds, and therefore where the risk of fraud lies). CPAs pushed for the differentiation, because most of the smaller broker-dealers (who are audited by AICPA smaller members) are only introducing broker-dealers, so this avoids unnecessary regulation on many of the smaller public company auditor members.

4. SOX 404(b): The compromise bill includes an exemption from audits of internal controls for publicly-traded companies with a market capitalization below $75 million. Although the profession supported no exemption for any size company so that all investors in public companies would get the same protections, this exemption could have been much, much higher – several proposed amendments were deflected.
    
5. Independence of standard-setting: In a statement, the AICPA commented, “We think accounting standards should be set without legislative interference, but the bankers and others tend to think differently and they worked hard to bring Congress into the picture. The profession worked just as hard to keep FASB's work independent, and the compromise bill ended up without specific legislative mandates, so this is really good news.”
    
6. Securities lawsuits: There was a late, unexpected amendment to try to overturn a Supreme Court decision that was only issued June 24, which would have encouraged the filing of securities lawsuits in U.S. courts. The amendment was defeated and replaced with a study. The AICPA stated that while this is a good outcome after an end run, studies often turn into legislation, “so we'll add that to our list of issues to work.”