duced by Congressman Fraser of Minnesota and Congressman Mathi of Maryland. These bills provide for the regulation of the pr fessional practice of certified public accountants in the District Columbia, including the examination, licensure and registration certified public accountants.

H.R. 7624 was introduced on April 27, 1965, and referred to th House Committee on the District of Columbia, Subcommittee No. S. 1853 was introduced in the Senate by Senator Dominick of Colorad on April 29, 1965, and referred to the Senate Committee on the Distri of Columbia, Subcommittee on Business and Commerce. H.R. 98 was introduced on July 13, 1965.

The bills are identical. They would repeal the present statute this subject, and serve as a substitute for it. If enacted into law, t statute would be known as the "District of Columbia Certified Pub Accountancy Act of 1965."

The present statute regulating the practice of certified pub accountants in the District became law 42 years ago-on February 1 1923 (District of Columbia Code, title 2, ch. 9, secs. 901-909; 42 St 1261, ch. 94).

The present District law was adopted when the profession of cer fied public accounting was itself only a few years old. In the int vening 42 years the dependence of the business community, Government, and the general public upon the services performed the CPA have greatly increased, and the standards of the professi have been raised. Every State in the Union has adopted a statute regulate the practice of this profession, and the majority of Sta have revised their statutes to reflect current needs. Because t present District law has been in effect so long without change, t standards of the great majority of the States are substantially high than those established for the District of Columbia by the act of 191

It is in the public interest to raise the standards governing professional practice of certified public accountants in the District Columbia so that they may be generally equivalent to those that n prevail over the major portion of the United States.

2. Why CPA standards are important to the public: The pract of certified public accountants constitutes a professional functi intimately affecting the public interest. Business manageme stockholders, credit and investment analysts, banks and other finan institutions, legislators, Government agencies-all must depend certified financial reports. The CPA certificate is a mark of p fessional competence, integrity, and independence. Stuart Cha the well-known economist, has said that the auditor's opinion, sig by a CPA, “is something like the sterling mark on silver."

If an auditor's opinion, certifying that a financial statement fai presents the position of a company is signed by a CPA, it mea 1. That the statement has been examined by a person who is fu qualified to express an expert opinion;

2. That enough supporting evidence has been examined to just the opinion;

3. That the statement has been prepared in accordance with g erally accepted accounting principles;

4. That the auditor stakes his reputation on the soundness of opinion.

CPA's are governed by established codes of ethics, similar to the codes for other professions; and they are subject to suspension or revocation of their certificates-both under the existing law and under the proposed new legislation-if they are guilty of fraud or gross negligence.

The enormous expansion of our economy in the last 50 years has been achieved in part through wider ownership of business. This kind of ownership by millions of people with no direct knowledge of the business in which they invest would not be feasible without reliable financial information. The American economy depends for its smooth operation on the orderly and rational flow of credit and investment. Without access to reliable facts, certified by independent and competent people, those responsible for the orderly and rational flow of credit and investment would operate under severe handicaps. The Federal Government has become a major user and stimulator of independent audits. Inquiry to 26 Federal agencies reveals that 38,000 audits are stimulated or used each year by these agencies in 53 separate programs as compared with about half that number of engagements just 5 years ago. The Securities and Exchange Commission alone uses 11,825 such audits annually. Other major users include Housing and Home Finance Agency, Interior Department, Small Business Administration, Rural Electrification Administration, Federal Home Loan Bank Board, and Farm Credit Administration. A law enacted by the Congress in 1964 requires annual independent audits of the more than 50 federally chartered private corporations. Hearings are scheduled on bills which would require independent audits of all banks insured by the Federal Deposit Insurance Corporation. In addition, more and more State legislatures are fostering the use of independent audits by local governments; for example, in Colorado all local government units must have an annual independent audit.

This profession has always been marked by a high degree of training, skill, and discipline. But today's increasingly complex business climate has created the need for more and more competence on the part of the CPA.

In addition to their traditional function of examining and reporting on the basic annual financial statements from the viewpoint of their fairly presenting the financial position of a company and the results of its operations, CPA's today are called upon for a multiplicity of services.

Mr. SICKLES. You talk about independent auditors and the requirement by some of the States. Do those laws specifically require an audit by a certified public accountant or is this an independent audit? Mr. BERNSTEIN. If my recollection is correct, sir, I think it is just independent auditing.

Mr. SICKLES. So whether a person was certified or not would not affect that?

Mr. BERNSTEIN. They have to be certified public accountants or a licensed accountant, licensed by the State in which they are performing the audit.

Mr. SICKLES. Would there be a way of licensing the individual as an accountant even though he was not certified?

Mr. BERNSTEIN. Not under our law.

Mr. SICKLES. So if such a law were in existence in the District of Columbia it would have to be a CPA?

Mr. BERNSTEIN. That is right.

Mr. ABERNETHY. I didn't understand Mr. Fraser to say that moment ago. I thought Mr. Fraser said a person can still practic accounting but cannot represent himself as a certified public accountant Mr. BERNSTEIN. That is correct, sir. These statements are bot correct.

Mr. ABERNETHY. You had better smooth them up a little bit, ther Mr. BERNSTEIN. Under the present law in the District of Columbi anyone can hold himself out as a public accountant.

Mr. ABERNETHY. And practice?

Mr. BERNSTEIN. And practice; yes, sir. There is no restriction o his ability to do so. He can practice as a public accountant.

This bill which we have introduced here will not change that. W are not doing anything to disturb their right to practice. We ar concerning ourselves only with certified public accountants.

Mr. ABERNETHY. This does not regulate, then, all accountin practitioners?

Mr. BERNSTEIN. That is right.

Mr. ABERNETHY. But only those who represent themselves to b certified public accountants?

Mr. BERNSTEIN. That is correct, sir.

Mr. ABERNETHY. All right.

Mr. SICKLES. To reemphasize my point-where the State legis latures regulate or where there is Federal legislation, it may or ma not require that that audit be made by a certified public accountan I am mindful of one section in the Taft-Hartley Act which require an annual independent audit of welfare funds and pension plans. seems it says nothing about certified public accountants. Is the only my interpretation? Or would you understand that to mea that if a person held himself out as a public accountant, even thoug he was not certified, he would continue to conduct that audit an would satisfy the Federal law?

Mr. BARNES. It is my opinion he could. We would like to addre ourselves in a supplemental report to that point. The term "ind pendent audits" means this does not proscribe a noncertified publi accountant from performing.

Mr. SICKLES. The reason I raise this is that it seems to me th thrust of your statement is that there is now a requirement the there be an annual independent audit and therefore we should tighte up the regulations as to who should be certified. There is a brea because they do not have to be certified to conduct the annual ind pendent audits. Is that right?

Mr. GLICK. May I supplement the comment? I am Philip Glic counsel for the District of Columbia Institute of Certified Publ Accountants.

Mr. Sickles, you are quite right, that the statutes generally requi the making of independent audits of the accounts of particular agencie and rarely specify that the audits must be made by a certified publ accountant. They usually require merely the making of an aud by an independent accountant or accounting firm.

The general practice under such statutes, however, which h grown up is to make the audit by a certified public accountant or firm of certified public accountants, and the increasing requirement

independent audits therefore does make it important to raise the educational and experience standards for CPA's.

Mr. SICKLES. Thank you.

Mr. FRASER. Mr. Glick-in any event, whatever the situation is, this bill does not fundamentally change it. All you are doing now is dealing with an already-existing professional class who are already under license. You are simply changing the requirements for that group, for your group.

Mr. GLICK. Both under the present law of the District of Columbia and under these companion bills one may practice as a public accountant without meeting the educational and experience standards of the bill or of the present law, but one may acquire a certificate as a certified public accountant which is recognized in the profession and in the business community as indicating a special level of competence and reliability only by meeting the standards stated in the

statute.

Mr. SICKLES. Are there some States where you may not practice public accountancy and practice only as a certified public accountant? Mr. GLICK. No, sir, although there are some States which set up one set of standards for certified public accountants and then set up another set of lower standards which one may satisfy and then become a licensed public accountant as distinguished from a certified public

accountant.

Mr. SICKLES. All right.

Mr. ABERNETHY. Proceed, Mr. Bernstein.

Mr. BERNSTEIN. Their ambit includes investigation of businesses to be acquired; assembly of data and formulation of plans for proposed mergers, sales and dissolutions; assistance in the preparation and presentation of financial data for inclusion in filings with the Securities and Exchange Commission; tax return preparation, tax planning for businesses; financial and tax planning for individuals; providing consulting services to management in such fields as organization planning, systems, procedures and controls, productivity measurement and compensation, and data processing; and assistance in the planning and administration of employee benefit programs such as pension plans, profit-sharing plans, group insurance plans, and stock option plans. The public's confidence in the ability and the integrity of the CPA must be continuously justified by the maintenance of high standards.

In 1896 New York State passed the first CPA law. By 1923, all of the 48 States, the then Territories of Alaska and Hawaii, as well as Puerto Rico and the Virgin Islands, had recognized the public interest in the profession by enacting legislation authorizing examinations leading to official recognition and designation of qualified practitioners as "CPA's". In every State the examination covers accounting theory and practice, auditing, and commercial law; and a successful candidate must have thorough training in these subjects.

In recent years, State after State has raised the standards and requirements for certified public accountants, in order to qualify this profession for living up to the needs and demands of the public upon it. The District of Columbia, as the Nation's Capital City, does not wish to keep its standards lower than those that already prevail over most of the country, and that are in the process of being raised in the States that still lag behind.

3. The trend in recent legislation in the 50 States: New York Sta passed the first CPA law in 1896. By 1923, all of the present States had enacted legislation authorizing the examination of cand dates, as a basis for designating qualified practitioners as certifie public accountants.

The May 1964 issue of Collegiate News and Views published article by Dr. Wilton T. Anderson, head of the department of accoun ing at Oklahoma State University, which included a two-page tabul tion of the CPA requirements for all 50 States, the District Columbia, Puerto Rico, and the Virgin Islands. This tabulatic shows, for each jurisdiction, its requirements with reference to ag residence, experience, education, and examinations. We offer fo inclusion in the record of these hearings the tabulation prepared t Professor Anderson.

There are at least 30 States that now require qualifications education and experience that are substantially higher than tho required by existing law in the District of Columbia. review these in detail a little later.

We sha There is a strong trend at present to bring State laws on this subje up to date, so that they may more adequately satisfy modern requir ments. The State laws have been thus recently revised in at lea 21 States Alaska, Arizona, Arkansas, California, Georgia, Idah Illinois, Massachusetts, Maryland, Nevada, New Mexico, Ohi Pennsylvania, Rhode Island, South Carolina, Texas, Tennesse Utah, Virginia, West Virginia and Wisconsin.

To make clear why we feel that the District of Columbia shou join this parade of modernizing States, we must first summarize t standards established in the existing law and the standards that wou be required under the proposed bill.

(The records referred to in Mr. Bernstein's statement follow:)