Question: An association I am managing wants to use the same individual (a CPA) to produce the monthly and quarterly financial reports, file the association’s taxes and perform the annual financial review. I have reservations about this and am wondering if my concerns are justified.

Answer: Ken Bloom, CPA a principal in the Massachusetts accounting firm Bloom Cohen Hayes LLC, thinks they are. The professional standards for accountants say that the opinions they offer in audits and financial reviews must be “independent.” That term isn’t clearly defined, Bloom acknowledges, “but if you dig deeply into the ethical standards for CPAs, you will find that they require independence in both fact and appearance.” That means an accountant must be able to review the financial information objectively. “But if we participate in the creation of the accounting information, how can we review it independently?” Bloom asks. There is, at least, the appearance of a conflict, he believes, and the potential for an actual one. “There are people who don’t agree with me,” Bloom acknowledges. “But I definitely stay away from arrangements such as this.”
While Bloom feels strongly that accountants providing financial reviews for a client should not also provide bookkeeping services, he sees no problem with their filing the client’s tax returns. But the Sarbanes-Oxley law, responding to Enron-type accounting scandals, has muddied those waters, Bloom explains. The law (which does not apply specifically to community associations and other nonprofits) prohibits accountants from providing both “attestation” and “non-attestation” services to the same client. Financial reviews are “attestation” services, requiring a professional opinion; tax returns fall under the “non-attestation” category. Bloom thinks drawing a line between financial reviews or audits and tax returns “is ludicrous. There is just no potential conflict between them,” he says. “I just don’t see it.”
However, to meet the Sarbanes-Oxley standards, Bloom and other CPAs will typically ask clients to sign a form indicating that they understand the division between “attestation” and “non-attestation” services and have asked the accounting firm to provide both.