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State Board Report

December 2012

How serious is the issue of whether or not accountants can whistleblow? The topic was addressed at NASBA’s Annual Meeting by Noel Allen, and then again by Mr. Allen and other attorneys at the Baruch College/Center for the Public Trust (CPT) conference on November 29 in New York City. Mr. Allen reminded the conference participants that, whatever may be decided by other organizations, CPAs must look to their states’ laws for guidance.

Over 3,000 whistleblower claims have been filed and the largest category was “corporate disclosure and financial issues,” Scott Univer, general counsel of WeiserMazars, stated. “You may not qualify for the bounty as the auditor, but what Dodd-Frank says is that, if you are an auditor and you believe that Sector 10(A) of the 1934 Act is not being observed properly or is being concealed, then you can whistleblow and get the bounty. Whistleblowing strikes at the root of client confidentiality.” Mr. Univer advised that Dodd-Frank will pre-empt Professional Code of Conduct ET 301.

“We have been living with whistleblowers for more than a decade, but the new whistleblower legislation provides new motivation – money,” Michael Young partner of Willkie Farr & Gallagher, remarked. “Before the consequences of whistleblowing were almost all negative – but now money is involved so plaintiffs’ attorneys are putting in whistleblower practices. There is a lot of opportunity for this to bring havoc,” he said.

Mr. Allen, NASBA legal counsel and a partner of Allen, Pinnix & Nichols told the conference that regulators are looking at not having a prohibition against whistleblowing. “It is unsettled law,” he stated and he reported that an exposure draft on this topic is expected to be released by NASBA and the AICPA.

At NASBA’s Annual Meeting in October (watch Annual Meeting videos), Mr. Allen noted that some states make whistleblowing by an accountant a crime. Very few states currently permit or require it. Currently the Uniform Accountancy Act’s Section 18 permits it under applicable laws, but there are only 12 states that currently have the UAA’s language.

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