CPA Exam, Mandatory Peer Review.

Thank you for the opportunity to clarify the position of the California Board of Accountancy (Board) on two issues that were covered by Bruce Allen's July 2005 article in this magazine: the computer-based Uniform CPA Exam and Mandatory Peer Review.

The Board appreciates that these two topics are of significant interest and relevance to our licensee community. As part of considering, deliberating and deciding policy issues in an open public forum, the Board has welcomed, received and carefully considered input from CalCPA, among other interested parties. Moreover, the Board continually strives to communicate with its stakeholders in a timely and effective manner. It is in that spirit that, on behalf of the Board, I offer the following thoughts on the Uniform CPA Exam and Mandatory Peer Review.

COMPUTER-BASED UNIFORM CPA EXAM

Lest there be any doubt, the Board is committed to a uniform national CPA examination. This Board is neither advocating nor pursuing a California-only CPA examination. Nor are we aware that the board of any other state is considering developing a state-specific CPA examination.

The computer-based Uniform CPA Exam (CB4) is a vast and cutting-edge undertaking on the part of state boards of accountancy, the National Association of State Boards of Accountancy (c), the AICPA and Thomson Prometric. Overall, the CBT has been a success. The CBT has not, however, been without its problems over the past year.

The Board, and the boards of the great majority of other states, have been frustrated by an apparent failure on the part of NASBA/AICPA/Thomson Prometric to address the boards' myriad concerns about the operation of the exam and insufficient communication between the three parties administering the exam, on the one hand, and the state boards of accountancy, on the other. Those frustrations culminated in a request by this Board--since joined by the New York State Board of Accountancy--to NASBA to begin exploring alternatives that could be available to the state boards of accountancy if and only if efforts to address the state boards' concerns ultimately proved unsuccessful.

This Board is committed to making the existing structure for the administration of the national CBT a success from the perspective of the state boards. Indeed, the Board is communicating and working individually and collectively with NASBA, the AICPA and Thomson Prometric to identify the root causes of perceived problems and implement effective and sensible solutions.

MANDATORY PEER REVIEW

On Sept. 1, 2005, the Board will submit to the Legislature a statutorily-mandated report on mandatory peer review. In its meeting of July 22, 2005, the Board approved the substance of that report, which is now being finalized.

In that report, the Board will make a number of recommendations based on more than two years of study, deliberation and consideration of this topic, with extensive input from and participation by CalCPA and other interested parties.

As the report will reflect, the Board's bottom line is this: the Board at this time is unable to embrace the AICPA peer review programs for two principal reasons, both of which have been communicated to the AICPA on a number of occasions.

First, the Board believes that there is insufficient transparency in the AICPA's peer review process. Second, the Board has unresolved concerns about the scope of the AICPA's peer review programs. In addition, the Board strongly believes that California consumers would be disserved if small firms and sole proprietors were exempted from mandatory peer review as provided by current state statute.

These three issues, among others, at this point prevent the Board from recommending implementation of mandatory peer review in California. But that is not, in the Board's view, the end of the discussion. In our report, we will recommend to the Legislature that the Board work in the near term with all interested parties to resolve the outstanding issues and make a recommendation to the Legislature as part of the Board's 2009 Sunset Review.

The Board hopes and expects that CalCPA, along with representatives of consumer groups and other professional organizations, will participate in this endeavor.

On behalf of the Board, I would like to thank CalCPA for the opportunity to submit these comments. As always, the Board welcomes your input and questions, and looks forward to a continued open and productive dialogue.

Renata M. Sos

Board President

Sacramento