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NASBA annual meeting: state boards as catalysts for quality.


Calls for greater uniformity among all 54 accounting jurisdictions were sounded by leaders of the profession at the 82nd annual meeting of the National Association of State Boards of Accountancy in Minneapolis. Some 150 representatives from 44 boards heard Robert C. Ellyson and others urge NASBA and its member boards to increase uniformity in both the profession's entry requirements and its regulations. Failure to reach agreement in areas such as the 150-hour education requirement, for example, will make the profession appear "silly and arbitrary," Ellyson warned, and create a push for federal licensing from large firms with interstate practices.

Ellyson, a partner of Coopers & Lybrand in Miami with many years of leadership in the Florida Board of Accountancy, Florida Institute of CPAs, NASBA and the American Institute of CPAs, made his remarks as he accepted NASBA's first William H. Van Rensselaer Public Service Award. The award was given in memory of the association's first executive director.

Oversight activities

Outgoing NASBA President Sam Yellen characterized the association's activities as evolving into an oversight role. "Oversight means looking over things; built into that role is the periodic invocation of criticism," said Yellen, a partner of KPMG Peat Marwick in Los Angeles. "Oversight is a tool for effectiveness, and what we at NASBA are dedicated to is kinder and gentler oversight, which requires understanding and encourages positive attitudes among others."

He cited some of the activities NASBA is currently involved in: the CPA examination review board, the Accounting Education Change Committee, meetings with federal agencies and the emerging national registry of continuing professional education sponsors.

American Institute of CPAs Board Chairman Charles Kaiser, Jr., echoed Yellen's sentiments when he told the meeting, "We are a self-regulatory profession. And if we want to remain self-regulatory, we have to recognize there is room for oversight. There is room for the Securities and Exchange Commission and the Public Oversight Board and certainly there is room for oversight from NASBA on the Uniform CPA Examination, on updating the Model Accountancy Bill and on the CPE sponsor registry."

Exam review

Reporting on NASBA's oversight of the CPA exam, Charles Taylor, chairman of the CPA examination review board, said the exam's construction, grading, administration and security may be relied on by accountancy boards in assessing the technical competence of applicants for certification or licensure as CPAs. Taylor, professor of accountancy at the University of Mississippi, said the review board found essay questions were being graded as essays and not merely as objective questions, as some board members had been led to believe during recent discussions on proposed exam changes.

"While language usage was not explicitly graded," Taylor said, the review board found "credit was granted to a candidate who listed a key concept only if the grader could determine from the written questions that the candidate understood the situation. The essay questions are thoroughly graded, as effectively as in most of the colleges and universities."

The exam planned for 1994 "has been shortened, but it's not easy," explained Professor Richard E. Czarnecki of the University of Michigan, chairman of NASBA's committee on the CPA examination and professional writing skills. The exam's time can be reduced to two days because

* Candidates will be permitted to use handheld calculators.

* Accounting theory and practice will be merged.

* The test will include other objective answer formats in addition to the traditional four-option multiple-choice questions, while the percentage of essay questions will be reduced.

Strategic planning

Existing NASBA member services, such as the exam review board, were given high ratings on the association's strategic planning questionnaire, reported incoming NASBA President Jerome A. Schine, a retired partner of Ernst & Young in Tampa. The questionnaire, completed by 41 state boards and 12 NASBA officers, was used in combination with data from numerous planning meetings to update NASBA's mission statement and to set goals.

NASBA's newly restated mission is to "enhance the effectiveness of state boards of accountancy in meeting their regulatory responsibilities." To this end, NASBA must

* Recognize, understand and serve the needs of its members.

* Offer high-quality, effective programs and services.

* Clarify issues facing state boards.

* Build consensus among state boards on selected issues affecting the regulation of public accounting.

* Be a proponent of specific positions on major issues affecting state boards.

Schine said the strategic planning questionnaire showed a high interest in enforcement of professional standards on interstate engagements. He said, "I'm asking our enforcement committee to study this issue: Should there be some kind of regional board with a representative from each jurisdiction whose sole responsibility would be to investigate identified substandard engagements that cross state lines?" On another subject, Schine said he would like NASBA's emerging issues committee to explore the possibility of a national CPA certificate issued by a federation of state boards. "It would be a federation to allow for ease of reciprocity if the licensee has met the standards the federation agreed on."

Other issues Schine urged NASBA committees to consider during the coming year are the revisions of the AICPA--NASBA Model Accountancy Bill, recognition of non-CPA partners, entry-level educational and experience requirements, reciprocity, positive enforcement and the CPE sponsor registry.

The CPE registry brought NASBA "an avalanche" of mail, recalled outgoing President Yellen. But, he added, in June, at NASBA's regional meetings, "we ended up with overwhelming support from the state boards in spite of the pressure that existed."

Since the idea for the registry was unveiled last year, it has undergone significant modifications as a result of NASBA's talks with the AICPA and state societies, Welling W. Fruehauf, chairman of the Pennsylvania State Board of Accountancy, reported. In particular, the definition of a "registered sponsor" has been clarified, and the sponsors' application process for entry into the registry is being streamlined via the creation of a two-tier system. Application procedures for sponsors that regularly undergo external peer review will be less rigorous than for those organizations that do not. Registered sponsors against whom there are complaints will be placed on probation or removed from the registry.

"The core of the registry is that we have established standards of performance and quality as they relate to the content material, the presentation material and the instructors who put on the programs," said Fruehauf. "The registry gives the member boards the ability to limit the amount of time they spend reviewing sponsors. It will give the boards the ability to know there is an independent third-party review of that sponsor's ability to put on an effective program."

Accepting commissions

Although the Federal Trade Commission's staff and the AICPA have worked out an agreement enabling Institute members to accept commissions and contingent fees from nonaudit clients, each state board has its own regulations. While five states have changed their rules to permit the acceptance of commissions, five other states have legislated a ban on the acceptance of commissions and nine are considering a ban, said Noel P. Kirch, former chairman of the Oklahoma State Board of Public Accountancy. NASBA has recommended that each board either impose a statutory ban on the receipt of commissions or modify its rules in conformance with NASBA's model code to permit licensees to accept commissions under certain limited circumstances.

California was the first state to legislate a ban on commissions; in September, its governor signed into law a new bill expanding the definition of "public accounting" to financial services and management services when performed by a CPA. These laws effectively prohibit CPAs from accepting commissions when rendering financial planning services, observed James J. Sullos, Jr., former president of the California State Board of Accountancy.

"There is no evidence that consumers want CPA services based on contingency fees and commissions. On the contrary, the public wants assurances that CPAs are objective and independent. One cannot continue to be objective if one's income depends on sales commissions from products being sold," said Sullos.

Commenting on the agreement worked out between the Institute and the FTC staff, Donald J. Schneeman, AICPA general counsel and secretary, said it is a much broader ban on commissions than the one originally proposed two years ago. This ban is client-based, not engagement-based. He believes it is "about as far as the FTC is willing to go."

Tomorrow's licensees

"What kind of person is going to be sitting in this room 20 years from now--that's the issue before us all," Doyle Z. Williams, chairman of the Accounting Education Change Committee, told the state boards. "You shape the threshold requirements for entering practice. Your dilemma, it seems to me, is should those requirements lead education or should they reflect current educational practice? You cannot set requirements that are unattainable."

Williams advised the boards to be flexible in the standards they set for the 150-hour education requirement with respect to curriculum; require candidates to have completed their formal educations before taking the CPA exam and perhaps move the CPA exam date from May and November to August; and cease publishing the candidates' exam results by school, so students' performance on the exam is not equated with a curriculum's success. Williams stressed the curriculum should have broader objectives than what can be included in the scope of the licensing exam, including helping students become good citizens and giving them a clear understanding of business.

NASBA's 83rd annual meeting will be held September 23-26, 1990, in Cambridge, Massachusetts.

PHOTO : Sam Yellen, NASBA's outgoing president

PHOTO : Jerome A. Schine, NASBA president 1989-90

PHOTO : Wilbert H. Schwatzer, immediate past president of NASBA

Louise Dratler Haberman, consulting editor of NASBA's monthly newsletter, The State Board Report, and managing editor of New Accountant.
COPYRIGHT 1990 American Institute of CPA's
No portion of this article can be reproduced without the express written permission from the copyright holder.
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Author:Haberman, Louise Dratler
Publication:Journal of Accountancy
Date:Feb 1, 1990
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