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NSPA's experimental program on quality assurance review.

At the close of the 1991 state legislative sessions there were 30 states whose accountancy laws provided for a quality assurance review (QAR) or peer review (PR) program. In several instances there is statutory authority for the state accountancy board to issue QAR rules and regulations to monitor its licensees, but the board has not yet finalized those rules and the effective date of the program is therefore not determined.

State accountancy boards and state legislatures are favorably inclined towards quality assurance review programs, also known as positive enforcement or peer review programs. The programs were originally criticized because they included periodic examination of compilations and review reports (unaudited statements) whereas the initial concept and target of a program was the audited statement and the adverse publicity that resulted from audit failures. There seemed to be no justification for the inclusion of compilation and review statements in quality assurance review programs. The accounting profession's bad publicity arose from audit failures, not compilation failures.

We conceded in October 1988 that the QAR type programs should not be ignored. We advanced the suggestions of NSPA member Leonard Ricketts, a licensed public accountant and member in 1988 of the Arkansas State Board of Public Accountancy, that unlicensed practicing accountants should voluntarily expose their work product to a quality assurance program.

By voluntarily submitting their financial statements to a quality assurance review, unlicensed practitioners can show their clients that their compiled (and, in some cases, reviewed) financial statements meet the same quality standards as the statements prepared by a board licensee. Moreover (as we wrote in this column in October, 1988), unlicensed accountants who voluntarily submit to a QAR program bridge the gap between the licensed and the unlicensed accountants in a manner that inures to the benefit of the public.

Additionally, the unlicensed accountant's voluntary participation in a QAR program clearly reflects an interest in the protection of the public. Unlicensed accountants whose skills are inadequate to perform an acceptable compilation of a financial statement will learn the techniques by which those skills may be improved. Moreover, participation in a voluntary QAR program disciplines and conditions the unlicensed practitioners to maintaining an acceptable level of competency.

With regard to QAR programs and licensees, the states that have an operational QAR (or positive enforcement) program have a provision in their law or regulation providing that the failure of the licensee to comply with the oversight review program may be cause for the board to decline or defer renewal of a practice permit. In some states, the peer review program sponsored by the state CPA society will satisfy the board's QAR requirement. CPAs who participate in the peer review program conducted by the state CPA society are exempted from the board's QAR program that is mandatory for all other classification of licensees.

But, what about the CPAs who are not members of the state CPA society (which is a voluntary organization) and what about the licensed (or registered) public accountants who are not eligible for membership in the state CPA society? What kind of QAR program does the state board set up for those licensees? Who will do the reviews and who will bear the program operating costs for the QAR program for CPAs who are not state CPA society members and for licensed PAs who are not eligible to be members?

Boards of accountancy have the statutory responsibility for oversight of the work product of all licensees. If the state CPA society can provide an acceptable peer review program for their members, why cannot NSPA or its state affiliate provide a program acceptable to the state boards to fulfill the boards' responsibility to licensees who are not obligated under the state CPA society program?

With the objective of providing QAR assistance to state boards and to encourage voluntary participation by unlicensed accountants in a QAR program, the NSPA Ad Hoc Committee on Quality Assurance Review was formed in December 1990 by then President Richard Garlock. The ad hoc committee is chaired by Ronald Duffin of Turlock, California. The mission of the ad hoc committee is to determine whether there is a need for a QAR program for use by NSPA members and affiliated state organizations, especially for those members who have no other place to turn for such service.

The ad hoc committee has formulated a QAR pilot program for off-site reviews by qualified reviewers of financial statements (other than an audit statement) voluntarily submitted by a randomly selected number of NSPA members. The NSPA members solicited for the pilot program will include an equal number of CPAs, PAs and unlicensed accountants. The selected participants are asked to submit the highest level of financial statement that they prepare except for an audit statement, to NSPA not later than May 25, 1992.

The quality assurance reviews will be conducted in a strictly confidential manner. The names of the participating members (or firms) and the client will not be known to the reviewer. The review will be conducted pursuant to NASBA's review standards. The NSPA reviewers will be specifically trained to perform the reviews, even though several of the NSPA reviewers who are licensed are currently qualified as reviewers by their state accountancy boards.

The NSPA QAR pilot program is not intended at this time to qualify the participating member for any mandatory state program. If the pilot program is successful, NSPA will explore the feasibility of a QAR or peer review program conducted by NSPA or the affiliated state organization in those states where a review is mandatory prior to reissuance of practice permits.

As mentioned earlier, the NSPA pilot program will include an equal number of randomly selected unlicensed accountants as well as CPA and PA members. Unlicensed members are encouraged to participate to upgrade their practices and gain a credential for marketing their services. As in the case of any QAR or peer review program, the primary objective is educational and remedial; that is, to assist the member to prepare financial statements of the highest quality.

The number of volunteer participants (selected by random) will be limited to the first 200 responses. The Ad Hoc Committee on QAR realizes that an active NSPA member not randomly selected may wish to participate. If so, the individual should inform NSPA's Legal Counsel of their interest to determine whether a limitation has been reached on the size of the sample group.

To assist in offsetting the cost of the pilot QAR program, each participant is requested to contribute $100. at the time of submitting the financial statement for review. The $100. will serve to defray the costs of the program and no part of the requested fee will be used as remuneration to the reviewers except for expenses actually incurred. All of the reviewers are contributing their services without any charge.

By the time this issue of the National Public Accountant reaches the membership, NSPA's pilot QAR program will be well under way. If you received an invitation to participate in the pilot program, consider the advantages of doing so. If you do, perhaps at some time in the not-to-distant future, members who participate in an approved NSPA quality assurance review program will be exempt from participation in the board's program, thus satisfying the board's responsibility for the oversight of the work product of all licensees at a cost not to exceed that of the CPAs who participate in the State CPA society programs.

Participation in the pilot NSPA program is the first step. It demonstrates a willingness to perform competent accounting work and a commitment to the profession through active involvement.
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Title Annotation:Washington Comment; National Society of Public Accountants
Author:Sager, William H.
Publication:The National Public Accountant
Date:May 1, 1992
Words:1266
Previous Article:Cost concepts.
Next Article:The tax bill is dead; long live the tax bill.
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