NASBA Meeting Showcases Profession’s Top Issues


Attendees at the annual meeting of the National Association of State Boards of Accountancy, September 18-20, in Boston reacted favorably to news that the state boards would participate more actively in the Uniform CPA Examination’s development and grading process as a result of the AICPA’s restructuring of its board of examiners.

Speakers also brought participants up to date on efforts to computerize the CPA exam, the SEC’s controversial proposed auditor independence rules, the revision of CPE standards and other important matters.

One of the developments drawing attention was the AICPA’s effort to diversify the membership of the board of examiners, its committees and subcommittees. David A. Vaudt, chairman of the NASBA examinations committee, stressed the impact of the board of examiners’ decisions on the grading and content of the CPA exam. Responsibility for the exam “is assigned to boards of accountancy by the state enabling statutes that created them. That is why the boards must have an active role in the maintenance of these policy-setting decisions.”

AICPA Chairman Kathy Eddy said the Institute’s board of directors wants the board of examiners, its committees and subcommittees to “reflect the regional and ethnic diversity that make up this profession and the publics we serve. When all of these committees are in place, we will have achieved these goals.” She stressed the importance of state boards’ ongoing participation in the effort to place individuals from public practice, government, state boards, accounting education and business on the committees.

Eddy also told attendees the AICPA and NASBA should continue their cooperative efforts—begun in 1997—to develop a computer-based CPA exam. “There is no way we can claim the high ground of public protection and not computerize the exam,” she said.

By the time the computerized exam is implemented in 2003, the announced cumulative increase over the current fee will be 366.7%, said J. Lamar Harris, executive director of the Alabama state board. “Boards not able to absorb the increase will have to raise the fees they charge candidates,” he noted. “And while some states permit boards to increase fees through rule making, others require new legislation.”

Although the cost of developing the computerized CPA exam ultimately will reach $10 million, the AICPA will not begin to recover that expenditure until 2003 when the exam is implemented. Meanwhile, graduated fee increases have been announced for 2001 and 2002 to cover current examination costs and past deficits.

The increases “may be a political problem” for some boards, Harris warned. NASBA and the state boards are discussing the proposed fees with the AICPA (see sidebar, “Changing the CPA Exam and Accounting Education,” below).


A question about the number of candidates that will take the Uniform CPA Examination was raised by Jan R. Williams, past president of the American Accounting Association, as he summarized the results of a joint study from the AAA, the AICPA, the Institute of Management Accountants and the Big Five: Accounting Education: Charting the Course Through a Perilous Future authored by W. Steve Albrecht and Robert J. Sack, professors at Brigham Young University and the University of Virginia, respectively.

The study made four points:

  • Accounting education has not kept up with the needs of the profession during a time of significant change in the business environment.
  • Accounting students are fewer in number and are less qualified than was so in the past.
  • If asked to make the choice again, neither accounting professionals nor academics would major in accounting.
  • Accounting education models are inadequate and are in urgent need of modernization.

From 1995–99 the number of enrolled accounting students dropped 23%, according to the study. Williams suggested several factors that may have contributed to the decline:

  • Lower starting salaries.
  • More attractive career alternatives than in the past.
  • Increased willingness to choose risky majors and career tracks.
  • Erroneous or incomplete information about the accounting profession.
  • Additional tuition expense and time associated with the 150-hour program rule.

Williams recommended four steps professionals can take to improve the situation:

  • Advocate necessary changes in schools where possible.
  • Serve as advisers to schools.
  • Make faculty internships available and inform faculty members of them.
  • Support changes in the CPA exam and other professional examinations.

Williams also urged accountancy boards to consider the changes proposed for the CPA exam.

Independence issues debated

But just when is change needed and when is it appropriate for regulators to stand firm? Dennis P. Spackman, NASBA chairman (1999–00), told the state accountancy boards, “The auditor’s independence lies at the heart of the public’s confidence.” He advised them to be guided by the core values NASBA adopted in July (see sidebar, “NASBA Core Values,” below), and said, “We will not look kindly on any behavior or initiatives that would impair, diminish or deter the state boards’ interests in any matter associated with these core values.”

SEC Chairman Arthur Levitt applauded the boards for recommending to the POB’s Panel on Audit Effectiveness greater public participation in the profession’s oversight.

Several state board representatives suggested to Levitt that the SEC’s proposed independence rule would work its way down to the state level and affect all independent auditors, whether or not they have SEC clients. But Levitt replied, “I assure you that there are ways it will not trickle down.”

Even so, in his inaugural address, John B. Peace, incoming NASBA chairman, asked, “What could be more confusing to the public than a separate set of independence rules applicable to auditors of SEC-registered companies and another set of independence rules for small firms? It behooves the regulators and the profession to make sure that the independence rules finally adopted by the SEC are good for the public and the profession.”

On the issue of the POB’s becoming a more powerful and independent self-regulatory organization, Peace said, “NASBA has sought to have more input and a voice in that organization. But if the POB seeks to become something more—a body that will license and discipline accountants on a national level—we will oppose that vigorously. One of our core values is that states—not a national body—should regulate accountants.”

Boards discuss concerns

As a result of the boards’ input, significant revisions lie ahead for the proposed continuing professional education (CPE) standards a joint AICPA/NASBA task force drafted. Gerald Burns, chairman of NASBA’s continuing professional education advisory committee, reported that 22 boards had written to express their concerns.

In the boards’ view, the proposed concept of self-directed CPE offered too much latitude for abuse. Burns noted that the joint task force had embraced the concept of self-directed CPE, but the boards’ comments were based on practical experience in enforcing CPE requirements. A joint review of the proposed standards is expected, culminating in another draft and exposure period, he said.

Johanna Duncan-Poitier, deputy commissioner for the professions in the New York State Department of Education, said the states’ regulatory boards have the experience to effectively oversee the professions, but need to better facilitate professionals’ interstate mobility. She warned that in a global economy the state licensing boards must collaborate to achieve comprehensive nationwide regulation. If they do not, she said, “someone else will fill that gap.”

While the accountancy boards have been concerned about the regulation of alternative practice structures, other professions have a longer history of such arrangements. Duncan-Poitier spoke of corporations’ increasing willingness to recruit for their staffs licensed professionals, such as pharmacists and optometrists, to provide services and boost revenue. The state of New York, she said, has not taken a position on the best form of ownership for all professional firms but is concerned about the potential effect various forms of ownership could have on professional judgment.

At the same time, Duncan-Poitier said, various groups are interested in making the accounting profession more accessible by lowering educational and licensing standards for CPAs. “Some are talking about having ‘registered accountants,’” she said, noting that this would confuse the public.

On the international scene, Harris Widmer, chairman of the NASBA/ AICPA International Qualifications Appraisal Board (IQAB) said the boards of directors of NASBA and the AICPA had signed a mutual recognition agreement with CPA Australia (formerly the Australian Society of Certified Practising Accountants), which will be sent to the state boards on an advisory basis. Similar agreements exist with the Institutes of Chartered Accountants in Canada and Australia.

Widmer also said the IQAB, in cooperation with the Canadian Institute of Chartered Accountants, is studying a new credential developed by the Instituto Mexicano Contadores Publicos. The credential is granted after candidates complete education equivalent to the United States’ 150-hour requirement, pass a uniform examination and earn sufficient experience. To underscore the extent of international interest in becoming a CPA, Widmer reported that in May 1999 more than 4,000 candidates from 19 foreign countries took the Uniform CPA Examination.

—Louise Dratler Haberman,
director of information and research at NASBA
and editor of the
State Board Report.

  • Preserve the public trust and confidence in the CPA license and credential.
  • Support the licensing of individuals who demonstrate and maintain competence through education, examination and experience requirements.
  • Ensure that the integrity, objectivity and independence of licensees are not compromised.
  • Foster compliance with ethical and all professional standards.
  • Promote the rights of boards of accountancy to regulate licensees in all their professional activities.


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