Special Report

BY LOUISE DRATLER HABERMAN

APS Generates Debate at NASBA Annual Meeting

Regulation of alternative practice structures (APS) emerged, once again, as a hot topic at the National Association of State Boards of Accountancy (NASBA) annual meeting.

Richard Hoiekvam, chairman of the task force on regulation of APS, said NASBA was considering a new way to regulate them. “Our preliminary decision was to have a principles-based approach to the application of the standards. We say attest and nonattest entities—from an independence standard’s viewpoint—should be regarded as if a single entity.”

Noel Allen, NASBA legal counsel, advised the boards, for the present, to assess the alternative business structures in their states in terms of the following state laws: the accountancy act and rules, the professional corporations act, partnership laws, the general business corporation act and the limited liability corporation and limited liability practice act. In addition, Allen said, there are hidden areas of the law to consider, such as the assumed names act and cross-references in the real estate and investment act.

Diane Rubin, NASBA Pacific regional director, reported that with respect to multistate practices, the regulatory boards of other professional associations also were interested in facilitating cross-jurisdictional practices. According to a poll conducted by a NASBA committee, some of them had established central data banks of licensee information to enhance interstate enforcement, thereby strengthening public protection.

Uniform Accountancy Act Update

The tenets of the Uniform Accountancy Act (UAA) are gaining acceptance, according to James Martin, a member of NASBA’s UAA education and implementation committee. He called 1999 a banner year in which 12 jurisdictions passed core UAA legislation, with another 12 to 15 expected to introduce legislation in 2000. He also said 32 jurisdictions were close to achieving the UAA’s provisions for entry into the profession.

To accomplish the ease of mobility and enhanced enforcement envisioned by the UAA, states need to adopt the substantial equivalency provisions described in section 23, said Michael Daggett, chairman of NASBA’s task force on transborder enforcement and discipline. By his tally, only 13 states have implemented such provisions. Daggett said the task force supported the use of consistent terminology among the states, although the group recognized it was unlikely jurisdictions would adopt the UAA verbatim.

The task force agreed it was necessary for licensees to notify a jurisdiction if they intended to perform professional services there. “Notification provides the state with more control over granting practice privileges. The task force is discussing a model notification form to facilitate the process,” Daggett said.

Dennis Spackman, NASBA chairman for the 1999–2000 term, urged the boards to consider the code of conduct developed by a joint task force of representatives of the NASBA ethics committee and the AICPA professional ethics executive committee. A vote on its acceptance is expected at both the AICPA and the NASBA annual meetings in 2000.

NASBA representatives worked with the AICPA auditing standards board (ASB) on developing Statement on Quality Control Standards (SQCS) no. 5, which contains experience requirements for those in charge of attest work. Rather than setting a time period for gaining the appropriate experience for attest work, the SQCS described the competencies needed to perform these services.

Gerald Burns, chairman of the NASBA attest experience task force, reported the task force, with the exception of one dissenting vote, had recommended the adoption of the standard. Burns had participated in the ASB project.

Key Issues in Education

Nita Clyde, chairwoman of the strategic initiatives committee, reported her group had identified several key issues of concern to the state boards: How does the accounting profession recruit today for tomorrow? Is it time for a name change from certified public accountant? Will there continue to be state boards of accountancy in the coming years? Will there continue to be an accounting profession in the future?

In response to state board concerns about the drop in the number of candidates for the Uniform CPA Examination, Jan Williams, chairman of the American Accounting Association, cited several causes:

  • The number of college students and the enrollment in business schools have declined in recent years.

  • Accounting lacks identity. Increasingly, it is harder to say what an accountant does.

  • Introductory accounting courses do not entice students to take more courses in the field.

  • Other undergraduate majors, particularly finance, information systems and logistics, lure students away.

  • A master’s degree in business administration is less limiting than an advanced degree in accounting.

  • Salaries for other careers are more appealing.

  • The profession is perceived as having unreasonable workloads.

Professor Williams was optimistic about the future. He predicted changing demographic trends would result in more college-age students and therefore increase the number of students entering the profession. He also predicted students would find the new computerized CPA exam attractive because of its revised format and content.

A panel discussion described the progress being made on the exam. Craig N. Mills, AICPA executive director of examinations, stressed the expertise that was being employed in the exam development process. Questions being explored included: What standard-setting methods will be appropriate for the content of the new test? How do promising test formats perform? And, how can we increase the pool of item writers?

Gary Heesacker, of the NASBA examinations committee, said the boards’ representatives had been seeking more involvement in developing the exam. Carol Sigmann, executive director of the California State Board of Accountancy and a member of the computerization implementation committee, said the computerized exam is expected to be ready in 2003, with the underlying practice analysis to be completed and reported on this spring.

Other News

This year, NASBA presented two service awards, the William H. Van Rensselaer Public Service Award to Jerome P. Solomon and the Distinguished Service Award to Leon Poch. Solomon served as NASBA president for two terms, and Poch was on the CPA Examination Review Board for nine years. Both have been leaders of their state boards and CPA societies.


—Louise Dratler Haberman, editor-in-chief
of NASBA’s State Board Report
and manager of member services

NASBA Polls the Public

Responding to member interest on alternative practice structures, NASBA commissioned a study that polled businesses and the public to learn whether they thought it appropriate for companies involved in other businesses to own CPA firms if they didn’t hold a controlling interest in the firm. The results of the poll were revealed at NASBA’s annual meeting in October.

The poll showed 51% of the business people surveyed said it was appropriate, while 41% said it was not. Sixty-six percent said CPAs employed by financial services corporations might be pressured by their employers to recommend to clients the corporations’ services and products.

The business respondents were more accepting than the public of a CPA firm’s both auditing a corporation and providing it with consulting services (71%). Fifty-eight percent of the public respondents believed such arrangements were inappropriate.

According to the poll, 26% of the general public was familiar with what CPAs do. Ninety percent agreed the basic requirements for a license to practice should include passing a certification test, complying with professional standards, abiding by a code of ethics, being of good character, participating in continuing education and completing required work experience.

The survey results confirmed there was a high degree of trust in the accounting profession, which surpassed trust in attorneys and insurance agents. Moreover, public respondents said they would hire a CPA for tax preparation or advice (66%), business support (38%), financial planning (29%) and investment advice (22%). Business executives reported they would hire accountants to prepare taxes (90%), perform audits (73%), prepare financial statements (56%) and provide accounting systems support or consulting (40%).

Also, 66% of the general public said if they had concerns about a CPA’s work they would contact either the state government or the state board of accountancy, while 8% said they would go to the state CPA society and 2% would go to the AICPA. Of the business executives, 44% said they would contact the state government or the state board of accountancy if they had concerns about a CPA’s work, and 17% would go to the AICPA.

The overriding significance of licensing was revealed when respondents were asked how much they would trust someone to handle their financial matters. The general public said they would trust an accountant licensed in their state, not necessarily a CPA, as much as a CPA (5.8 on a 10-point scale) while rating an unlicensed accountant 4.5. The business respondents differentiated more between types of licensees, giving a CPA licensed in a respondent’s state a score of 8, an accountant licensed in the state—not necessarily a CPA—a 5.8 rating and an unlicensed accountant a 3.6.

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