Accountancy Boards Target Reciprocity at Annual Meeting
|By Louise Dratler Haberman|
|Louise Dratler Haberman is NASBA's manager of member services and editor-in-chief of its State Board Report.|
R esponding to the reciprocity concerns raised by the joint AICPA/ NASBA committee on regulatory structure, the National Association of State Boards of Accountancy launched an initiative to help make the CPA license more transportable across state lines. NASBA's leaders urged the more than 250 attendees at the association's 89th annual meeting to look at the credentials of CPAs seeking reciprocal licenses with an eye to substantial equivalence. Even when there may be significant differences between states' requirements, if an individual licensee meets the requirements set out in the Uniform Accountancy Act (UAA), he or she should find it relatively easy to obtain a reciprocal license under a new rule being proposed for adoption by the state boards.
The state boards were asked to adopt the following rule, which had been approved in principle by the NASBA board of directors: "For purposes of reciprocity, an applicant having a valid unrevoked license to practice as a certified public accountant from any jurisdiction and who has obtained from NASBA verification of compliance with the Uniform Accountancy Act's CPA registration requirements shall be presumed to have qualifications substantially equivalent to this state's."
NASBA UAA committee chairman Gerald Burns encouraged meeting attendees to win support for the concept from their state boards, check with their legal counsel to see how it could be implemented and then adopt the rule. Members of his committee will meet with individual state boards to discuss how the rule can be put into practice. Burns explained the idea was to develop a "seamless approach" to reciprocity-to allow the boards to accept credentials from other jurisdictions without extensive checking requiring duplicate detailed applications from licensees.
Though coordinated action was called for, NASBA leaders made it clear that licensing and discipline would remain with the individual state boards. NASBA incoming chairman John M. Greene said, "The state boards own the CPA designation." He disagreed with the idea that some services performed by CPAs should not be regulated by the accountancy boards-"Shouldn't everything a CPA does be regulated at least to the extent of conduct and competency?"-and stressed the need for public confidence in all services rendered by a CPA.
"Most state boards regulate only attest now. However, the concept of 'acts discreditable' to the profession means these boards ultimately regulate all areas of a CPA's practice," Greene said. "This concept changes to fit the circumstances as market forces open new services for CPAs." Greene challenged the need for "creating a level playing field" since CPAs are not being hindered in the marketplace under the current system of accounting regulation.
CPAs must respond to market
"We are entering a decade of enormous and rapid change in accounting and assurance services," Ronnie Rudd, outgoing NASBA chairman told the state board representatives meeting in San Antonio, Texas. "Unless NASBA and the AICPA respond rapidly, neither organization will be around in 10 to 20 years. That is our challenge."
Rudd alluded to the future services identified by the American Institute of CPAs special committee on assurance services, the online electronic hookups that are bringing professionals across state lines and CPAs' use of the Internet for advertising. He underscored the need for the accountancy boards to develop effective strategies for addressing these areas.
Robert Mednick, chairman of the AICPA board of directors, presented some differing views to the regulators, urging them to rethink which areas require regulation and suggesting oversight is required only where the public interest is the greatest. Mednick had outlined his thoughts in "Licensure and Regulation of the Profession: A Time for Change," JofA, Mar.96, page 33.
"We need to find a way to differentiate between the credential and the license," Mednick said. He identified the following changes as necessary to help CPAs become independent information professionals:
- A more focused regulatory scheme that emphasizes areas with the greatest public interest and avoids creating unnecessary barriers to CPAs' performing other services in an increasingly competitive marketplace.
- A change in the education (both university and continuing professional education) of practitioners.
- New assurance services to jump-start the broader 21st century practice.
- The creation of a new image for the profession so CPAs have the 'permissions' to successfully perform new and expanded information services."
Expanding on Mednick's comments, AICPA President Barry Melancon explained that services being offered by CPAs can be thought of as falling into two buckets, one holding traditional services and the other new services that are truly between just two parties. It is the two-party services that he maintains should be free from the most intense regulatory function.
This more limited view of regulation was not supported by the statistics presented by NASBA President David Costello. According to the electronic polls conducted at the AICPA spring council meeting and NASBA's June regional meetings, both the AICPA and NASBA respondents agreed CPAs who perform services also performed by non-CPAs should be regulated (76% agreement at the NASBA meetings and 61% at the AICPA council meeting). Costello highlighted the similarities and differences between the two organizations' responses: While 85% of NASBA respondents and 91% of council members said reform efforts should receive highest or moderate priority, both groups favored the current regulatory system, with uniformity, over any other proposed combination of regulatory and licensing bodies.
Rudd gave the audience an update on the work of the joint committee on regulatory structure, saying there was some agreement on using the concept of substantial equivalence, but "the devil is in the details." The joint committee is considering issues such as nonlicensee ownership of public accounting firms, which Rudd said cannot be ignored as the courts and state legislatures continue to look at them as well. He assured the state board representatives that no decisions would be made by the joint committee without first bringing the proposals to the state boards. If necessary, a special meeting will be called for this purpose.
Representatives from the United Kingdom and Canada explained how similar issues were being handled by their professionals. Anyone can offer general accountancy services to the public in the United Kingdom and Ireland, reported Roger Lawson, chairman of the Chartered Accountants Joint International Committee; however, three areas are restricted to individuals meeting specific requirements: statutory auditing, investment banking and insolvency practice. He also said that while U.S. CPAs are concerned about the portability of their license within their own country, British CAs currently are implementing measures for free movement of professionals throughout the European Union member states. Lawson said CAs are becoming information professionals and, following a common core of courses, are training for specialist designations after they qualify as CAs.
Michael H. Rayner, president of the Canadian Institute of Chartered Accountants, told the NASBA audience about the results of the CICA's future-oriented study: "Our vision is that accountants should be leaders in creating, validating and interpreting information that measures and enhances organizational performance and should be the obvious choice for financial management, assurance and other specialized services." He said the challenge of the profession "is to reinvent ourselves."
Before detailing what services the profession is expected to be offering, NASBA past president Sandra Suran, a member of the AICPA special committee on assurance services, reminded the attendees of NASBA's first strategic plan, developed some 15 years ago when she led NASBA. It encouraged the organization to take a proactive position "to identify trends as they emerge, before they become disasters." Calling accounting today a profession "in transition," that is seeking to serve its clients' needs more completely, Suran quoted one user of CPA services who said of financial reporting: "The current system is like timing your cookies with a smoke alarm." The profession needs a process for developing and introducing new products constantly, and "NASBA must assure attest services are a strong, regulated part of the new services being offered," Suran advised.
Regulators in many professions feel "the ground is changing under us," Sarah Blake, NASBA's incoming vice-chairman, commented. "I would argue that change is here. How do we protect the public when a practitioner is servicing a client as far as 5,000 miles away?"
Blake noted that via the Internet people from other countries are assuring potential financial services clients that their work conforms to "local GAAS and GAAP." She said she did not realize there were such things as "local" GAAS and GAAP. She advised those state boards that have prohibitions on advertising that those prohibitions are being violated on the Internet.
"There is a point where you have to be able to reach a person and have some impact. How do we harmonize our regulations in these instances where you have work being sent to a client by a CPA that is beyond your jurisdiction's boundaries?" she asked. Blake recommended that the boards pair themselves with other professional regulators in their states, such as the medical boards, to approach their state legislators on the common issues involved in telepractice.
During the annual meeting NASBA presented the William H. Van Rensselaer Public Service Award posthumously to Richard J. Goode. He had been NASBA president-elect in 1991 when he was struck down by an automobile. Goode, managing partner of the Salt Lake City office of Coopers & Lybrand, had spearheaded the development of the NASBA National Registry of CPE Sponsors.
Drawing the meeting to a close, Greene identified issues that NASBA will consider during his year in office. These included: nonlicensee ownership of public accounting firms; determining which services need to be regulated; coordinating ethics requirements; developing a central recordkeeping system including examination grades, experience and education information to facilitate licensees' mobility; reconsideration of the "holding out" concept and "acts discreditable" provisions; achieving reciprocity with the United Kingdom; and bringing the states together through the concept of substantial equivalence.
NASBA's 90th annual meeting will be held September 21-24, 1997, in