Computerized Exam the Major Topic at NASBA Meeting



Creating and implementing an electronic version of the Uniform CPA Examination topped the agenda at the annual meeting of the National Association of State Boards of Accountancy in October. Speakers reported on contract negotiations among NASBA, the AICPA and Prometric, a provider of electronic testing services that will deliver the proposed examination. The parties are expected to sign a basic agreement this month, which NASBA then would ask the state boards to endorse—adding individual schedules, as necessary, to match their regulatory needs.

Speakers also updated participants on efforts to stem the decline in the number of accounting students, on the new AICPA/NASBA continuing professional education standards, on proposed changes in the Uniform Accountancy Act and on accountancy boards’ and their licensees’ use of the Internet.

Olivia F. Kirtley, chairman of the AICPA board of examiners (BOE), assured the accountancy boards the computer-based test would continue to be “a licensure examination that admits individuals to the profession only after they have demonstrated the entry-level knowledge and skills necessary to protect the public interest in a rapidly changing business and financial environment.”

To that end, the BOE will develop a 14-hour computerized exam with four sections that cover auditing and attestation, financial accounting and reporting, regulation and business environment and concepts. A proposed transition policy will make it unnecessary for candidates to take parts of the computerized exam if they’ve passed, within a specified period of time, equivalent sections of the current exam.

The state boards have, for some time, expressed concern about the historical and projected costs of the examination and also about their ability to convince legislators to raise exam fees. So, NASBA engaged Barry Burney of Professional Resources International, Inc., to review exam costs from 1998 through 2001. His research showed the AICPA was operating at a deficit for the paper exam, and he concluded the cost of future paper exams was accurately reflected in the AICPA’s projected costs for fiscal years 2002 and 2003. Each state board adds the AICPA’s costs for the examination and its grading to the board’s administration fees to determine the fee charged to candidates. (Examination fees are subject to scrutiny by some state legislatures.)

The AICPA/NASBA computerization implementation committee (CIC) recommended allowing candidates to take the different sections of the test in any order but requiring them to pass all four sections within an 18-month period. Also, candidates taking the computerized exam would not have to achieve a minimum score on sections they fail in order to obtain credit for sections they pass, which currently is the policy in most jurisdictions. CIC member Nathan T. Garrett said the proposed policies would make it easier to prepare for individual exam sections and would reduce overall exam fees because candidates wouldn’t take sections for which they weren’t prepared. He added that the CIC would expose the proposals for public comment.

According to William Treacy, CIC member and executive director of the Texas state board, the committee still plans to launch the computerized exam in November 2003. The CIC engaged researchers to ensure it didn’t overlook any state laws or regulations that would prevent a jurisdiction from implementing the exam at that time. In addition, Treacy said, the AICPA conducted focus groups of young professionals and students and found their primary concern was the exam’s content, not its cost. The CIC will receive ongoing reports from its educators task force, which is formulating curriculum recommendations with the American Accounting Association.

In addition to computerizing the CPA exam, boards must tackle two other issues, according to John B. Peace, then NASBA chairman: preserving and strengthening state regulation of the accountancy profession by getting more states to adopt the Uniform Accountancy Act’s section 23 on substantial equivalency and reversing the decline in the number of CPA candidates.

To encourage more students to consider becoming CPAs, the AICPA has engaged the Wunderman communications agency, which specializes in marketing to young people. James G. Castellano, AICPA chairman, told the NASBA audience the campaign would foster communication with high school and college students and measure changes in their awareness, attitudes and behavior as they gravitated toward a particular career.


Barton W. Baldwin, NASBA’s UAA committee chairman, alerted state boards to proposed changes in four parts of the Uniform Accountancy Act: Internet practice; notification under UAA section 23, “Substantial Equivalency”; education requirements and conforming revisions related to compilations governed by SSARS no. 8, Amendment to Statement on Standards for Accounting and Review Services No. 1, Compilation and Review of Financial Statements.

The AICPA/NASBA UAA committee’s proposed Internet practice rules call for firms who offer services via a Web site to disclose a responsible licensee and his or her principal state of licensure on the site. Baldwin asked the boards for their comments by the end of 2001. He said the CIC would expose for comment proposed UAA changes related to the computerized exam.

The two exposure drafts are available on the NASBA Web site at .

Baldwin said the committee hoped to publish its final revisions to the UAA in February 2002 after it analyzed the comments and the AICPA and NASBA boards of directors approved the proposed changes.

Baldwin, who also is NASBA’s new chairman, said he and the national board would be “tenacious on crucial issues, such as the CPA examination, auditor independence and maintaining the rights of state boards to regulate their licensees.”


Balancing the needs of all who use the Internet also got its share of attention. “The individual’s right to privacy is in a constant tug-of-war with the right of the public to gain access to information collected and maintained by government,” Michael R. Granen, California deputy attorney general, told the state boards. “This is reflected in statutes with seemingly conflicting mandates of ‘public disclosure’ and ‘privacy protection.’ With the advent of the Internet, state legislatures have expanded legislation in this area to the extent of mandating specific licensee information on individual board Web sites.”

For example, he said, in California the state legislature requires the medical board to provide on its Web site a wide variety of information about its licensees, including addresses, pending litigation, school and date of graduation, malpractice judgments and privileges revoked by hospitals. In addition, the board’s site must link to the sites of other medical credential-granting bodies.

Granen noted that although privacy laws limit the collection, maintenance, use and disclosure of personally identifiable information (such as name, home address, home phone number and education) to that which is relevant and necessary for an agency to fulfill its statutory mandate, an accountancy board can disclose matters of public record, such as agency disciplinary matters or criminal convictions substantially related to the practice of public accountancy. He recommended that the boards inform licensees of their disclosure policies at the point at which information is gathered—for example, a licensing or renewal application.

Granen said it’s very easy to get and use Web information for the wrong purposes. He told the boards to “underline in red” that the information the licensee is about to provide will be on the Web site. He added that giving consumers information about licensees and protecting licensees’ privacy are not mutually exclusive if the boards pay attention to the information they collect and how they maintain it.

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

Refining the Exam and Its Prerequisites

Professor Robert J. Sack of the University of Virginia, coauthor of Accounting Education: Charting the Course Through a Perilous Future, a 2000 study confirming the reduced number and quality of accounting students, advised attendees at NASBA’s annual meeting to support upgrading the CPA exam so that it tested candidates’ ability to think at the required level.

He also recommended that state boards reconsider the way they applied the 150-hour requirement. The current UAA calls for candidates to complete 150 hours of study before taking the CPA exam. Some states let candidates take the exam after 120 hours, but won’t issue a license until students complete the remaining 30 hours.

In addition, Sack proposed that state boards forgo requiring candidates to take courses with specific titles before they entered the profession. He also suggested that boards no longer mandate certain types of courses to meet CPE requirements. Instead, he said, schools and the market should determine what courses are necessary.


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