T he National Association of State Boards of Accountancy held its annual meeting in October 2003 on Maui, Hawaii. Meanwhile, the public company accounting standards and federal regulations implementing the provisions of the Sarbanes-Oxley Act of 2002 continued to develop. Discussion therefore focused on how the state boards would cooperate with each other, with the Public Company Accounting Oversight Board (PCAOB) and with the SEC to coordinate state accounting laws for both public and private companies with the new federal guidelines in order to best protect the public interest.
TRUST COMES FIRST
One of the panelists, Gail Hillebrand, a public member of the California state board, recommended creating a national database on the reporting of restated financial results, developing state rules for audit documentation and considering rotating the auditors for public companies and large not-for-profits.
CONSISTENCY AND SARBANES-OXLEY
Andrew L. DuBoff, vice-president of the New Jersey state board, said it would take time to determine whether regulations derived from the Sarbanes-Oxley Act and the PCAOB accomplish what they were meant to do. DuBoff also said that in the meantime state boards should stay abreast of the positions NASBA, the PCAOB and the AICPA take on Sarbanes-Oxley-related issues.
S. Scott Voynich, AICPA chairman, called for cooperation. “Now, more than ever,” he said, “the state societies, the state boards of accountancy, NASBA and the AICPA have an opportunity and a responsibility to find the right balance, to promote yet protect, to enhance the value of the CPA and the CPA hallmark while continuing to protect the public interest.”
PCAOB member Kayla J. Gillan added that confidence in the capital markets won’t return until not only auditors—but also corporate managers, attorneys, investment analysts and others who played a part in the financial scandals of 2001 and 2002—redeem themselves in the eyes of investors. In addition, she said, Congress, the SEC, the stock exchanges, state boards and legislatures must work together to foster meaningful regulatory compliance. During the PCAOB’s review of firms’ registration applications, she recalled, it questioned firms that employed accountants a regulatory authority had disciplined. Frequently, such firms told the PCAOB not to be concerned about disciplined auditors because they no longer audited public companies. “Firms should not be able to avoid oversight simply by shifting ‘problem’ people from one practice area to another,” she said. “Together we can seek to avoid these types of regulatory gaps.”
An SEC enforcement official also called for closer relations with state boards. According to Spencer C. Barasch, associate administrator and head of the SEC’s Fort Worth, Texas, enforcement office, in 2002 the commission had—nationwide—more than 2,200 open investigations—40% of which involved financial fraud. That same year the number of new investigations that involved financial reporting and disclosure rose 69% from 2001. Barasch said that since both the SEC and state boards have common goals and limited financial and staff resources, “it makes sense to work together when our interests overlap.” For example, the SEC refers to appropriate state boards its enforcement actions involving CPAs. Barasch recommended that boards contact the SEC investigators who worked on those cases to learn which accountants had cooperated with the commission and which had not so state regulators could apply leniency where appropriate.
THE NEW CPA EXAM
—Louise Dratler Haberman is NASBA director of information and research and editor of the State Board Report.