The National Association of State Boards of Accountancy (NASBA) held its annual meeting in Chicago in October. Attendees were advised how to restore public trust in the profession. The gathering’s keynote speaker, Public Company Accounting Oversight Board (PCAOB) Chairman William J. McDonough, thanked NASBA and the state boards for the assistance they had provided while the PCAOB developed rules, registered auditors and prepared to begin operations.
Referring to the PCAOB’s intent to share findings from its
inspections of auditing firms, McDonough said, “We have worked out a
system to provide the full reports to the boards in states where the
firms are licensed, pursuant to a certification [by each] state board
[that it] will honor the confidentiality provisions of the
Sarbanes-Oxley Act.” He urged all state boards to cooperate with the
PCAOB by submitting such certifications.
NASBA President David A. Costello moderated a panel of standard setters that included PCAOB Chief Auditor Douglas R. Carmichael, GAO Chief Accountant Robert F. Dacey, Auditing Standards Board (ASB) Vice-Chairman Harold L. Monk Jr. and John Kellas, chairman of the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). Costello asked them whether multiple sets of standards would confuse the public and the courts.
In reply, each panel member underscored the need to converge standards. Kellas said, “There should be only one set of standards, but we should listen to issues raised by smaller entities and write standards [so] all can use them.” Monk said the AICPA fully supports convergence and favors working with the IAASB on principles-based standards: “Auditors like bright-line standards, but principles-based [standards] make sense. Standards should have flexibility so the auditor can exercise professional judgment to make an appropriate plan.” Carmichael said the public deserves a certain level of assurance regardless of an entity’s size, but added it’s essential to “differentiate between the standards and implementation.” Dacey said the GAO is committed to working with the other standard setters and is a member of a coordinating forum.
NASBA Chairman David A. Vaudt noted the increased participation of state board members in audit standard setting. Five CPAs with state board experience now are ASB members: Barton W. Baldwin of North Carolina, Gerald W. Burns of Oregon, James W. Goad of Arkansas, Wanda R. Lorenz of Texas and Diane M. Rubin of California. Two are on the PCAOB’s Standing Advisory Group: Samuel K. Cotterell of Idaho and Lorenz.
Vaudt also congratulated everyone involved in the successful launch in April 2004 of the computer-based Uniform CPA Examination, and a panel of speakers updated meeting attendees on its implementation. Although candidates have commented favorably on the testing sites, and passing rates on the examination’s sections have risen, the number of sections being taken has not met expectations. Nevertheless Rubin, chairman of the NASBA Examinations Committee, said the response will improve because more students are enrolling in undergraduate and graduate accounting programs and firms’ revenue for accounting and auditing work is growing.
AICPA Chairman Robert L. Bunting said in his address, “I believe in capitalism—but not unfettered capitalism. That’s why the [state boards’] role is important to the public interest.” He then went on to describe the program the AICPA has established to make its members aware of how important it is to increase transparency in the peer review program.
Costello announced that NASBA is planning a June 2005 pilot test for the U.S. Accountancy Licensee Database it designed to quickly give boards current information about CPAs practicing in multiple states. He also said NASBA has established the Center for the Public Trust to foster confidence in American corporations and institutions and the professions serving them.
Calling on the boards to adopt a uniform regulatory approach, incoming NASBA Chairman Michael D. Weatherwax said, “NASBA will dedicate resources to assist you in removing barriers between states.”
—Louise Dratler Haberman is NASBA director of information and research, and editor of the State Board Report.
Editor’s note: As it relates to auditing standards, the PCAOB chairman and the AICPA have both publicly stated that they prefer no differences for the sake of differences in auditing standards between public and private company audits, but only where necessary for the private audit environment.