Accountancy Board Wants Peer Review Reports

Accountancy Board Wants Peer Review Reports
Motion Seeks Regs to Make Firms Report Adverse or Modified Reports

By Simon Eskow

New York—The New York State Board for Public Accountancy is recommending that CPAs submit copies of peer review reports to the board.

The board at its Jan. 26 meeting unanimously passed a motion that proposes an amendment to the state regulations that would require CPA firms to submit copies of modified or adverse peer review reports to the board.

Board members called the motion a step in the right direction toward greater transparency, in that peer review results reported to the board would be a matter of public record.

“It is a clear, effective and efficient method of monitoring firms,” said John Olsen, who heads up the board’s Practice Committee. Olsen reported on the recommendation to the board on behalf of his committee.

Executive Secretary Dan Dustin indicated the board would forward the recommendation to the State Education Department’s Counsel’s office for review.

Currently there is no statute for mandatory peer review in New York state. The recent accounting scandal in the Roslyn School District has revived a call for mandatory peer review, something that the New York State Society of CPAs has pursued in supporting proposed legislation in the last few years. The state Senate approved that legislation, S-302D, two years in a row, but each time, the bill remained in committee.

Recent testimony (see story at top of this page) in a hearing before the Senate Higher Education Committee—whose chair, Sen. Kenneth LaValle (R–Port Jefferson), sponsored S-302D—illustrated the renewed interest in revamping the regulations to require peer review.

“I believe that we need strong internal controls in every school district, augmented by effective annual outside independent audits performed by CPA firms,” New York State Comptroller Alan Hevesi said at the hearing. “The standards for those independent audits and for peer review of CPA firms must be improved.”

Currently, 37 states have a mandatory peer review requirement. New York and a small number of other states have been considering making peer review mandatory, according to Susan Coffey, head of Member Quality and State Regulation at the AICPA.

Coffey had, coincidentally, given a presentation to the board regarding the AICPA’s peer review program and recent efforts to glean from various state accounting boards their perspectives on peer review and making reports public. Coffey said that the AICPA has made transparency in peer review a priority and last year set out on an education program to increase awareness of peer review and the necessity for transparency. She said, though, that no states require submission of peer review reports without a mandatory peer review law. The transparency issue for the AICPA’s program will ultimately hinge on a general vote by the AICPA membership.

Board Objects to CBT Price Increase

In other action, the board passed a motion asking that the SED consider an expected price increase in the Computer Based Test (CBT) to be unwarranted and a financial barrier to entry into the profession.

Discussion among board members revealed that the price for sitting for the recently implemented computer exam is rising to $650, from $500, because of a lower-than-expected volume of testing sessions, which by contract allows the testing service, Prometric, to raise its fees. The number in 2004 was 33 percent less than anticipated.

Members reacted strongly to the fee hike.

“This increase borders on the self-serving,” Richard Isserman said.

Members said the business plan for the testing agreement should have taken into consideration differences between the predicted and the actual number of testing sessions.

Other members were surprised not by the increase but that it increased so quickly, and complained that the increase in testing costs was a penalty being passed to future generations of CPAs.

The board’s motion states that the SED “consider the proposed price increases of the Uniform CPA Examination to be charged to New York candidates for examinations as certified public accountants to be unwarranted and that it call upon the AICPA to rescind its planned increase in examination fees as it represents a significant financial barrier to entry into the profession.”