State Reconsiders CPA Exam

State Reconsiders CPA Exam
Accountancy Board Also Continues Work on ‘Troublesome’ Regulatory Proposal

By Simon Eskow

Continued from the Home Page

The New York board agreed unanimously at its June 29 meeting to support the proposal.

“California is saying not to put all our eggs in one basket,” said Daniel Dustin, the board’s executive secretary. “They’re saying to gather information on where we should go.”

The year-old CBT has sparked criticism from a number of boards of accountancy over problems at testing centers, pricing and other issues. New York has seen its share of difficulties, and board members wondered if rising costs and unresolved technical problems are creating an obstacle for entry into the profession.

Dustin told the board that exam sessions for the CBT have fallen below the paper-and-pencil average, from about 5,000 per testing window to 2,600 in the window that just ended. The number of licenses issued by the state, he added, has declined by 25 percent.

While there is no empirical evidence to draw a direct connection between testing issues and the decline in candidates, the board has noted technical issues and rising costs in the past. Some members, however, see the efficacy of the exam as a bigger question than the rising cost.

The California letter noted that NASBA seemed to be working toward a formal plan to tackle outstanding problems in the current exam. The letter, though, urges NASBA to issue prior to the end of the year a Request for Information (RFI) on the cost, time frames and overall feasibility of developing an alternate test.

Dust-up Over ‘Troublesome’ Proposed Regulations

The board also voted 8 to 3 to change a definition that would expand greatly the kinds of companies affected by a set of regulations proposed by the State Education Department (SED). The board had voted to support those regulations at a meeting on June 1.

The proposed regulations cover professional conduct, but would also apply Sarbanes-Oxley Act (SOA)–style language, such as prohibitions of nonaudit services and auditor rotation, to corporations not already covered under SOA.

The New York State Board of Regents harshly criticized the proposal later, during a presentation at its meeting on June 20.

The Regents focused on another provision that would consider disciplinary action by federal regulators as grounds for professional misconduct. According to eyewitness accounts, they called the disciplinary proposal “unsettling” and “troublesome”; questioned the constitutionality of the state’s charging a CPA or firm with misconduct based on decisions of federal bodies, whether or not there was a finding of guilt; and noted that the SED could not answer many of the Regents’ questions on the matter.

“Last Monday, the Regents met and (we) gave a presentation and a few of the Regents raised concerns on parts of the regulation,” Dustin said. “Given the feedback and comments the Regents made, we’ll go back to them to continue working on the regulations. It’s an evolving process.”

Dustin also addressed an article the July 1 edition of The Trusted Professional that discussed the Board’s actions at a last-minute special session on June 1, in which the board approved the preliminary proposed regulations.

Dustin quoted a sentence in the article that stated the proposed regulations “appeared to have found its roots in a board meeting held last November…(when) board members learned that the…(SED) actively sought state regulatory changes with or without legislative support,” and attributions to NYSSCPA Executive Director Lou Grumet, who said the Society had not seen the exact wording of the proposal being given to the Regents and hoped that the SED’s actions wouldn’t “muddy the legislative waters” while the legislature was working feverishly to pass accounting reform bills (see articles in this edition).

“Grumet says he hadn’t seen the regulations,” Dustin said. “I was surprised when he said that. We’ve been talking about these regulations since April 2003. At no time did the legislative staff say these regulations would muddy the legislative waters.”

Dustin also quoted a letter authored by Grumet.

“The second document is a letter Lou (Grumet) wrote to the Regents, and in that letter he cites that he had just learned about the proposed regulations we’re just introducing to the Regents,” Dustin said. “I’m surprised nobody told Lou. As I’ve stated, we’ve been discussing these rules for more than two years….I’d suggest this board and your predecessors have been working for more than seven years to update the 50-year-old law. We’ll be working more in the future.”

“The Society was well aware of the discussion over some regulations for many years,” Grumet said in a later interview. “In fact, the Society has been involved in those discussions. However, it has been a work in progress. The actual regulations were not posted on the board’s Web site. In fact, the board’s agenda did not indicate the matter would be discussed (at the June 1 meeting). Theory and concepts differ from actual wordings.”

Dustin, earlier, had reiterated that the SED would continue to push the regulatory change.

“There were some questions (at the Regents) that were raised with respect to the statutory authority of the regulations,” Dustin said. “Counsel’s office believes we have the authority to do this now.”

Gray Area

In another segment of the meeting, Chairman Robert L. Gray announced to the board that he had a consulting relationship with NASBA.

“I have a dual role with NASBA,” Gray said. “It’s important for the board to know where I stand with NASBA….I’m also a consultant for NASBA….(but) my consulting capacity is limited to PCAOB, SEC, and GAO work…not the policy of NASBA itself. If the board takes on an issue, I’ll turn my role over to the vice chair if I feel that I’m not independent.”

Gray said that the issue regarding NASBA at that meeting did not affect his independence because it did not touch on his consulting capacity.