State Accountancy Board Rejects Controversial Computerized CPA Exam Proposal

By Dennis O’Leary

New York—The New York State Board for Public Accountancy rejected a proposal allowing the National Association of State Boards of Accountancy (NASBA) to develop a computer based test (CBT) for CPAs that could be available as early as November 2003.

During a meeting in Atlanta on Jan. 9, delegates from state accounting boards, in a 43-to-7 non-binding “advisory vote,” gave NASBA the green light to develop the CBT in conjunction with the American Institute of CPAs (AICPA) and Prometric, a for-profit subsidiary of Thomson Corporation, Four states abstained from voting.

The state board’s decision to vote against the CBT “master contract” does not prevent New York from adopting the test in the future, though board members have expressed concerns over the contract. As a public advisory body to the New York State Board of Regents on both regulation and licensure of the CPA profession, a major change in the examination for licensure is of great concern to the state accountancy board with respect to future CPA candidates and the protection of the public from candidates passing at a higher rate a potentially less rigorous exam. Board members at a meeting in New York City last December raised concern over several issues, ranging from pricing to potential conflicts of interest.

The board sent a letter to NASBA addressing these concerns, in hopes that NASBA would adequately address them prior to the advisory vote, apparently to no avail.

Among these concerns was a rise in projected costs to the candidates for the CBT, from the current level of around $250 to $600—a state board estimate—for a single examination sitting for first-time applicants. Board member and former NYSSCPA President Barry Seidel declared such an increase to be “staggering to candidates.” Board member Harvey Moskowitz said, “No one has made an adequate study of the cost.”

NASBA Executive Director David Costello explained at the meeting that the cost of the exam is driven by the pass rate and the volume of candidates taking the exam. The currently projected cost to candidates is based upon an increase from the current 30 percent pass rate. If the pass rate goes to 60 percent, the volume of candidates sitting for the exam (including repeat tests) will decrease. Board Chairman Charles (Chuck) Schoff noted that there is a potential that the public won’t be protected if the pass rate goes to 60 percent, since it implies that the CPA has passed an exam far less rigorous than that of today’s standards.

The issue of cost to candidates will also be affected by a change that would allow candidates the option to sit for only one part of the exam, as opposed to a minimum of two parts in one sitting. A NASBA representative could not confirm whether the $600 cost was a one-time fee, or if other fees would be incurred in subsequent sittings. The representative added that the $600 price was not official.

Costello also urged the state board to look at the totality, to keep the exam uniform among the states.

“We don’t want to damage uniformity through the states,” Costello said.

Daniel Dustin, executive secretary to the state accountancy board, noted that there are already differences among the states on education and experience requirements: “non-uniformity in two out of three Es (education, experience and examination),” but Costello insisted that the continuing non-uniformity in the CPA examination would be a disservice to the public interest.

Schoff later challenged Costello to guarantee that the contract contained no conflict of interest, considering AICPA’s current relationship with Prometric’s parent company, Thomson, in their joint venture, CPA2Biz.

Costello denied this was a significant conflict of interest, adding it was not a big issue to other state boards. Costello added that only a few boards were concerned about $3 million in interest from a loan offered by Prometric to NASBA for development of NASBA’s confidential candidate database.

Board members also questioned whether states would have enough say over exam content, contending that the contract allows for a board of examiners (BOE), only 50 percent of whom would represent various states.

State board member Dwight Hadley recommended that NASBA, not the AICPA, should make the appointments to the BOE.