State Board Report

July 2010

State Boards were asked to begin studying several proposals unveiled at the 2010 NASBA Regional Meetings, held June 9‐11 in Charleston, SC, and June 23‐25 in Seattle, WA, and to send their comments to the committees that initiated those proposals. The State Board Relevance and Effectiveness Committee, led by Carlos Johnson, released their rationale and model legislation for a semiindependent accountancy board, and the Ethics and Strategic Professional Issues Committee, led by Gaylen Hansen, distributed their proposed uniform definition of independence, as well as draft rule related to performing audits or attest engagements below cost. Material distributed at the 2010 Regional Meetings can be found on the NASBA Web site, www.nasba.org , in the “Meetings” section.

“It has become apparent the degree of independence of a state board affects its efficiency,” said Ellis Dunkum, chair of the subcommittee which drafted the rationale for the semi‐independent board project. “NASBA believes the State Boards need a high degree of autonomy with the authority to do what they need to do,” he told the breakout session in Charleston. Ray Johnson presented model legislation for establishing a semi‐independent board based on the provisions in place in Texas and North Carolina, along with a chart showing where the Uniform Accountancy Act addresses the issues raised in the paper. These documents developed by the committee can assist Boards that are facing consolidation or Sunset Review, as well as others that are looking for a way to take more control of their responsibilities and funds, Committee Chair Johnson explained.

“We are not looking to open the accountancy act,” NASBA Chair Billy Atkinson said. “This would be an amendment as to how to make the act operational. This legislation covers how you will discharge your act, how you will take care of your budget,” he told the Boards’ representatives.

At the Ethics Committee’s breakout session, Ray Johnson said they had concluded: “In principle, there is a presumption that performing an audit, or other attest services, below cost poses a significant threat to independence, due care, and compliance with professional standards.” The Committee has asked Boards to review their draft rule and let them know if changes are required. Comments on the Ethics Committee’s proposed definition of “independence” were requested by Kent J. Bailey, during his presentation at the breakout session. The Committee had surveyed 42 states and found 23 broadly define “independence” from an exceptions approach, 15 reference the AICPA’s independence standards as of a certain date, and only four have their own unique definition of “independence”.

The Committee’s proposed definition is based on the AICPA’s and the Texas State Board’s rule on independence.

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