State Board Report
My predecessor, David Costello, and I used to compare stories and compete as to who was the poorest when we were kids. That debate continues and is often the catalyst for new recollections (sometimes enhanced slightly). The common recurring message is that both of us began our lives in humble financial environments, and that neither of us would change that — even if we could.
One of my recollections of childhood is that I never recall feeling jealousy or “turfishness” (my word) towards others who had more material things or opportunities than my family had. In fact, I found it somewhat motivational. I never felt something was coming to me. I knew that if I wanted to improve my condition, then I had better be prepared to work hard. Now, what does this story have to do with, or have relevance to, NASBA and Boards of Accountancy?
I often write and speak about the importance of making both NASBA and Boards of Accountancy more relevant. Being relevant is not about gaining turf, but about being more significant in the deliberative processes in the accounting arena. In recent discussions about standards setting, promulgations of accounting related guidance and the creation of new frameworks and other such non-authoritative “standards,” I often hear that “standards” are somehow flawed solely because of where they originate.
Those that work closely with me know that I often challenge that position. Remember that I am not a “turf guy.” But I do agree with the underlying concern that historically Boards of Accountancy, and others, have often been relegated to enforcing standards, frameworks and guidance that have been unilaterally developed and promulgated by the profession or a special interest within the profession. The Constitution, Sarbanes-Oxley Act and State Law place the determination of what standards are to be enforced in the hands of state regulators, but what we frequently have is a classic “tail wagging the dog” scenario.
Others involved in accountancy regulation are also questioning the current processes. In a recent speech, Daniel Gallagher, a commissioner with the Securities and Exchange Commission (SEC) raised the issue of the legitimacy of third party organizations that unilaterally set accounting and financial disclosure standards with no apparent authority. He specifically singled out the Sustainability Accounting Standards Board (SASB) that is developing and releasing “Sustainability Standards” for U.S. companies to use in their annual filings. Mr. Gallagher maintains that only the Financial Accounting Standards Board, under the Financial Accounting Foundation, has the clear legal authority to issue such standards. His argument was not a “turf” argument, but a statement of fact. The SEC (and Boards of Accountancy) are seeing an increasing number of these types of accounting practice guidance occurring in their jurisdictions. I know many of the people who make up the bodies that unilaterally produce such guidance, and I hold many of them in high regard. My concern is not people, personalities or turf, but the disparate and nonregulated process used in their products’ development.
After the Financial Reporting Framework for Small and Medium-size Entities (FRF for SMEs) issue last year (which you will recall was resolved through consensus with AICPA), NASBA’s volunteer leadership realized that we should have been in a position to have proactively addressed State Boards’ concerns in that matter earlier in the process. As a result, a new Standards Study Group (SSG) was named to consider the issue of the lack of Accountancy Boards’ input and review of the standards setting process. The initial outcomes of that group’s efforts were presented to the NASBA Board of Directors in April, and will be presented to the Boards of Accountancy at the Regional Meetings in June.
Some key elements of the SSG’s conclusions are that Boards of Accountancy, through NASBA, should monitor and be responsive to proposed standards, guidance and frameworks used in public accounting. That monitoring would include a review of: the issuing body’s authority; its membership’s makeup and quality; the transparency of the standard-setting process the Accountancy Boards’ input; potential regulatory concerns; and more.
I am looking forward to hearing the feedback at our Regional Meetings from our Boards of Accountancy regarding this next step in enhancing their, and NASBA’s, relevancy. Not for “turf” reasons, but because it falls within the scope of our public protection mandate.
Remember, I am not a “turf guy!”
Semper ad meliora. (Always toward better things.)
— Ken L. Bishop
- MEMBER CENTER