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State Board Report

September 2016

When I began my career in accounting regulation in 1999, laws, rules and basic assumptions were much different than what they are today. It was less than 20 years ago, but the world was a much different place. While computers were occupying many desks, they had less computing power than some of today’s watches. Professionals were transitioning from pagers to cell phones, stimulated in part by the release of the Blackberry with the launch of text messaging. The first iPhone would not come on the market for another eight years!

While concepts like CPA interstate mobility, a national Accountancy Licensee Database and a computerized Uniform CPA Examination were under discussion for many years, in some circles for decades, change and transition were often tough to sell. In 1999, a common complaint was the allegation that a CPA from one state distributed his business card when visiting another state. Few would have believed that, within a decade, a majority of states would have adopted mobility. The success of mobility served as the catalyst for the development and implementation of the Accountancy Licensee Database (ALD), which now contains information on 98 percent of the U.S. CPA population and is an important tool for State Boards. Its spinoff system, CPAverify, provides consumers with the unprecedented ability to ascertain the license status of CPAs throughout the country.

The accounting profession continues to evolve and new challenges face, or will face, State Boards and NASBA. For example, the Boards need to keep pace with the rapidly changing education models in the U.S. and abroad. Most of the U.S. accountancy laws and rules were written with the expectation that students would attend classes in traditional brick-and-mortar colleges and universities and, so long as those schools were accredited by bona fide accrediting bodies, the State Boards could rely on the quality of their education. When current state laws and rules were developed, online courses, credit for life experience, and the application of varied competency models were not even considered. We now have ascertained that the accrediting bodies the Boards are relying on seemingly have not kept pace with new, and sometimes questionable, delivery and output models. NASBA, in partnership with the AICPA, has been working closely with educators and accrediting bodies to understand the evolution of education and to consider appropriate changes. We have been very pleased with the reception and willingness of educators and accreditors to work with us. At the 2016 Annual Meeting we will be providing State Boards an update on this activity.

In the last few months, State Boards have received information from NASBA and AICPA about changes in the AICPA peer review program, specifically with proposed reorganization of the administering entities. The changes being considered may make the current peer review oversight procedures of State Boards unworkable. As a result of these recent exposure drafts and surveys, many State Boards have reached out to NASBA to express their concerns and to ask what NASBA can, and will, do to help them perform this vital oversight function. At the Annual Meeting and at this year’s Executive Director and Legal Counsel Conferences we will hold discussions with you to ascertain your expectations.

The final, and possibly the most important, change in the profession we have to consider is the increasing use and relevance of data analytics, particularly in auditing. Data analytics is already being used by many large entities and by the firms auditing them. Auditors now must use a hybrid methodology, applying data analytics while maintaining work papers and processes to be in compliance with current standards. Because of the costs and dynamics of this redundant process, it is easily predicted that the profession will be changing standards and eliminating processes in the near future.

NASBA and AICPA have already begun a dialog about the importance of data analytics and the need to make sure that future CPAs are educated and tested to keep pace. We have discussed how State Boards can be ready with the tools necessary to conduct an investigation into a process that may not include any of the traditional instruments tested to ascertain compliance and quality. Similarly, current peer review procedures will have to change to monitor processes in real time by using computers instead of humans. At NASBA, we are having serious discussions about the development of tools and software that support State Boards in their responsibility for monitoring the continuing competence of the people and firms that they license.

Can regulation keep pace? We believe it can and will — and NASBA will be there to support you!

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