At the Regional Meetings, Board representatives were asked to consider adding a competency requirement to firm registration that would call for additional experience, beyond the basic one year of general experience described in the Uniform Accountancy Act, for individuals who sign audit and examination reports. NASBA Vice President – State Board Relations Daniel Dustin described what would possibly be a condition for registration of CPA firms doing this type of work. Based on a review of what is being required of auditors with signing rights in other countries, a starting point for further research and discussion is the suggestion that the person signing would have at least 2,000 hours of experience in audit and/or examination services within the last five years. Firms that did not have an individual licensee who met that criteria would have each audit and examination engagement subject to an Engagement Quality Control Review until the firm had a licensee who met that requirement.
This suggestion brought mixed responses from the Boards’ representatives. There was agreement that firms need to have the appropriate competency for the engagements they undertake, and while competency is required in most states and the AICPA Code of Conduct, which 43 States refer to in some way, the Code does not define what makes a licensee competent to supervise, sign or authorize someone to sign an accountant’s report. Meeting attendees listened to Sharon Jensen (MN) and Telford Lodden (IA) report on the mutual recognition agreements that the NASBA/AICPA International Qualifications Appraisal Board have developed and learned about the different requirements in other countries for those responsible for signing reports. All have more experience required prior to being designated the responsible party.
While the Board members voiced support for measures to improve audit quality, questions were raised about whether adding to the experience requirement would accomplish that objective. Firms with experience have performed poorly too. Some Boards presently have in their laws more than one year of required experience.
The Board Chairs were asked to go back to their Boards and continue exploring the topic. If such a requirement has the support of the Boards, the AICPA/NASBA Uniform Accountancy Act Committee will be asked to develop proposed language for consideration of the Boards.
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