NATIONAL ASSOCIATION OF STATE BOARDS OF ACCOUNTANCY

More than 100 years ago, in 1896, New York appointed the first board of certified public accountant (CPA) examiners. By 1925 all U.S. jurisdictions were administering CPA examinations. Though all states today administer a single Uniform CPA Examination, there are still fifty-four independent boards of accountancy (for all states, the District of Columbia, Guam, the Virgin Islands, and Puerto Rico) that issue licenses to accountants. These boards set entry requirements for their licensees; enforce measures to support continuing competence, through both professional education and/or peer review requirements for renewal of individual licenses and firm registrations; and insure that technical and ethical standards are upheld via disciplinary proceedings growing out of a complaint-based system. Board-levied penalties for malpractice range from fines, to additional education requirements, to prereport issuance reviews, to withdrawal of license.

The average CPA is generally more aware of the activities of the professional associations than of those of the state board of accountancy. However, the professional path of all CPAs all begins with the board: they had to apply to the state board of accountancy to take the Uniform CPA Examination; then they took the examination under the auspices of a state board and waited to hear the results of that examination issued by the state board. It is the state board that requires renewal forms and fees to be submitted and the state board that allows licensees from other states to begin to practice within its borders. Fortunately, in the vast majority of cases, the licensee will never see the disciplinary side of the state board's operations. However, that is a vital aspect of the board's operations that protects the public from unqualified practitioners. The wronged consumer needs no legal counsel. A complaint can be brought directly to the board by any individual or organization. In fact, government agencies that uncover inferior performance by licensees are encouraged to refer their complaints to the accountancy boards. With the growth of the Internet, several states accept on-line complaints via their Web sites.

BOARD MEMBERSHIP

For a long time, the CPA profession has prided itself on self-regulation, partially because of the discipline enforced by its professional organizations and partially because the state boards are primarily composed of licensees. Typically members of a board of accountancy are appointed by a state's governor and include both licensed CPAs and public members. The CPA members are often selected by the governor after consulting with the state's CPA society. A small daily stipend for meeting attendance and travel is awarded by some states; others do not provide such compensation. Boards vary in size from five to nineteen members, many with only one public member. In some jurisdictions, there is a limited term of service whereas in others, board members can be reappointed indefinitely. Many of the boards appoint task forces or committees to handle various activities, such as continuing professional education or investigations, which increases the number of volunteer participants. Legal assistance to the boards may come only from the state's attorney general's office or it may also be available from independent counsel. In some states, boards share their administrative staff with other regulatory boards, yet in one jurisdiction the accountancy board has a dedicated staff of over sixty. Similarly, revenues generated by the boards are not treated uniformly: One state will allow the board to use its revenues directly for its licensees; another will have all revenues go into the state's general fund.

As of 1998, the number of licensees in each jurisdiction ranged from Texas, with more than 74,000, to Guam, with 86. Other states with large numbers of licensees include California, with more than 63,000; Ohio, with more than 36,000; and New York, with more than 33,000.

ABOUT NASBA

While the regulation of certified public accountants (and in some jurisdictions public accountants or licensed public accountants) exists on a state-by-state basis, the boards share many concerns and it is from those mutual concerns that the National Association of State Boards of Accountancy (NASBA) was born. Thanks to the efforts of the New Jersey State Board of Public Accountants, the organization was formed in 1908 as the National Association of CPA Examiners, with seventeen examiners from ten states. At that time the New Jersey Board invited all accountancy board members "to confer in regard to matters of mutual interest."

In the early twenty-first century, as in 1908, NASBA provides a forum for the boards to exchange views on professional and regulatory issues and trends affecting regulation. Since 1997 its headquarters have been in Nashville, Tennessee, and a satellite office is maintained in New York City. Committee meetings as well as annual and regional meetings are held at sites throughout the country.

Volunteer leadership includes a chairman, vice chairman, nine directors-at-large, and eight regional directors. The directors-at-large are elected for three-year terms. All others serve one-year terms, and all are elected by the member boards at the annual meeting. Officers are not limited to licensees.

To help the NASBA achieve its mission of "enhancing the effectiveness of state boards of accountancy," the association holds an annual meeting and regional meetings as well as special issue conferences (including those on continuing professional education, ethics, and legislation) for representatives of accountancy boards. It has volunteer committees researching and reporting on issues of concern, such as examinations, relations with government agencies, and international recognition. The committees are composed of members of the state boards of accountancy as well as state board administrators. In addition, a state accountancy board administrators' committee and legal counsel committee work to assist these individuals who specifically work for the member boards.

NASBA's communication efforts include a monthly newsletter, a biennial digest of state laws, an annual Uniform CPA Examination candidates' statistics report, and a Web site (www.nasba.org) that is linked to the Web sites of all of the state boards that maintain sites. Some audio and videotape production is also done.

NASBA promulgates no laws. Its committees develop model statutes and rules. However, it is the state legislatures and accountancy boards that do the final drafting and implementing of the laws that regulate the practice of public accountancy. NASBA's committees consult with professional organizations, including the American Institute of Certified Public Accountants (AICPA), the National Society of Accountants, and the American Accounting Association, as they develop suggestions. A joint NASBA/AICPA committee developed the Uniform Accountancy Act (UAA) and Rules, which are continually reviewed and updated as necessary. Model contracts and handbooks have also been developed by NASBA committees.

The profession's technical standards are developed by the AICPA. Members of the profession can be brought before the AICPA for disciplinary procedures in cases where such standards have not been met. However, while the professional organization can withdraw membership privileges, it is only the state board of accountancy that can withdraw the license to practice. Since a person's livelihood is involved in such a decision, every effort is made by the boards to ensure that due process is followed throughout all disciplinary proceedings. Formal hearings are held with legal counsel present, if the licensee so desires.

ENTRY-LEVEL REQUIREMENTS

Requirements to become a certified public accountant vary slightly from jurisdiction to jurisdiction. As Internet practice increases cross-border engagements, all states are being encouraged to move in the direction of adopting one set of standards, as detailed in the UAA. This model act calls for 150 hours of education, one year of experience as attested to by a CPA, and successful completion of the Uniform CPA Examination. For those licensees signing audit reports, additional experience is required. To find out the specific requirements for each state, a candidate needs to check with the state board of accountancy.

The required 150-semester-hour education includes a baccalaureate degree with a concentration in accounting, though not necessarily an accounting major. Again, it is necessary to check with the appropriate accountancy board.

Each of the state boards is charged with the responsibility of administering the Uniform CPA Examination, which is developed and graded by the AICPA. Grades are released to candidates through the state boards. The examination as given in May 2000, for example, was a fourpart test given over a two-day period. The four sections of the examination were: auditing (AUDIT), business law and professional responsibilities (LPR), financial accounting and reporting—business enterprises (FARE), and accounting and reporting—other areas (ARE).

In November 1997, 20.8 percent of the candidates passed all parts of the exam for which they sat. This does not mean they passed the entire examination, since some candidates retake the examination and consequently only take selected parts. In a few jurisdictions, candidates can choose to take only a limited number of parts at a time. Studies are being conducted to transform the Uniform CPA Examination into a computer-based examination rather than paper-and-pencil test. Such a transformation would shorten the time needed to complete the examination and enable candidates to take the examination on additional dates.

Experience is another requirement carefully defined in each state's accountancy rules. At one time only auditing experience in public accounting firms was acceptable. In many states, work in government, industry, and academia that leads to professional competence is also being accepted.

CONTINUING COMPETENCE

Continuing professional education (CPE) is mandatory for license renewal in all jurisdictions except Wisconsin. Some states have course requirements in auditing and accounting, others have course requirements in ethics, and still others allow licensees to select courses to meet CPE requirements. With more than half of CPAs now not working as public accountants, pressure exists for enlarging the scope of CPE to encompass a broader range of programs and experiences that help ensure the licensee's competence.

In many states CPA firms are required to register with the accountancy board. The firms are then required to participate in quality review programs periodically, which bring the firms' attest services under the review of outside professionals.

AREAS OF COMMITTEE ACTIVITY

The focus of NASBA's committees echoes the areas of the boards' mutual concerns. Examination, for entry-level candidates as well as international licensees seeking U.S. recognition, continues to be a primary area of interest. Ensuring that the examination adequately measures competence is an ongoing concern. The Examination Review Board audits the preparation, administration, and grading of the Uniform CPA Examination to ensure the boards' requirements are met.

Many states call for CPAs to give evidence of "good moral character." This has been interpreted to mean having knowledge of professional ethics as well as having no criminal record that could be related to practicing accounting. NASBA's ethics committee and administrators committee both are concerned with these issues.

Committees on public perception, strategic initiatives, new horizons, and so forth demonstrate the association's continuing concern with keeping in touch with the public's and the profession's expectations and goals. Information about NASBA is available from NASBA at 150 Fourth Avenue North, Suite 700, Nashville, TN 37219-2417; (615) 880-4200; or www.nasba.org.

Licensed public accountants and public accountants are also recognized in a limited number of jurisdictions.

see also American Institute of Certified Public Accountants ; State Societies of CPAs

Louise Dratler Haberman