State Board Report

April 2013

Legal counsel and investigators from 23 states participated in NASBA’s 18th Annual Conference for State Board Legal Counsel, March 3-5 in Tucson. Besides attending joint sessions with the Boards’ executive directors, the attorneys participated in a roll call of states and in-depth discussions of recent case law, codification of the AICPA Code of Professional Conduct, NASBA enforcement resources, international standards, CPE audits, unauthorized use of title and client records of deceased licensees.

State Board Report

April 2013

Looking for legislation of interest to your State Board of Accountancy? Take a look at NASBA’s Legislative Tracking System, as customized by NASBA Director of Legislative Affairs John Johnson. “The system NASBA is using searches for accountant-specific bills that fit at least one of seven profiles,” said Mr. Johnson, who introduced the system during the executive directors’ conference. “The profiles are: Boards of Accountancy-related legislation; accounting standards; education/ethics/CPE/exam; military/spouse of military licensure; SOX cascade; tax preparers; or other activity affecting the profession.”

Mr. Johnson told the executive directors: “If there is a bill that is important to you, let me know and I will set up an alert so the system will automatically e-mail you the status of that bill anytime it changes.” He added, “And If I come across things that would jeopardize the regulation of the profession, I will pick up the phone and notify you.”

Through the NASBA Web page, it is possible to see legislative reports by state, alphabetically, or by each of the seven profiles. The current status of the legislation can be learned through the links the system provides. Questions about the legislative tracking system should be directed to Mr. Johnson at jjohnson@nasba.org.

State Board Report

April 2013

NASBA’s communications department is ready to step in and assist State Boards that need help with their communications efforts, NASBA Communications Director Thomas Kenny told the executive directors. He encouraged the Boards to get involved with social media as a way to increase awareness of the Boards, especially among students, without incurring much cost.

For Boards that want to produce a newsletter, they just need to supply the rough copy in a Word document and NASBA will provide the editing, layout and even help with distribution. NASBA has newsletter templates Boards can select from or new customized designs can be created.

Mr. Kenny pointed out that NASBA had created videos for the Texas and Washington Boards. Staff can travel to the Board, or the video can be done at NASBA’s offices, and voiceover talent can be provided.

The Communications Committee has found: 50 percent of the Boards currently produce an annual report; 39 percent of the Boards publish articles or updates in their state society’s newsletter or on their Web site; and 46 percent are engaged in social media. Mr. Kenny said for NASBA assistance with newsletters, brochures, annual reports or videos, Board staff can contact him at tkenny@nasba.org.

State Board Report

April 2013

Awards Committee Chair Michael T. Daggett has called on State Board members, executive directors, associates and staff to submit their nominations for the 2013 William H. Van Rensselaer Public Service Award, the NASBA Distinguished Service Award and the Lorraine P. Sachs Standard of Excellence Award. Award criteria and nomination forms can be found on www.nasba. org. Completed forms should be submitted to Communications Manager Cassandra Gray (cgray@nasba.org) by July 1, 2013. The Awards will be presented at NASBA’s Annual Business Meeting on October 29, 2013.

The William H. Van Rensselaer Award, in honor of NASBA’s first full-time executive director, recognizes a volunteer who has contributed to the development of a new or existing program for State Boards of Accountancy, or who has influenced the passage of rules or statutes to strengthen accountancy regulation. The Distinguished Service Award recognizes a volunteer for unswerving commitment and dedication to enhancing the effectiveness of State Boards. The Lorraine P. Sachs Award, in honor of NASBA Executive Vice President Emeritus Sachs, is presented to a current State Board administrator who has done an outstanding job of improving the effectiveness of regulation.

Questions should be directed to Ms. Gray at (615) 564-2172.

State Board Report

April 2013

NASBA’s in-depth analysis of CPA candidates’ data is giving schools greater understanding of their students’ performance on the CPA Examination, James Suh, editor of the NASBA 2012 Uniform CPA Examination Candidate Performance and School Performance volumes, told the Executive Directors’ conference. He explained that the candidate data being collected by the State Boards, and then submitted to NASBA when they send information about eligible candidates to NASBA’s Gateway System, is of interest to many audiences. The changes in the 2012 published reports are a direct result of the feedback received from the previous years’ reports’ end users. In 2012, there were 245,193 sections of the four-part Uniform CPA Examination taken and 26,152 candidates passed their fourth part, the data reveals.

Mr. Suh, who heads NASBA’s Continuous Improvements and Analytics department, said his team is working with NASBA’s Education Committee to standardize the data collected from all the states. Besides the Candidate Performance book and the School Performance book, the department is also producing customized products with other data sets. School specific trends are being considered, showing differences in the passing percentages for each of the examination’s sections, differences in passing rates for all four parts as related to date of when the examination was first taken, and performance by geographical region.

When one school saw its graduate students had a 20 percent lower passing rate than its candidates who had only a baccalaureate, they contacted NASBA to determine why. Mr. Suh said analysis of the data showed that the numbers reflected the institution’s graduate students had transferred in from other schools.

All Boards of Accountancy have been sent copies of both the Candidate Performance and the School Performance books. Information about ordering copies can be found on this website.

State Board Report

April 2013

Twice this tax season, H&R Block unsuccessfully tried to stop Intuit’s TurboTax ads that claim users who need assistance with filing their taxes using the Turbo Tax program could get help from Turbo Tax’s CPAs, enrolled agents or tax attorneys. Although neither H&R Block, nor any other tax preparation service, was mentioned by name in the Turbo Tax ad campaign, it portrayed other tax preparers as part-timers who might also be plumbers, sales clerks, etc. The U.S. District Court for the Western District of Missouri rejected Block’s request for an injunction for the second time on March 11, 2013 stating the ads are neither false nor misleading.

State Board Report

April 2013

In Tucson, executive directors were given a peek at the training videos prepared by NASBA, in cooperation with the Enforcement Resources Committee, to prepare investigators for working with Accountancy Boards. Rather than host a day-long investigator training session, NASBA decided to produce a six-module training program that would be available to the Boards’ personnel throughout the year at no cost to them. Based on input from the Committee and their subject matter experts, the modules were scripted by NASBA Regulatory Affairs Manager Stacey Grooms, Esq., who previously served as the attorney for the Tennessee Board of Accountancy. Each of the modules is 6-11 minutes long. The training program is on the NASBA home page.

The Committee has also launched other programs to assist the Boards’ enforcement efforts, NASBA Director of Compliance Services Maria Caldwell, Esq., told the State Boards’ executive directors. In response to Boards’ requests, two databases have been created to house information submitted by investigators or expert witnesses who are available to be hired by Boards of Accountancy on a case-by-case basis. Another tool, the Enforcement Resources Guide, is an evergreen collection of information, including model forms and practices. The Enforcement Resource Guide can be accessed through a password protected portal located on the Member Services tab on the NASBA.org site and the Investigator Pool and Expert Witness Pool will be launched soon and be housed in the same area.

Ms. Caldwell pointed out the enforcement value of the Accountancy Licensee Database is increasing as more states come online. As a single source for current license information and disciplinary action, the ALD lends itself to being a key component for Boards’ enforcement efforts at the state level and nationwide in many ways. Disciplinary e-mail alerts are sent to EDs and designated Board staff when a licensee has had his/her license suspended or revoked by a State Board in a different state. There are 43 states on the ALD and 38 on CPAverify now, with most of the remaining Boards in the process of establishing their daily feed.

State Board Report

April 2013

Estimating he had sent out about 100 letters to Boards of Accountancy to alert them to substandard work performed by CPAs in their audits of employee benefit plans, Ian Dingwall, Chief Accountant of the Department of Labor, encouraged Executive Directors at their Tucson meeting to respond to these letters. Very few of the Boards’ executive directors attending the meeting recalled receiving such a letter. There continue to be problems with these audits, particularly those performed by those professionals who Mr. Dingwall termed “dabblers,” those performing only a limited number of employee benefit plan audits each year. Firms that are performing many of these audits are not as likely to have the problems uncovered by the DOL inspectors.

The Department of Labor’s Office of the Chief Accountant was established in 1989 to monitor and improve the quality of employee benefit plan audits and to identify and correct substandard audits. However, the DOL does not have the authority to establish special CPE or licensing standards for the CPAs who audit ERISA employee benefit plans, Mr. Dingwall pointed out. It is up to the State Boards to establish standards for competency. The Employee Benefits Security Administration can reject the plan’s annual report and penalize the plan administrator, but it cannot impose civil penalties directly on accountants for deficient audit work or for filing a deficient accountant’s opinion in the benefits plan’s annual report.

There are approximately 9,200 CPA firms performing 80,000 plan audits with $5.5 trillion in plan assets subject to audit. While 83 firms do the audits on larger plans, the vast majority of CPA firms are doing five or fewer benefit plan audits, Mr. Dingwall reported. His division has made over 700 referrals to the AICPA’s Employee Benefit Plans Audit Quality Center for rehabilitation. Although he said this has been a very positive program, rehabilitating about half of the firms, it is only for AICPA members, and the DOL contacts the State Board when the program cannot handle a firm. While audit quality has improved for the CPA firms that perform the largest number of plan audits, Mr. Dingwall observed: “Some of the small firms have not invested the time, effort and money in doing this right.”

He told the Executive Directors: “I am trying to get into a new relationship with you as we are uncertain what has been done with our referrals. We want to get to a better relationship.” He encouraged the Boards to consider requiring additional education for benefit plan auditors and he advised the EDs to call him directly with any questions.

State Board Report

April 2013

About dusk one night in late March, I was wrapping up a few things at the end of what had been a pretty busy week at NASBA. As is typical, the radio in my office was tuned to “95.5 – The Wolf,” an FM station that has a country music format with its studio located on Music Row in downtown Nashville, a few blocks from our office. Preparing to end a long day, I was turning out the lights and gathering some reading material when the radio announcer mentioned the large number of families who had chosen Nashville for this year’s Spring Break location.

My office looks down on the Ryman Theater, Broadway, parts of 2nd Street and what is generally known as Nashville’s “honky-tonk” district. As I listened to the announcer, I looked out my window and confirmed that, in fact, a large number of families seemed to be taking in the sights and sounds of “Music City” in celebration of Spring Break.

Our NASBA Chair, Gaylen Hansen, had been in Nashville that week working through the plans for upcoming meetings, conferences and other activities. As a part of our discussions, Gaylen and I were considering the number of important issues and decisions that are being addressed by our volunteer committees and task forces – right in the middle of tax season. We expect volunteers to digest complicated information, analyze positions and then make recommendations that impact State Boards, the public and the profession just when many of their practices are in the busiest cycle of the year.

The staff at NASBA, like that of State Boards, have sensitivity to the time of the year and they try to keep the number of meetings and interactions to a minimum until after mid-April. However, the work doesn’t stop. When called upon, NASBA volunteers step up and, after putting in extraordinarily long days at the office and balancing personal and other responsibilities, come to consider the issues that impact the regulation of the profession as dedicated, prepared advisers.

I can easily and comfortably articulate the public protection value of having U.S. CPAs and CPA firms provide high quality tax-related services to their clients in any year. This year, with the early uncertainty of what rules, rates and models would shake out of Congress, the value proposition is even higher. Clients of CPAs trust that their tax guy or gal is going to be well prepared, educated and thorough in their behalf. I wonder how many of your clients know that, in addition to insuring your own preparedness and capability for their returns, you have also taken on the holistic task of developing and maintaining a State Board regulatory model that insures the integrity of the system itself.

My hat is off to you, the conscientious multi-tasking professionals, our dedicated volunteers and State Board members during this busiest of seasons for many of you. The staff of NASBA knows firsthand of the sacrifices you make during tax season. Thank you for the sleep deprivation, the missed family time, the skipped trips to the gym, the unwatched games and the lunches by the phone. This is our opportunity to thank you and to wish each of you a successful and enriching tax year – coupled with productive committee activities!

So, while I was listening to the radio announcer’s description of Spring Breaks, of folks taking off, traveling with their families, and relaxing during the early spring…I was thinking of you and thinking “Spring Break”…Really? Maybe in late April.

Semper ad meliora. (Always toward better things.)

— Ken L. Bishop
President and CEO