The UAA, from the grassroots: John Peace

The National Association of State Boards of Accountancy (NASBA) administers the Uniform CPA Examination for many states through its CPA Examination Services (CPAES) division. NASBA also regulates the practice of public accountancy and sponsors committee meetings, conferences, programs, and services that enhance the effectiveness of its 54 member boards.

While in New York late last year, NASBA Chair John B. Peace, now serving a one-year term as the organization’s chief elected officer, sat down with CPA Journal Editor-in-Chief Robert H. Colson to discuss NASBA’s plans and Peace’s own perspective on issues facing the accounting profession.

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The CPA Journal: What is your opinion of the 150-hour requirement and its effect on the number of accounting students and new CPAs?

John B. Peace: I was encouraged by a recent study conducted by Steve Albrecht and Robert Sack and sponsored by the American Accounting Association (AAA), the Institute of Management Accountants (IMA), the AICPA, and the Big Five [see the March CPA Journal for an analysis of the study]. The study found that the 150-hour requirement was a factor but not the factor in the declining number of accounting majors. Students have to understand the value that the CPA credential will have over the life of a practice—for the sole practitioner, a CPA is more valuable than an MBA. The problem is how to make them more aware of that value when they’re still young enough to make major decisions about their career goals and the education they need to reach them. My firm recently hired two tax lawyers, and both of them are returning to school to earn their CPAs because they know it will add value to their tax practice. They perceive it—correctly—as a valuable business development tool.

CPAJ: What is your view on how state regulation enhances the public’s opinion of CPAs as opposed to attorneys and doctors, who are largely self-regulated?

Peace: The public wants to know that the professions are somewhat regulated. While they may not know every detail of which agencies regulate which professions, the public is comforted by knowing that a certain level of regulation exists. In Arkansas, the state regulates professional services, so if a CPA firm performs human resources services, it is regulated at that level.

CPAJ: What are the hurdles some states face in passing the Uniform Accountancy Act [UAA]?

Peace: I think there’s a great misconception that adopting the UAA is an all-or-nothing proposal, which I doubt will ever happen in every state. NASBA is encouraging states to adopt the parts of the UAA that enhance the ability to practice across state lines—the three Es—the education, exam, and experience requirements.

To date, 40 states have adopted licensing provisions that are substantially equivalent to the UAA. But only 14 states have adopted section 23, which enables practice across state lines. The challenge in the 2001 legislative season is to get more states to adopt section 23. That would be a win-win: It would be good for the profession, of course, and for regulators as well, because the statute gives regulators the tools to regulate the practice.

CPAJ: There are problems connected with maintaining a license in multiple states, and there is some effort to create barriers to outsiders.

Peace: Overall, the UAA concept hasn’t been sold as well as it could have been. Right now, getting more states to adopt not only the three Es but also section 23 is probably NASBA’s No. 1 priority.

CPAJ: How does the multidisciplinary practice [MDP] issue play in Arkansas for someone like you—an attorney with ties to the CPA profession and NASBA?

Peace: NASBA is following the MDP issue closely. The American Bar Association rejected it but state and local bar associations all over the country are looking to adopt it. The UAA supports MDP; the conflict is that both CPAs and attorneys want control of the MDP. It’s going to be tough for any CPA firm that wants to do attest work to have a lawyer in the firm working with the same clients, because the auditor needs to be independent.

CPAJ: But in remote areas, MDPs would be an asset to the community because firms would be able to offer both legal and accounting services to non-SEC clients, such as banks. We know that there are professional service practices going on where you’ll see two adjacent doors in a hall, one door says Smith & Jones, CPAs, the other says Jones & Smith, Attorneys at Law. Many partners don’t want to have to go outside the firm for someone to write a simple contract.

Peace: I essentially agree with that, and I think that MDPs will eventually come about at the state and local levels rather than the national level.

CPAJ: That’s the sticking point in New York. There’s a part of the Assembly and the Senate that specifically favors legislation prohibiting accountants from practicing law but permitting them to consult on legal services.

Peace: I don’t have any advice to give there—particularly on New York politics! I think Illinois has a similarly byzantine organizational arrangement for regulating the accounting profession. I don’t think the state boards would stand in the way. The UAA as written would allow for MDPs as long as state boards would have the authority to legislate them and there would be no corporate ownership of CPA firms. About 25–30 state legislatures will be considering the UAA this coming year. In the joint NASBA/AICPA task force that’s working on the UAA, section 23 is a high priority. The committee is taking a grassroots approach; each committee member is focusing on about three states, calling on its legislators, state CPA societies, and state boards to help them understand the benefits of section 23 in particular.

I think there’s a good chance that 10 or more states will adopt the provisions of the UAA this year. Again, our position is that regulation should remain at the state level, but firms should be allowed to practice across state lines—a more viable alternative to the concept of a national license.

CPAJ: Regarding the AICPA, is there any interest on NASBA’s part in administering the CPA exam?

Peace: A NASBA division administers the CPA exam in 26 states, and we have the machinery through a for-profit subsidiary for other nonaccounting professional exams, such as engineering and architecture. The subsidiary is a fairly good profit center, separate from our primary work with state boards of accountancy, and its value is growing. We also recognize that the AICPA would not be interested in these non-CPA examination services.

We enjoy good cooperation with the AICPA on the computerizing of the exam. I don’t know the details of the financial arrangement, but, essentially, the AICPA provides the up-front money and the rest is funded by exam fees.

CPAJ: What about the AICPA’s portal project?

Peace: As a regulator, I don’t have a problem with the portal. I’m less certain about the proposed global credential. I think it would be difficult to maintain an attest practice and do commission-based work through the portal for the same clients. I see the credential and the portal as separate issues that happened to arrive at the same time.

CPAJ: Among the boards, are there state-to-state differences based on the political majority?

Peace: Not at the state level, and I see no change based on this year’s elections. Each state more or less wants to regulate its own licensees.

CPAJ: What about the SEC’s auditor independence proposal?

Peace: NASBA has a strong interest in the debate. I think the state boards will very carefully consider whatever the SEC decides. Eight boards testified at the SEC hearings on auditor independence. NASBA may develop a conference program in 2001 on the follow-through to the new auditor independence rule, possibly in cooperation with government agencies, the AAA, and the AICPA. I think the SEC and the accounting profession will reach some type of compromise on IT consulting. But I’m not even going to the next public hearings. I’ll read the transcripts.

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