MINUTES
BOARD OF PUBLIC ACCOUNTANCY
DATE : May 3, 2005
TIME : 9:10 a.m.
PLACE : 500 N. Calvert Street, 3rd Floor Conference Room, Baltimore,
Maryland 21202
PRESENT : Jacob J. Cohen
Leslie A. Mostow
Arnold Williams
Barbara R. Stewart
Thomas Chambers
Michele L. Pittman
ABSENT : Craig Bancroft
OTHERS
PRESENT : Harry Loleas, Deputy Commissioner
Dennis L. Gring, Executive Director
Daphne Thomas, Management Associate
Bert Fenwick, Consultant
Shirley Buchanan, MSA
Ron Grafman, MSA
Carol Kirwan, MACPA
CALL TO ORDER
The meeting was called to order by the Chair at 9:10 a.m.
MINUTES
It was moved (I) by Mr. Williams, seconded by Mr. Mostow and unanimously carried to approve the minutes of the meeting held April 5, 2005 as written.
REPORT OF THE CHAIR
The following is the text of the remarks of Jacob J. Cohen, Chairman of the Board of Public Accountancy:
“It gives me a great pleasure to announce that the Governor signed into Law House Bill 977 on April 26, 2005. The Bill goes into effect October 1, 2005 and through reciprocal treatment Maryland CPAs can now service clients in other states and vice versa. The law imposes a $50 fee for two years on CPAs with an office in other states therefore creating a new category of licenses available to practice in the State of Maryland.
In addition, it gives me a great deal of pleasure to announce that the Governor also signed into Law HB 1223 – Mandatory Peer Review on April 12, 2005.
May 3, 2005
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REPORT OF THE CHAIR CONTINUED
The new Law mandates to all licensees and permit holders that perform specified accountancy services to undergo a periodic peer review under specified minimum standards.
Regulations outlining detail requirements under both HB 977 and HB 1223 will have to be promulgated and published for comments before they become effective to answer many questions that cannot be answered initially in the Act.
Both Commissioner Safko and I gave a promise during the legislative hearings to give the industry and the public an opportunity to submit their views prior to drafting the regulations.
I have already received input from Don Hull, Executive Director of Maryland Society of Accountants and I am sure we will hear from MACPA as well if not today in due course.
As I stated in my e-mail circulated to all of you, we will be discussing the mechanics of gathering the input later on during our meeting today for regulations on both these Bills.
Please keep in mind that there will be a very brief meeting of the Board on May 17th for the purpose of approving the exam fee regulations. Since I will be unable to attend, I asked Dr. Stewart to Chair the meeting for purposes of entertaining and approving a motion to accept the fees. It is important to have a quorum at the meeting so please do not fail to show up.
The AICPA Council is meeting in Washington, D. C. May 22-24 at the JW Marriott Hotel on Pennsylvania Avenue. If you have the time (and you do not need to attend the entire Conference) I would very much suggest that you register for it.
Attending Council meetings is a great way of understanding the industry issues and catching up with the very fast moving industry that we regulate.
Attending Council meetings, unless you are an elected member, is by invitation only and I will be very happy to give you a web link that will allow you to register as a guest observer being a Maryland State Board Member. Just let me know if you would like an invitation.
We understand that Daphne Thomas will be out for a couple of months for a surgical procedure. On behalf of the Board, I would like to extend to our wonderful recording Management Associate the best of health and a speedy recovery so that we can get her back soon.”
EXECUTIVE DIRECTOR’S REPORT
Mr. Gring deferred to Deputy Commissioner Harry Loleas for a report on the recently adjourned 2005 Maryland General Assembly.
Mr. Gring reminded the Board members that regulations need to be approved to implement the new notification and peer review laws. He advised the Board members that during the next several meeting they should think about what the Board policies and procedures should be under these new laws.
May 3, 2005
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EXECUTIVE DIRECTOR’S REPORT CONTINUED
Mr. Gring provided a comparison of the performance of Maryland CPA Examination candidates with the performance of CPA Examination candidates nationwide. The performance by Maryland’s candidate on the FARE examination section exceeded the national performance rate in the first quarter of 2005. Maryland candidates passing rates exceeded the national pass rate on the REG section.
JAN '05 THRUGH FEB '05 / EXAMS ADMINISTERED IN 2004SECTION / NO. PASS / EXAMS ADMIN / % PASS / NAT.
% PASS / SECTION / NO. PASS / EXAMS ADMIN / % PASS / NAT.% PASS
BEC / 33 / 95 / 35% / 43% / BEC / 89 / 255 / 35% / 45%
AUD / 37 / 99 / 37% / 39% / AUD / 145 / 434 / 33% / 39%
REG / 26 / 95 / 27% / 36% / REG / 118 / 308 / 38% / 35%
FARE / 26 / 61 / 43% / 35% / FARE / 30 / 96 / 31% / 36%
BEC- Business Environment and Concepts AUD – Audition and Attestation REG – Regulation
FARE – Financial Accounting and Reporting
DEPUTY COMMISSIONER’S COMMENTS
Mr. Loleas offered comments about the signing of both of the Bills mentioned above by the Chair. He conveyed his pleasure in seeing the peer review bill ultimately enacted and expressed disappointment that the special fund legislation did not get out of committee. He assured the Board that special funding for the Board will be addressed in future legislation. Mr. Loleas requested the Board’s proposal for new legislation for the next session (2006) explaining that the entire deadline process has been moved forward one month. He further stated that the Board should prioritize proposals to give Messrs. Lawrence and Gring sufficient time to prepare the legislative packets.
EDUCATION COMMITTEE REPORT
Dr. Stewart reported that Ms. Thomas administratively approved twenty-three applications since the last meeting. All were Internet transactions.
Transfer of Grades Application
Quahua Mao - Did not condition as required when he sat for the examination in the other jurisdiction. Can only retake the examination under Maryland’s 150-hour requirement, or meet the 150 hour requirement, obtain an original license in another jurisdiction, then reapply to Maryland for reciprocity or reapply under the 4 and 10 rule.
Mary Ellen Skinkle - Did not meet Maryland’s educational requirements when he obtained his initial license in the other jurisdiction. Can only take the required courses under the 150 hour requirement and obtain an original license in another jurisdiction, then reapply to Maryland for reciprocity or reapply under the 4 and 10 rule.
As part of her report, Dr. Stewart stated that Loyola University has a graduate program wherein there is the practice of waiving credits because of appropriate undergraduate courses taken. The official transcript does not denote satisfactory, just indicates waived. She wondered if the Board needed to propose a regulation. Questioning how “waived” is defined, Ms. Pittman suggested
May 3, 2005
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EDUCATION COMMITTEE REPORT (CONTINUED)
that the school be notified for an explanation. From a prior experience, Mr. Cohen stated that his University of Sorbonne transcript showed a waived course which he was required to take again.
In compliance with the law, Mr. Lawrence stated that an applicant must complete 150 hours in accordance with same. Dr. Stewart stated that Loyola University should be contacted for further explanation.
Dr. Stewart’s other issue were “internships” which are not mentioned in the Law/regulations but were found unacceptable towards the educational requirements.
It was moved (II) by Ms. Pittman, seconded by Mr. Williams unanimously carried to approve the Education Committee report.
EXPERIENCE COMMITTEE
Ms. Pitman reported that she reviewed twenty-two RPE’s, finding nineteen acceptable, one denial and two exceptions.
It was moved (III) by Mr. Chambers, seconded by Mr. Williams and unanimously carried to approve the Experience Committee Report.
ETHICS COMMITTEE
Mr. Mostow who sits on the Professional Response and Regulatory Committee of NASBA who have responded to PCAOB’s proposed auditing standard to allow a firm to hire an independent auditor to report of the elimination of material weaknesses. The Committee felt that if a report was issued by the auditor, it should include the status of all weaknesses previously reported and not just the one that had been eliminated.
The Committee is also responding to AICPA on items related to Accounting and Review Services.
ORIENTATION COMMITTEE
Mr. Chambers provided all parties with hard copies of his report as some Board Members have been experiencing problems with their personal computers. He welcomed any suggestions or corrections. Having been asked about his deletion of specific courses under the 150 hour requirement, he responded that he did not list them because of the fact that over time, courses are changed and his document would have to then be updated. Additionally, Mr. Chambers added that there are three appendices that will become a part of the manual.
The Chair thanked Mr. Chambers for his efforts which were very much appreciated and found the manual terrific. He commented that the Board would view it periodically for further enhancements.
May 3, 2005
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NASBA REGIONAL MEETING TASK FORCE
Mr. Williams stated that MACPA stepped up and agreed to provide the reception welcoming desk and to be the responsible party to get the Governor to attend the meeting. He remarked that he
was sure everyone has gotten mail or have seen flyers/formal announcements. Mr. Chambers provided some ideas to NASBA i.e. places to obtain gift bags, etc. Insofar as a Departmental
representative speaking at the affair, Mr. Mostow had spoken with Commissioner Safko.
Mr. Mostow stated that if any Board Member has not registered for the Regional Meeting yet, one should call Tom Kenney to get the old registration price.
OTHER BUSINESS
The Board was in receipt of a submittal addressed to all Boards concerning passing the LEP (limited English proficiency) Motion. Mr. Loleas explained the past history in this regard, advising the Board to go on record in confirming or reaffirming a motion. After some discussion, it was moved (IV) by Mr. Mostow, seconded by Mr. Chambers and unanimously carried that the Board expressly determined that the ability to communicate in English is needed to engage in the practice of public accountancy.
PRESENTATION
Recognizing last week as National Secretaries week, and based upon Ms. Thomas upcoming absence, Mr. Williams presented Ms. Thomas with a gift and card from the Board. Mr. Gring also seized the opportunity to present a gift to his Management Associate. Ms. Thomas thanked the Board and Mr. Gring for their generosity and recognition.
OLD BUSINESS
As regards the Board’s tabling of this matter at the last meeting, it was moved (V) by Mr. Mostow, seconded by Mr. Williams and unanimously carried that the Board endorse Mr. Cohen as Regional Director, circulating that recommendation to all surrounding states in the Mid Atlantic Region.
Mr. Williams commended Mr. Mostow for bringing that motion after last month’s meeting wherein a precarious situation existed and Mr. Mostow, with the above recommendation, “stepped up to the podium.”
INFORMAL MEETING
Ms. April Davis appeared before the Board, with her dad, providing the Board with the additional information requested i.e. other nine papers written which was reviewed by Dr. Stewart. Her
father, after having reviewed the Board’s past minutes, hoped that the Board would consider his
daughter’s courses as in previous cases. Dr. Stewart asked about Ms. Davis’ philosophy courses to which Ms. Davis explained and her dad provided the actual course catalog descriptions. Ms. Davis was advised by the Board that they would review her submittals in closed session and she would be notified by Ms. Thomas of their decision.
May 3, 2005
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BILLS
The Board extensively discussed developing regulations for both bills that had been passed as mentioned earlier. As regards peer review, Mr. Chambers volunteered to head a task force as stated by the Chair who is looking for a uniform approach and develop regulations that suits the Board and the industry.
Mr. Mostow added that the regulations have to address those levels of work being performed by the industry; and who can do peer reviews. As to major issues, Chairman Cohen stated that under PCAOB, the Board is supposed to keep the process confidential and sign an agreement that reports not be disclosed to the public.
Mr. Gring advised that given this is a new program, the Board needs develop information well in advance of the October 2008 reporting requirement for renewals. Also, he added that individuals renewing next year and beyond will have to have this information as well so that they can have a peer review completed in time to comply with the law..
The Chair questioned whether or not a task force is needed for the other bill (Notification). Mr. Lawrence stated it would not be as complicated as peer review, but Mr. Mostow disagreed as he felt that creating regulations would be more complicated than one thinks and the Board needs to determine what substantial equivalency means. Chairman Cohen responded that in the UAA substantial equivalency refers to the three e’s – experience, education and examination.