Peer review was one of the major topics of discussion at last week’s Members Advisory Forum meeting in Lansing. The biannual event attracted more than 200 members from across the state and featured national and state leaders as speakers.

State – Mandatory Peer Review
At the state level, a mandatory peer review enrollment provision for licensure of Michigan CPA firms and sole practitioners performing attest services will take effect March 2007. Michigan State Board of Accountancy (MSBA) Licensing Administrator Suzanne Jolicoeur said the peer review requirement was just one element of the accounting reform legislation adopted in December 2005. (Visit MACPA web site for more on the legislation.)

Jolicoeur said the State Board is in the early stages of writing administrative rules to support the legislation. She anticipates that the rule making process may take several months. (MACPA will keep you updated as information becomes available.)

The move toward mandatory peer review is a national trend in response to accounting scandals and Sarbanes-Oxley. All but five states have, or soon will have, some sort of peer review requirement as a condition of licensure.

Nation – Peer Review Transparency
Meanwhile, the AICPA’s Board of Directors and Governing Council have gone on record in support of greater transparency of the peer review process. AICPA Chair and Michigan CPA Leslie Murphy told Advisory Forum attendees that the move toward greater transparency is being driven by several factors.

Regulators are pushing for transparency. For example, the National Association of State Boards of Accountancy (NASBA) leadership calls for state boards to have “unfettered access” to peer review results. Also, banking regulators and the Department of Labor are on record supporting greater transparency of peer review reports for those accounting firms that audit financial institutions and pension plans. Plus, changes anticipated later this year in the Governmental Accounting Office’s Yellow Book are expected to include transparency provisions.

In addition to regulatory pressures, Murphy explained, the general public is clearly demanding more transparency in all businesses and business transactions. Plus, the AICPA Board of Directors and Council support transparency because they believe it is the right thing to do.

AICPA leaders believe that by taking the lead and making a change to this aspect of self-regulation, the profession would be making a strong statement about its ability and willingness to regulate itself. More importantly, it would be helping to preserve the uniformity of the peer review process among the states.

In order to educate members on this complex issue, the AICPA has published numerous articles and is beginning a series of meetings with state society groups to garner feedback. Murphy told the audience that Michigan is the first state to participate in roundtables and provide feedback to the AICPA.

AICPA President Barry Melancon said a special AICPA Board task force has made numerous recommendations to the Peer Review Board relating to the quality of peer reviews and reviewers. The Peer Review Board is working on new standards, with an exposure draft expected this fall.

Other Issues at the Forum
Melancon kicked off the Members Advisory Forum program with an overview of numerous national issues in addition to peer review transparency. Highlights of Melancon’s presentation include the following:

On Image – Polls consistently show the CPA professional image continues to improve. Programs such as CPA Ambassadors and Financial Literacy are working, says Melancon. In addition, he noted that board rooms are placing more emphasis on hiring CPAs as CFOs. Thirty-five percent of CFO positions filled in 2005 were CPAs, as compared to 20 percent in 2003.

On Advocacy – Top issues include relief from Gramm-Leach-Bliley privacy notice provisions; relief from workload compression through small business tax flexibility legislation; and continued involvement on Circular 230 and Schedule D tax issues.

On Future Accounting – The AICPA supports the development of high quality GAAP for private companies and will work jointly with FASB to create a model for implementation. Melancon also indicated the use of XBRL in increasing. He predicts that in 3-5 years, it will be commonplace for financial information users such as banks to require annual reports to be submitted using XBRL.

Melancon also expressed concern about the high turnover in CPA firms – one in six CPAs left firms in 2004, up two percent from the prior year. He said employee retention is a major concern for all firms and that work-life issues must be addressed in order to meet future staffing needs. The AICPA has launched a Young CPA Network as one initiative to retain and engage young CPAs.

More Highlights of the Day
MACPA President and CEO Peggy Dzierzawski’s multi-media presentation provided an overview of important Association initiatives including tax assistance programs, the MACPA Accounting Blitz, Hospice of Michigan partnership and high school and college student outreach.

In addition to talking about peer review, Jolicoeur reported that the number of candidates taking the Computerized CPA Exam increased slightly during its second year; however, total numbers are still significantly lower than with the paper-and-pencil exam. As a result, fee increases will be implemented beginning August 1, 2006 amounting to about $100 more for all four sections of the exam.

The MACPA Political Action Committee (PAC) Board Chair John Pridnia provided a PAC Update.

Attendees also heard from and asked questions of prominent business leader and candidate for Michigan Governor, Dick DeVos. The former CEO of Alticor, Inc., DeVos spoke about Michigan’s economic outlook, and other issues and concerns that affect all CPAs. To ensure everyone has an opportunity to hear a balance of information, MACPA has invited Governor Jennifer Granholm to speak at our Fall Members’ Advisory Forum on September 28 in Novi.

Members warmly welcomed newly certified CPAs and many college students to the meeting including 2006 Michigan Accountancy Foundation scholarship recipients. (See related story.)