The Account Balance

Summer 2011 

IN THIS ISSUE
2011 Applications Surge
New Safe Harbor Legislation
From the Chair
E-CPE Audit Report
New CPAs Take Oath
MD Pass Rates Above Average

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WHAT TO DO IF A COMPLAINT IS FILED AGAINST YOU

 

Usually, the first time you know a complaint has been filed against you, is when you receive a "Notice of Complaint" from the Board. This notice is only the beginning of the Board's consideration of a formal complaint. Upon receipt of this notice you are required by the Code of Professional Conduct to respond within 30 days.

 

Accompanying the notice is a copy of the consumer complaint for review. In your response, you should present any pertinent information in response to the issues raised in the complaint.

 

The Board's complaint committee reviews the facts presented in a complaint, the licensee's response, an investigative report (if necessary), and the provisions of the Maryland Public Accountancy Act and any regulations that may be relevant. Based on these considerations, the committee will either dismiss a complaint or refer it for review by an Assistant Attorney General to prepare administrative charges.

 

If the facts presented in a complaint warrant an administrative hearing, licensees have their right to a hearing, to be represented by counsel, and to call witnesses on their behalf. The Board is authorized to reprimand, suspend, or revoke a license or permit, as well as assess a fine up to $5,000 for each finding of a violation. Any finding by the Board may be appealed to the courts.

 

View Disciplinary Actions Taken by the Board

  

CPA EXAM APPLICATIONS

SURGE AS STUDENTS GRADUATE

Typically, the number of applications for the CPA Examination spike in the period immediately following spring graduations. This year, the Board received a record number of applications in June (179). The volume was higher than during any month since the beginning of computer-based testing in 2004. In fact, the number of applications (858) received by the Board in the fiscal year ending June 30, 2011 is the second-highest number of applications ever. Last year, the Board received the most applications in a year with 891. 

 

As shown to the right, applications received by the Board in the May-June period in each of the past three years has surged dramatically when compared to the average number of application received during the period FY2005-FY2008. 

 

The Board processes each application in order of when the application is complete. An application is considered complete when all of the official documents are received. This is the most fair and efficient way to process applications for all candidates. 

 

The review process involves reconciling the college transcripts with the courses and credit hours claimed on the course checklist and the list of accounting, business and ethics courses that are required by Regulation. Once the required course work and 150 semester (225 quarter) hours are confirmed, the applicant is notified and can begin to register for exam sections.


REQUESTS TO MODIFY YOUR CPE REPORTED

If you need to modify the CPE you have reported in your renewal, you must make a written request to the Board within 30 days of the date you filed your renewal application. In the request for CPE modification, please complete the CPE Inventory Checklist and submit course completion certificates to document both the CPE initially claimed in the renewal application as well as documentation of the CPE that you wish to add. Remember, any additional CPE that you want credited must have been completed prior to the date that you filed the renewal application.

 

FILE A CPR IF YOU ENCOUNTER A PROBLEM TAKING YOUR EXAM

In the event you experience a problem in taking your exam, please file an official center problem report (CPR) before you leave the test site. Filing this report documents the problem and permits the test center, AICPA and NASBA to thoroughly investigate the problem and advise the Board. Also, be sure to submit a written report about the problem to the Board immediately after leaving the test center. 

  

BEFORE YOU DECIDE TO CANCEL YOUR EXAM APPOINTMENT... 

Maryland residents, along with people around the globe, have witnessed some distressing weather events in recent years. Administration of the Uniform CPA Exam has been challenging at times. But, exam candidates should be forewarned that if you decide to cancel your test date based on a weather forecast, it can really cost you. If you cancel and the severe weather or other local emergency fails to materialize, you will forfeit both your registration and your exam fees. Please be prepared to get to your test center until you know for sure that the exam has officially been cancelled. If an actual closure occurs, you may be able to take advantage of an extension without losing your initial fee. Call the test center directly on the day of your exam to determine if it will remain open. If you are unable to contact the test center, you may visit the Prometric site status website (U.S. and territories only).

 

Take a few moments to familiarize yourself with all of the policies set forth regarding cancellation and rescheduling of the exam. The Uniform CPA Examination Candidate Bulletin contains all of the information you need in order to proceed in case of cancellation, rescheduling, and closure for any reason. Instructions regarding changes in exam appointments begin on page 13.

  

NOW THAT YOU HAVE PASSED THE CPA EXAM... 

You have finally passed the CPA Exam. What are you going to do next? Complete the process to get your license, that's what! How do you do that? Submit the Report of Practical Work Experience and the certificate of completion of Professional Ethics: AICPA's Comprehensive Course of the AICPA. Please Note: Do not request AICPA to forward the ethics completion certificate to the Board. It will not do so. Please send a copy of the completion certificate that you receive directly to the Board via email to cpadocsupport@dllr.state.md.us.

Please keep your original certificate in a safe place in case you need it later. After a period of time, AICPA does not issue duplicate certificates.

  

CPA PARTNERSHIPS SHOULD HAVE CONTINGENCY PLANS

Although no one wants to talk about it, CPA firms, especially partnerships, should have an emergency plan in the event a partner dies. Title 2-409 of the Maryland Public Accountancy Act allows for the surviving partner to continue to use the partnership name for up to one year after the death of the next-to-last partner.

  
GOVERNOR APPOINTS BOARD MEMBERS
 

Governor O'Malley has reappointed three current members to second terms on the Board: Tim Murphy, recently elected Board chair, Raymond C. Speciale and Ella Pierce. Mr. Speciale, an attorney as well as CPA, is the education member of the Board and continues to head the Education Committee. Ms. Pierce, a former purchasing agent for Baltimore City and various other state agencies, serves as a consumer member.

 

The Governor also appointed two new industry members: Clifton B. Jeter and Mac N. Claxton. Mr. Jeter is a sole practitioner of tax and accounting services. Mr. Claxton is the head of Claxton and Company, PC, of Greenbelt, Maryland. Additionally, a new consumer member was recently appointed. The Board welcomes Naomi B. Powell, a mortgage consultant and community activist from Prince George's County.  


STUDENTS ELIGIBLE TO APPLY FOR CPA EXAM WITH ACCOUNTING DEGREE BEGINNING OCTOBER 1
bill signing 5/10/11

Credit: Governor's Press Office

Governor Martin O'Malley signed legislation that will allow accounting students to qualify to take the Uniform CPA Exam earlier.

 

Beginning in October 2011, individuals can qualify for candidacy for the Uniform CPA Examination upon the completion of 120 semester hours and the attainment of a degree in accounting or its equivalent. Currently, CPA Exam applicants must complete a minimum of 150 semester hours to qualify for the examination. The current requirements can be found on the Board's website.

 

The Board, at its June 7, 2011 meeting, proposed new regulations that will require CPA Exam applicants to complete a minimum of 30 semester hours in courses including, but not limited to: auditing, cost accounting, nine semester hours in financial accounting, U.S. federal income tax, and business/accounting ethics as part of the 120 hour requirement. The proposed regulations were published in the Maryland Register on July 29, 2011, and are expected to take effect in October.

 

The Board will begin accepting applications under these new requirements by mid-October. Updates will be posted on the Board's website as they become available. Applications received under the new requirements prior to the posted acceptance date will be denied, and the applicant's fee will not be returned.

 

Individuals who pass the CPA Examination will still need to have earned a minimum of 150 semester hours of college education to fulfill the education requirements for licensure. To qualify for a license, an applicant will need to have completed a minimum of 21 semester hours in five of the nine following business subjects: 1) statistics; 2) economics; 3) corporation or business finance; 4) management; 5) U.S. business law; 6) marketing; 7) business communication; 8) information technology/systems; and 9) quantitative methods.

SAFE HARBOR LEGISLATION FOR NON-LICENSED ACCOUNTANTS IN EFFECT OCTOBER 1

In May, Governor O'Malley signed two bills (SB370 and HB328) that eliminate the performance of a review by non-CPAs and provides for safe harbor wording for compilations performed by non-licensed accountants. This was a technical correction necessary since passing mandatory peer review legislation in 2005.

 

These bills require the Board to adopt, by regulation, appropriate disclaimer language. These bills also change the definition of attest service to include compilations in the professional literature. Both bills take effect on October 1, 2011.

 

In a nutshell, the safe harbor wording to the compilation report will eliminate any reference to AICPA SSARS (Statements on Standards for Accounting and Review Services) language and will include a statement to the effect that the non-licensed accountant has not undergone peer review. The Board is expected to review the wording at its September meeting and will propose regulations. Board members advise that the exact safe harbor language may change over time as a result of future changes in the financial standards.

GREETINGS FROM THE CHAIR
Thomas J. "Tim" Murphy, CPA

Thomas J.

As the recently elected Chairman, I want to introduce myself and tell you about what I've been doing on behalf of licensees and members of the public since I was appointed to the Board in July 2007.

 

First, on behalf of the Board, I would like to extend our thanks and appreciation to former Chair Terry Hancock. Mr. Hancock's term as a member of the Board expired last month. Mr. Hancock was instrumental in the modernization of the CPE regulations and policies, as well as the recent passage of legislative initiatives; the 120/150 education/licensing concept; and safe harbor language for non-CPAs who perform compilations. His dedication and energy to the CPA industry and public welfare will be missed.

 

I have been a Maryland CPA licensed since 1970. I am also a Certified Financial Planner, Personal Financial Specialist, Certified Valuation Analyst, and Accredited Estate Planner. I am a member of AICPA, MACPA (having served as president of the Southern Maryland Chapter), and MSA. I have also represented Maryland on several committees of the National Association of State Boards of Accountancy (NASBA).

 

Previous to my election as chairman, I served as chair of the Board's Complaint Committee. During my time with the Complaint Committee, the Board received 253 complaints. Common complaints ranged from failure of a licensee to timely communicate with clients or to return documents, to alleged errors in the preparation of tax returns and financial statements. Many of these types of complaints can be easily avoided. Other complaints are more complex and have involved licensee sanctions by the IRS and SEC as well as felonies and misdemeanors involving a licensee's fitness as a CPA.

 

You can easily avoid being the subject of common complaints. Before initiating any work, enter into an engagement agreement with the client. In this engagement letter, clearly state the services you are going to provide, specify all of documents you need to properly perform the service, and explain the conditions for payment. Take the time to explain the relevant laws and financial standards that govern the service you are going to provide. Frequent communication, so that clients fully understand what you are doing for them, will help you avoid these types of complaints.

 

I look forward to working as chairman on behalf of the profession and the citizens of Maryland.

CPA Applications Received By Board
BOARD OBSERVES FIRST ANNIVERSARY OF
E-CPE AUDITS

If you've renewed your license since April 5, 2010, you may already be aware of how easy the Board has made the audit process for continuing education claimed to support license renewal. Just over one year ago, the Board began the random selection of licensees for audit at the time of license renewal. Prior to last year, licensees were notified they were chosen for audit as long as six months after filing a license renewal application.

 

The audits have found that most licensees are in compliance. However, the audits have revealed that licensees do not understand that 4 hours of CPE in ethics must be earned in each preceding license term and taken prior to filing the renewal application. Some licensees, once they are notified that they have been selected for audit, register for a course and then submit it as documentation to support the CPE claimed in the renewal application.

 

The Board points out that an ethics course or any other course completed after a renewal application is filed cannot be used retroactively to satisfy the documentation required for the audit, and is only eligible to be applied to the next renewal. At the time of renewal, a licensee certifies to the correctness of the completion of CPE that is claimed. The Board views, very seriously, misrepresentations made in any application for a license or permit. 

 

The Audit Notification Process

 

Anyone who files for active license renewal is eligible to be selected for audit. Licensees who file a renewal application online are advised of their selection upon the confirmation of the renewal transaction. A reminder notice of selection is also transmitted via email. Applicants who file a paper renewal are notified, by email and regular mail, of their audit selection shortly after the Board receives the application.

 

If a licensee cannot provide documentation of CPE claimed, the amount of CPE is adjusted accordingly. Usually, this adjustment results in a reduction in the amount of CPE that is credited toward the next renewal. In some other cases, the failure of a licensee to provide documentation and CPE adjustment results in an audit failure. An audit failure subjects the licensee to possible disciplinary action by the Board.

 

Types of CPE Audit Findings

 

Satisfactory Compliance means that the licensee fully documented the CPE credits claimed on the license renewal application.

 

Adjusted Compliance means that the licensee did not fully document the completion of the number of CPE hours claimed in the license renewal application, but had sufficient carry forward credits to meet the 80 CPE requirements for renewal. Adjustments are made to the licensee's CPE history file to deduct the number of hours that are not documented. A civil penalty for misrepresentation on the renewal application is an optional course of action for the Board.

 

Audit Failure means that the licensee did not document a sufficient number of CPE hours to meet the requirements for license renewal. This results in the licensee being referred to the Board Complaint Committee for further review and action. The Board may choose to issue a reprimand, suspension, revoke the license and/or impose a fine.

 

Make sure that you are up to date on the Board's CPE Policy and associated regulations (See COMAR 09.24.02.01 through .05). A summary of the guidelines is provided on the Board's website in the section entitled "CPE." There you can find a useful inventory sheet, as well as a checklist for your support documentation. Remember, even if you are not chosen for a CPE audit, you still need to accurately document the credits you've earned. The Board has the authority to review at any time during each two-year license period.

Stanley J. Botts

Stanley J. Botts

Commissioner

Photo Courtesy MACPA

 

NEW CPAS TAKE OATH;

PLEDGE PROFESSIONAL,

ETHICAL CONDUCT

 

The Board and the Maryland Association of Certified Public Accountants conducted the Fourth Annual Swearing-In Ceremony for recently licensed CPAs at the BWI Hilton on June 2, 2011. Commissioner of Occupational and Professional Licensing Stanley J. Botts administered the oath to nearly 100 new CPAs.

swearing in ceremony 2011

Photo Courtesy MACPA

THE OATH...

"I solemnly swear that I will assume the responsibilities and obligations as a Certified Public Accountant in the State of Maryland and in the United States of America.

 

I will support the laws and regulations and perform my professional duties to the best of my ability in an ethical, professional and objective manner.

 

As a CPA, I will uphold the honor and dignity of the accounting profession and abide by the rules of professional conduct."

MD PASS RATES EXCEED NATIONAL AVERAGE
IN 2010

The pass rate of Maryland candidates in 2010 exceeded the national average on three of the four sections of the Uniform CPA Examination. Maryland candidates performed better in the Auditing and Attestation, Financial Accounting and Reporting and the Regulation sections of the exam. The performance by Maryland candidates on the Business Environment and Concepts section lagged behind the national average by 4 percent. 

 

2010 RESULTS

NAT.

MD

NAT.

MD

NAT.

MD

NAT.

MD

SECTION

AUD

AUD

BEC

BEC

FAR

FAR

REG

REG

1ST

QTR %

46.86

43.75

46.59

51.05

44.95

48.69

49.00

58.38

2ND

QTR %

50.77

58.69

48.88

44.05

48.39

48.50

52.07

48.24

3RD

QTR %

49.40

52.27

50.79

48.30

52.71

55.56

54.03

55.43

4TH

QTR %

44.89

50.15

44.27

42.13

45.02

43.70

47.29

47.06

YEAR %

47.80

51.46

47.29

45.36

47.81

49.12

50.66

52.01

 

Source: Maryland Board of Public Accountancy research and the American Institute of Certified Public Accountants.

WHY IT IS TAKING LONGER TO REPORT YOUR CPA EXAMINATION SCORES

CPA Exam candidates can expect it to take a little longer to receive their scores until this year's October-November administration window. The reason for this is the conversion of the examination to a new format, CBT-e in January of this year. With the new changes with CBT-e, the scoring process requires more analysis and takes longer.

 

During the first three administration windows, the Board of Examiners (BOE) is implementing stronger quality controls to ensure the validity of the scores. This has, naturally, slowed the scoring process. Once the BOE validates the new scoring methodology, it expects that examination candidates will be able to receive their scores more quickly.

 

The Board understands the anxiety that candidates experience as they wait for their scores. The Board has reviewed the exam history of current CPA exam candidates. It does not appear that the conditional credit earned by examination candidates will be adversely affected by this delay. Candidates should arrange their testing appointments to maximize their opportunity to pass the exam.

AICPA's 2011 Score Release Timeline

Learn more about Psychometrics and Scoring

MOST EXAM CANDIDATES WAIT UNTIL THE END OF TEST PERIOD

NASBA reports that most exam candidates wait until the end of the quarterly test window to take the CPA Examination. The following graph shows the current and historical testing pattern:


window testing pattern

Source: Quarterly Summary Report, CBT Steering Group, May 2011

73 CANDIDATES PASS EXAM IN 2ND QTR 2011

The scores are in for the April-May administration window for the Uniform CPA Examination. Seventy-three (73) candidates passed the exam in this window. To date in 2011, 140 candidates have passed the examination. Maryland candidates passed 321 of the 794 examination sections administered during this period for a passing rate of 40.4%. See the section by section analysis below:

 

2ND QTR EXAM SCORES

 

SECTION

ADMIN

RPT

PASS

% PASS

AUD

211

211

87

0.412

BEC

170

170

69

0.406

FARE

186

186

67

0.360

REG

227

227

98

0.432

TOTAL

794

794

321

0.404

1st QTR EXAM SCORES

 

SECTION

ADMIN

RPT

PASS

% PASS

AUD

181

181

78

0.431

BEC

158

158

50

0.316

FARE

152

152

63

0.414

REG

202

202

77

0.381

TOTAL

693

693

268

0.387

INDIVIDUAL LICENSES AND FIRM PERMITS ISSUED BY THE BOARD (as of August 1, 2011)

LICENSE CATEGORY

COUNT

ACTIVE C.P.A.

13,621

INACTIVE C.P.A.

5,493

CPA FIRMS

901

 

20,015


BOARD MEMBERS

Thomas J. "Tim" Murphy, CPA

Chair, Industry Member

(Prince George's County)

Mac N. Claxton, CPA

Industry Member

(Prince George's County)

Elizabeth S. Gantnier, CPA

Industry Member

(Frederick County)

Clifton B. Jeter, CPA

Industry Member

(Montgomery County)

Naomi B. Powell

Consumer Member

(Prince George's County)

Raymond C. Speciale, Esq., CPA

Education Member (Frederick County)

 

DIVISION PERSONNEL

Stanley J. Botts

Commissioner, Occupational

and Professional Licensing

Harry Loleas

Deputy Commissioner, Occupational and Professional Licensing

STATE BOARD OF PUBLIC ACCOUNTANCY STAFF

Dennis L. Gring, Executive Director

Matthew A. Lawrence, Board Counsel

Linda L. Rhew, Administrative Officer

Bert Fenwick, CPE Consultant

Barbara Hardy, Office Service Clerk

Alicia Coar, Office Secretary

Janet Morgan, Outreach Coordinator


 

Department of Labor, Licensing and Regulation / Maryland Board of Public Accountancy / 500 N. Calvert Street / Baltimore, MD 21202

Department of Labor, Licensing and Regulation / Maryland Board of Public Accountancy 

500 North Calvert Street / Baltimore, Maryland 21202