State of Arizona
Office
of the
Auditor General
PERFORMANCE AUDIT
Report to the Arizona Legislature
By Debra K. Davenport
Acting Auditor General
September 1999
Report No. 99-20
ARIZONA
STATE BOARD
OF
ACCOUNTANCY
The Auditor General is appointed by the Joint Legislative Audit Committee, a bipartisan committee
composed of five senators and five representatives. His mission is to provide independent and impar-tial
information and specific recommendations to improve the operations of state and local government
entities. To this end, he provides financial audits and accounting services to the state and political
subdivisions and performance audits of state agencies and the programs they administer.
The Joint Legislative Audit Committee
Senator Tom Smith, Chairman
Representative Roberta Voss, Vice-Chairman
Senator Keith Bee Representative Robert Burns
Senator Herb Guenther Representative Ken Cheuvront
Senator Darden Hamilton Representative Andy Nichols
Senator Pete Rios Representative Barry Wong
Senator Brenda Burns Representative Jeff Groscost
(ex-officio) (ex-officio)
Audit Staff
Kim Van Pelt—Manager
and Contact Person (602) 553-0333
Sandra Tulloss—Audit Senior
Catherine Dahlquist—Staff
William Parker—Staff
Copies of the Auditor General’s reports are free.
You may request them by contacting us at:
Office of the Auditor General
2910 N. 44th Street, Suite 410
Phoenix, AZ 85018
(602) 553-0333
Additionally, many of our reports can be found in electronic format at:
www.auditorgen.state.az.us
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OFFICE OF THE AUDITOR GENERAL
SUMMARY
The Office of the Auditor General has conducted a performance
audit and Sunset review of the Arizona State Board of Account-ancy
pursuant to a May 27, 1997, resolution of the Joint Legisla-tive
Audit Committee. The audit was conducted as part of a
Sunset review as set forth in Arizona Revised Statutes §§41-2951
through 41-2957.
The former Auditor General and the current Acting Auditor
General are certified public accountants and registrants of the
Board. Consequently, to avoid the appearance of a conflict of
interest or impropriety, they recused themselves from this audit.
Additionally, none of the Auditor General staff assigned to the
audit were Board registrants.
Background
The Arizona State Board of Accountancy, overseen by a seven-member
Board appointed by the Governor, is responsible for
establishing and enforcing qualifications and accounting stan-dards
for certified public accountants, public accountants, and
registered accounting firms. The Board exercises this responsi-bility
by:
n Processing certifications and administering certified public
accountant examinations.
n Registering certified public accountants, public accountants,
and accounting firms biennially.
n Ensuring that registrants obtain continuing professional edu-cation.
n Conducting quality reviews of financial statements com-pleted
by registrants and filed with select state agencies.
n Receiving, investigating, and resolving complaints made
against registrants.
Summary
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OFFICE OF THE AUDITOR GENERAL
The Board Sometimes Does Not
Handle Complaints in a Timely Manner
(See pages 7 through 10)
Although the Board resolves many complaints within a reason-able
number of days, some take considerable time to resolve.
Some complaints take over a year to be resolved. The Board
could benefit from studying ways to further speed complaint-handling
processes. Specifically, the Board may wish to focus its
study on complaints resolved by formal discipline or requiring
investigators. Additionally, the approval process for minutes
received from the Tax Practice and Auditing Standards Com-mittee
should be reviewed to determine if a more timely ap-proach
is appropriate.
Public’s Access to
Information Is Limited
(See pages 11 through 14)
Statutory language and Board practices impede access to public
information. Providing unimpeded public access to information
is an important component of regulatory boards’ responsibilities.
Arizona Revised Statutes prohibit the Board from releasing im-portant
information about its registrants, such as dismissed com-plaints,
pending complaints, and complaints resolved by letters of
concern. Additionally, problems with the Board’s automated
telephone answering system and public viewing requirements
present further obstacles to members of the public who wish to
obtain information about registrants.
The Board could improve access to public information by seeking
changes to statutes that prevent the release of information con-tained
in letters of concern. Additionally, changes would allow
the Board to disclose the number and nature of pending and
dismissed complaints. If statutory changes are made, the Board
will need to develop a public information policy specifying which
information staff will automatically provide to the general public.
In developing this policy, the Board will need to protect the con-fidentiality
of registrants’ clients, as well as the integrity of ongo-ing
investigations. Finally, the Board should investigate the feasi-bility
of adding an option to its telephone answering system so it
is easier for the public to obtain information about registrants and
Half of the complaints
received by the Board
take more than six
months to resolve.
Statutes block the public
from accessing key infor-mation
about CPAs.
Summary
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OFFICE OF THE AUDITOR GENERAL
stop requiring members of the public to obtain a notarized state-ment
when viewing registrants’ files for personal use.
Board Needs to Consider Changing or
Eliminating Its Quality Review Program
(See pages 15 through 20)
As currently implemented, the Board’s Quality Review Program
appears to mostly identify minor technical deficiencies, encom-passes
only a limited number of registrants, and is duplicative for
some Program registrants.
Contract investigators the Board hires limit their review to public
filings at nine participating state agencies, including the Depart-ments
of Banking, Insurance, and Transportation. Consequently,
only registrants who prepare public filings at one of the nine par-ticipating
public agencies are subject to program review. Most of
the deficiencies noted by investigators are minor in nature, and
the Board closes the vast majority of resulting complaints without
action. Additionally, the Quality Review Program is redundant
for those Board registrants who have completed American Insti-tute
of Certified Public Accountants (AICPA) peer review re-quirements.
The Board should review the Program’s effectiveness and make
changes where warranted. Specifically, the Board should consider
reorienting the program to a peer review approach or eliminating
it. As a part of this effort, the Board should consider promulgat-ing
rules or requesting that the Legislature clarify the Program’s
statutory authority to conduct a peer review program.
Current Quality Review
Program produces mini-mal
results.
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OFFICE OF THE AUDITOR GENERAL
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OFFICE OF THE AUDITOR GENERAL
TABLE OF CONTENTS
Page
Introduction and Background ......................... 1
Finding I: The Board Sometimes Does
Not Handle Complaints in
a Timely Manner........................................... 7
Many Complaints Take
Six Months or More to Resolve ...................................... 7
Reasons for Lengthy
Processing Times Are Varied......................................... 9
Board Needs to Examine
Complaint-Handling Process......................................... 10
Recommendation........................................................... 10
Finding II: Public’s Access to
Information Is Limited.................................. 11
Public Benefits From
Full Information.............................................................. 11
Statutes Limit
Public Access................................................................... 11
Available Information Is
Difficult to Access ........................................................... 13
Recommendations .......................................................... 14
Finding III: Board Needs to Consider
Changing or Eliminating Its
Quality Review Program.............................. 15
Background..................................................................... 15
Table of Contents
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OFFICE OF THE AUDITOR GENERAL
TABLE OF CONTENTS (Concl’d)
Page
Finding III (Concl’d)
Effect of Current
Program Limited ............................................................ 16
Board Needs to Consider
Modifying or Eliminating Program............................... 17
Recommendations .......................................................... 20
Sunset Factors.................................................. 21
Agency Response
Tables
Table 1 Arizona State Board of Accountancy
Statement of Revenues, Expenditures, and
Changes in Fund Balance
Years Ended June 30, 1997, 1998, and 1999
(Unaudited)................................................... 4
Table 2 Arizona State Board of Accountancy
Days Needed to Resolve Closed Complaints
Year Ended June 30, 1998............................. 8
Introduction and Background
1
OFFICE OF THE AUDITOR GENERAL
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has conducted a performance
audit and Sunset review of the Arizona State Board of Account-ancy
(Board) pursuant to a May 27, 1997, resolution of the Joint
Legislative Audit Committee. This audit was conducted under
the authority vested in the Auditor General by Arizona Revised
Statutes §§41-2951 through 41-2957.
The former Auditor General and the current Acting Auditor
General are certified public accountants and registrants of the
Board. Consequently, to avoid the appearance of a conflict of
interest or impropriety, they recused themselves from this audit.
Additionally, none of the Auditor General staff assigned to the
audit are Board registrants.
Board Responsibilities
The Arizona State Board of Accountancy was created in 1919 to
establish and enforce standards of qualification and accounting
practice for certified public accountants (CPAs), public account-ants
(PAs), and accounting firms. Together, this group is referred
to as registrants. Under A.R.S. §§32-721 through 32-751, the
Board’s specific responsibilities include:
n Examination and Certification—The Board administers the
uniform CPA examination of the American Institute of Certi-fied
Public Accountants (AICPA). The Board processed 362
new CPA applications and certified 365 CPAs in fiscal year
1999.
n Registration—The Board oversees the biennial registration
of CPAs, PAs, and accounting firms. In fiscal year 1999, 7,824
CPAs, 16 PAs, and 762 firms were regulated by the Board.1
1 Public accountants (PAs) were required to meet less stringent ex-amination
requirements than CPAs. PA status is no longer granted
to new applicants.
Board examines, certi-fies,
and monitors
CPAs, PAs, and regis-tered
accounting firms.
Introduction and Background
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OFFICE OF THE AUDITOR GENERAL
n Continuing Education—During biennial registration the
Board is responsible for ensuring that registrants have ob-tained
continuing education. CPAs in public practice must
obtain 80 hours of continuing professional education every
two years.
n Quality Review—The Board’s investigators review a sample
of audits and financial statements prepared by registrants to
determine if they comply with professional standards. If the
audits and financial statements do not comply, the Board can
initiate complaints.
n Complaints—The Board receives, investigates, and resolves
complaints against registrants. Typical complaints include
the unauthorized use of the “CPA” title by nonregistrants,
discrepancies on income tax returns, and registrants’ failure
to complete required continuing professional education.
However, the Board also spends a great deal of time resolv-ing
a relatively small number of complaints against large
firms. These major cases involve significant litigation or po-tential
litigation and extensive legal resources. The Board
opened 222 complaints in fiscal year 1999.
Organization and Staffing
The Board is comprised of seven members appointed by the
Governor to five-year terms. The Board consists of five certified
public accountants and two public members. Ten full-time em-ployees
and two full-time Assistant Attorneys General assist the
Board.
Under Arizona Administrative Rules, the Board also supports
five advisory committees. These volunteer professional commit-tees,
not composed of Board members, provide specialized re-views
and recommendations to the Board. Committees examine
issues related to professional standards, CPA certification, pro-fessional
education, pending legal issues (such as complex cases),
and taxes. Committees also review complaints, initiate investi-gations,
and recommend disciplinary action to the Board.
Introduction and Background
3
OFFICE OF THE AUDITOR GENERAL
Funding and Budget
The Board is funded through revenue collected from licenses
and fees. Additional funding is derived from fines and forfeits. In
fiscal year 1998, the Board collected revenues of $1,076,629. Ex-penditures
in fiscal year 1998 amounted to $1,225,057. The Board
is a 90/10 agency, remitting 10 percent of its gross revenues to
the State General Fund. Remittances to the State General Fund in
fiscal year 1998 amounted to $116,963. (See Table 1, page 4)
1979 Report Follow-up
and Update
Auditor General staff revisited the concerns identified in the 1979
performance audit report of the Board (Auditor General Report
No. 79-5). The 1979 report contained four recommendations, as
follows:
n Designating the public accountant classification as a “dying
class” and eliminating provisions for any new registrants
under the “PA” classification while permitting existing reg-istrants
to retain their certificates.
n Adopting additional methods for encouraging public input.
n Amending statutes to require less frequent registration and
budget approval for implementing automated data process-ing.
n Formulating a policy for expanding the quality review pro-gram.
The Board has made progress on the first three issues. Statutory
provisions regarding issuance of a PA certificate were repealed
in 1980 and the Board position formerly held by a public ac-countant
is now designated for a member of the public. In addi-tion
to adding the second public member position, the Board has
opened an Internet Web site and issues news releases when ma-jor
cases are resolved. The Board now licenses registrants on a
biennial basis and has implemented an automated data proces-
Introduction and Background
4
OFFICE OF THE AUDITOR GENERAL
Table 1
Arizona State Board of Accountancy
Statement of Revenues, Expenditures, and Changes in Fund Balance
Years Ended June 30, 1997, 1998, and 1999
(Unaudited)
1997 1998 1999
Revenues:
Licenses and fees $ 855,213 $ 928,448 $ 924,911
Fines and forfeits 337,691 130,707 5,550
Charges for goods and services 25,290 17,411 21,610
Other 63 5,564
Total revenues 1,218,194 1,076,629 957,635
Expenditures: 1
Personal services 253,080 285,011 285,310
Employee related 50,961 57,900 60,105
Professional and outside services 656,245 596,321 660,615
Travel, in-state 8,324 11,288 16,145
Travel, out-of-state 6,869 8,675 6,834
Other operating 211,255 265,862 225,454
Capital outlay 30,586
Total expenditures 1,217,320 1,225,057 1,254,463
Excess of revenues over (under) expenditures 874 (148,428) (296,828)
Other financing uses:
Net operating transfers out 5,543 5,067 2,943
Remittances to the State General Fund 2 125,856 116,963 100,758
Total other financing uses 131,399 122,030 103,701
Excess of revenues under expenditures and other
uses (130,525) (270,458) (400,529)
Fund balance, beginning of year 1,740,357 1,609,832 1,339,374
Fund balance, end of year 3 $1,609,832 $1,339,374 $ 938,845
1 Includes prior year administrative adjustments and special investigations, legal services, and year
2000 project expenditures that the Legislature authorized as special line items.
2 As a 90/10 agency, the Board remits administrative penalties and 10 percent of other gross reve-nues
to the State General Fund.
3 Fund balance is unreserved and undesignated; however, the balance cannot be spent without leg-islative
appropriation.
Source: The Arizona Financial Information System (AFIS) Revenues and Expenditures by Fund, Program,
Organization, and Object and Trial Balance by Fund reports for the years ended June 30, 1997,
1998, and 1999.
Introduction and Background
5
OFFICE OF THE AUDITOR GENERAL
sing system. However, as reported in Finding III (see pages 15
through 20), the current audit found that the Board still needs to
make changes to the quality review program.
Audit Scope and
Methodology
Audit work conducted focused on determining if the Board pro-vides
adequate information to the public regarding registrants,
the effectiveness of the Board’s quality review program, and
whether the Board adequately tracks, investigates, and resolves
complaints. To do so, Auditor General staff:
n Randomly selected a sample of 107 files for complaints re-ceived
by the Board in fiscal year 1998. Files reviewed in-cluded
complaints regarding taxes, professional education,
CPA titles, and audit/accounting practices. The staff then
analyzed selected files to determine whether complaints
were processed in a timely manner, reviewed the actions rec-ommended
by committees, and compared the final action
taken by the Board with committee recommendations.
n Interviewed representatives from accountancy boards in 15
other states (Georgia, Missouri, Illinois, Michigan, New York,
Oklahoma, Virginia, West Virginia, Wisconsin, Ohio, Cali-fornia,
North Carolina, Texas, Oregon, and Tennessee).
n Attended four full Board meetings and four committee
meetings.
n Conducted an extensive review of literature, including pro-fessional
journal articles, books, Internet Web sites, and re-ports
from other states.
n Reviewed performance audits conducted on similar boards
in four other states.
n Interviewed representatives of the Arizona Society of Certi-fied
Public Accountants, the American Institute of Certified
Public Accountants, and the National Association of State
Boards of Accountancy.
Auditors reviewed 107
complaint files in-depth.
Introduction and Background
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OFFICE OF THE AUDITOR GENERAL
The audit presents recommendations in three areas:
n The need for statutory changes to allow better public access
to complaint information.
n The need for the Board to improve some aspects of the com-plaint-
handling process.
n The need for the Board to review the quality review program
to determine if the current program is the most effective
method available.
This audit was completed in accordance with government
auditing standards.
The Auditor General and staff express appreciation to the mem-bers
of the Arizona State Board of Accountancy, the Board’s rep-resentatives
from the Office of the Attorney General, the Execu-tive
Director of the Board, and the Board’s staff members for
their cooperation and assistance throughout the audit.
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OFFICE OF THE AUDITOR GENERAL
FINDING I THE BOARD SOMETIMES DOES
NOT HANDLE COMPLAINTS IN
A TIMELY MANNER
Many of the complaints filed with the Board take a considerable
amount of time to resolve. While 180 days for complaint resolu-tion
is a reasonable standard for occupational regulatory boards,
only about half of the complaints received in fiscal year 1998
were resolved within that time. These lengthy processing times
are caused by many factors, including registrants’ legal tactics,
investigative hurdles, and administrative practices in referring
complaints to the Board for final resolution. Because the causes
are so varied, more study is needed to determine what might be
done to speed up the process.
The Board is responsible for investigating and resolving com-plaints
against CPAs, PAs, and registered public accounting
firms. Complaints are often made regarding tax services per-formed
by registrants, alleged violations of accounting and
auditing standards, inappropriate use of the CPA designation,
and registrants’ failure to meet continuing education require-ments.
If a complaint needs further investigation before it can be
addressed, it is assigned to one of the Board’s investigators.
Board staff may also assign complaints to the Board’s commit-tees
or the Office of Administrative Hearings to make recom-mendations
for Board action. Ultimately, all complaints are
eventually heard and resolved by the full Board.
Many Complaints Take
Six Months or More to Resolve
While many complaints received by the Board are resolved
quickly, others take a considerable time to resolve. Auditors’
examination of complaint resolution processes followed by
regulatory boards in many professions has shown that 180 days
is a reasonable benchmark. When compared to such a bench-mark,
the processing times for many of the complaints the Board
filed are longer. As shown in Table 2 (see page 8), the Board
Board takes more than
six months to resolve
half of the complaints it
receives.
Finding I
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OFFICE OF THE AUDITOR GENERAL
took over180 days to resolve half of the complaints it received in
the fiscal year ending June 30, 1998, based on a file review of 107
complaints.
Some of the complaints that take a long time to resolve involve
serious situations posing a financial risk to the public. For ex-ample,
one complaint involving a certified public accountant
who pleaded guilty to criminal charges in a U.S. District Court
took approximately a year and a half to resolve. Prosecutors had
accused the accountant of taking part in a scheme that defrauded
investors in Arizona and California out of $10 million. The regis-trant
eventually agreed to terminate his certificate.
Table 2
Arizona State Board of Accountancy
Days Needed to Resolve Closed Complaints
Year Ended June 30, 1998
Nature of Complaint Allegations
Days
to
Resolve1
Auditing and
Accounting
Standards
Tax
Practices
Continuing
Education
Use of CPA
Designation
Total
Number of
Complaints
Reviewed
Percentage
of
Resolutions
by Number
of Days
0-180 14 6 11 12 43 50%
181-360 3 8 17 10 38 44
Over 360 2 1 1 1 5 6
Total 19 15 29 23 86 2 100%
1 Resolution calculated from the date the complaint is received to the Board’s decision.
2 Auditor General staff were unable to independently identify open and close dates for 21 of the 107 complaints initially
reviewed.
Source: Auditor General staff analysis of 107 complaints filed with the Board during the year ended June 30, 1998.
Finding I
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OFFICE OF THE AUDITOR GENERAL
Reasons for Lengthy
Processing Times Are Varied
There are many reasons why complaints can be delayed in proc-essing.
Auditor General staff reviewed nine of the most lengthy
cases received by the Board during fiscal year 1998. Auditors
found that these complaints were delayed for various reasons
that included postponements, lengthy negotiating periods, and
processing delays. For example:
n One complaint, which accused a registrant of accounting
standards violations, took over a year to resolve. An investi-gator
worked on this complaint for three months. Addition-ally,
the registrant requested to postpone an informal inter-view
twice, adding two more months. Finally, the registrant’s
attorney attempted to negotiate a settlement for over four
months. The registrant eventually signed a consent order that
required his future work to be reviewed prior to its release.
n A second complaint, which accused a registrant of tax prepa-ration
problems, took over a year to resolve. The complaint
was initially closed without action within three months, but
was reopened, deliberated again, and assigned to an investi-gator
after the complainant notified a legislator about her dis-satisfaction
with the initial outcome. The complaint was fur-ther
delayed during the holiday season when almost three
months elapsed between the Board’s vote to issue a letter of
concern and the date the Board President signed the letter.
Because there is no single clear explanation for the Board’s slow
handling of some complaints, it is difficult to identify potential
remedies. The Board’s complaint-handling process already in-corporates
some best practices. For example, the Board uses pro-fessional
rather than voluntary investigators. An audit con-ducted
of another regulatory board has shown that using vol-untary
investigators can be another source of problems. In addi-tion,
the Board already monitors whether investigators are re-porting
their results to the Board within a statutorily mandated
time period.
Complaints delayed for a
variety of reasons.
Finding I
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OFFICE OF THE AUDITOR GENERAL
Board Needs to Examine
Complaint-Handling Process
Some processing steps could be taken more quickly. The Board
would benefit from examining its complaint-handling process
and identifying ways to decrease the time needed to resolve
complaints. In particular, the Board may wish to review its proc-esses
for handling cases involving investigators and those cases
resulting in either disciplinary action, a consent order, or the is-suance
of a letter of concern because these cases tend to take the
most time to resolve.
As a part of this review, the Board should examine practices that
its committees use to refer items for Board action. These com-mittees
provide specialized reviews and recommendations to the
Board and often have responsibility for the initial phase of the
complaint-handling process. For example, the Accounting and
Auditing Standards Committee and the Tax Practice Committee
do not refer their recommendations for resolving complaints to
the Board until they have approved their committee meeting
minutes at their subsequent meeting. Approval of minutes may
not occur for at least a month after the committee votes on its
recommendation.
Recommendation
The Board should formally study its complaint-handling proc-esses
to determine if complaints could be resolved in a more
timely manner. The Board may want to focus on complaints that
are eventually resolved by formal discipline, require an investi-gator’s
assistance, or pass through a Board committee.
Committee practices may
delay action on com-plaints.
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OFFICE OF THE AUDITOR GENERAL
FINDING II PUBLIC’S ACCESS TO
INFORMATION IS LIMITED
Because of statutory limitations and certain Board practices, the
public lacks access to information about registrants that it needs
to make informed decisions. Statutes currently limit information
that can be disclosed about complaints regarding registrants that
resulted in formal disciplinary action. Further, the public cannot
find out whether complaints were filed but dismissed, or
whether the Board took less formal action, such as issuing a letter
of concern. Consumers’ ready access to information is also lim-ited
by problems in navigating the Board’s automated telephone
system and obtaining access to registrants’ files.
Public Benefits
from Full Information
Providing unimpeded public access to information is an impor-tant
component of regulatory boards’ responsibilities. Regula-tory
boards need to be accountable to the public for their activi-ties.
In addition to providing for accountability, public informa-tion
also helps to ensure that boards meet their statutory man-dates
to investigate complaints, issue letters of concern to warn
practitioners to improve potentially problematic, but legal, prac-tices,
and discipline statutory violators. Further, public informa-tion
assists consumers to select competent and ethical profes-sionals
to handle sensitive information and perform important
services, such as preparing tax returns.
Statutes Limit
Public Access
Arizona Revised Statutes prohibit the Board from releasing im-portant
information about its registrants. Specifically, informa-tion
about dismissed complaints, pending complaints, and com-plaints
resolved by letters of concern is confidential. Statutory
Public can make better
choices when fully in-formed.
Finding II
12
OFFICE OF THE AUDITOR GENERAL
changes are needed to allow the Board to disclose registrants’ full
complaint histories to the public and conduct more business in
open session.
Statutes prevent public from learning about registrants’ full his-tories
—Members of the public who telephone or visit the Board
to inquire about a registrant cannot be told about key aspects of
the registrant’s complaint history. Rather, they are told whether
or not a registrant was disciplined. Specifically, dismissed com-plaints,
pending complaints, and complaints resolved by letters
of concern are kept confidential in accordance with statute.
However, keeping this information confidential can convey a
false impression to the public if a registrant has been the subject
of complaints, but was never formally disciplined.
Further, because pending complaints are confidential under state
statute, the Board conducts significant portions of its meetings in
executive session. Consequently, the public is significantly re-stricted
from observing Board proceedings.
The Board also destroys its Executive Session meeting minutes
after only six months. This further limits the ability of appropri-ate
parties, such as the Auditor General’s Office, to review the
Board’s minutes. In contrast, other state agencies retain their ex-ecutive
session minutes longer. For example, the State Board of
Dental Examiners keeps its executive session minutes indefi-nitely.
Statutory changes could protect public and clients—Statutory
changes are needed to allow the Board to disclose registrants’ full
complaint histories to the public and conduct more business
publicly. Specifically, the following statutes should be amended:
n A.R.S. §32-741(F), which specifies that the letters of concern
are confidential and are not public records; and
n A.R.S. §32-749(C), which requires pending and dismissed
complaints to be kept confidential, except under very limited
conditions.
In considering changes, the Board would need to balance its ob-ligation
to the public to disclose as much information as possible
while still protecting the confidentiality of registrants and their
Statutes block public
from learning CPAs’ full
record.
Statutory changes needed
to protect public.
Finding II
13
OFFICE OF THE AUDITOR GENERAL
clients and the integrity of ongoing investigations. To accomplish
this goal, a prior Auditor General report (Report No. 95-13) has
recommended that regulatory boards provide information about
the number and general nature of dismissed and pending com-plaints
and information about disciplinary actions to inquiring
consumers. For example, the Veterinary Medical Examining
Board has a policy requiring staff to inform callers of the status of
a veterinarian’s license; disciplinary actions taken; and the num-ber
and nature of complaints.
Available Information Is
Difficult to Access
Although much of the information the Board maintains about its
registrants is confidential, more could be done to make the re-maining
public information more accessible to the public. For
example, the Board is statutorily allowed to report if a registrant’s
certificate has been suspended or revoked. However, when
Auditor General staff posing as members of the public tried con-tacting
the Board, they encountered two major difficulties:
n Automated telephone system is difficult to navigate—
The Board’s automated telephone system presents callers
with several options. The directions include terminology that
may help registrants obtain information, but is not
necessarily meaningful for members of the public. For
example, there is no option clearly intended and labeled for
the general public to inquire about a registrant’s record with
the Board. As a result, members of the public may not
understand which option to select to obtain consumer
information. Board staff could change the current options
without expending Board money.
n Notarized statement requested to review a file—The
Board’s staff requires members of the public who wish to
view a registrant’s files in person to provide a notarized
statement. This practice is principally directed at people
wishing to view the Board’s records for commercial pur-poses,
such as developing mailing lists. However, it is a cum-bersome
obstacle for members of the general public who
want to view a limited number of files for personal use and is
inconsistent with Board policy. Other occupational regula-
Board requires public
to provide notarized
statement to view
files.
Finding II
14
OFFICE OF THE AUDITOR GENERAL
tory boards do not require the general public to provide a
notarized statement.
As a result of these obstacles, members of the general public may
be impeded from obtaining important information.
Recommendations
1. The Legislature should consider revising the following Board
statutes:
a. A.R.S. §32-741(F), to specify that letters of concern are not con-fidential
and are public records; and
b. A.R.S. §32-749(C), to allow the number and nature of pending
and dismissed complaints to be public record.
2. If statutory changes are made, the Board should develop a
public information policy:
a. To direct staff regarding what information will be automati-cally
revealed and available to the inquiring general public.
b. To protect the confidentiality of accused registrants and their
clients and the integrity of ongoing investigations.
3. The Board should maintain its Executive Session minutes
longer as do other occupational regulatory boards.
4. The Board should change the options in its automated tele-phone
answering system so that callers have a direct way to
obtain information about registrants.
5. The Board’s staff should follow Board policy by no longer
requiring members of the public to provide a notarized
statement when viewing registrants’ files for noncommercial
use.
Finding III
15
OFFICE OF THE AUDITOR GENERAL
FINDING III BOARD NEEDS TO CONSIDER
CHANGING OR ELIMINATING ITS
QUALITY REVIEW PROGRAM
The Board’s Quality Review Program (Program), begun as a way
to ensure that registrants are doing work that complies with pro-fessional
standards, needs to be reexamined. As currently im-plemented,
the Program has limited effect in that it mostly iden-tifies
minor technical deficiencies and encompasses only a lim-ited
number of registrants. Additionally, it is duplicative for
some registrants who already face a similar requirement for peer
review. Therefore, the Board should consider either reorienting
the Program toward a peer review approach or, given its current
limitations, eliminating it altogether.
Background
The Board’s Quality Review Program was initiated in 1976 as a
means of ensuring that practitioners’ accounting practices are in
compliance with generally accepted auditing standards and ac-counting
principles. If these standards and principles, as speci-fied
by the American Institute of Certified Public Accountants,
are not followed, an accountant can substantially misrepresent
an entity’s financial position. The general public, relying upon
this information, would then reach inaccurate conclusions, invest
or extend credit to the entity, and increase the likelihood that
financial harm would occur.
Under the Program, the Board assigns contract investigators to
review audits and financial statements filed with participating
public agencies, including the Departments of Banking, Insur-ance,
and Transportation.1 After reviewing all of the applicable
filings, investigators then conduct a more detailed examination
of those filings that appear to violate generally accepted auditing
1 The other participating public agencies are the Arizona Corporation
Commission, Department of Health Services, Department of Library
and Archives, Department of Racing, Office of the State Treasurer,
and State Board for Private Post-secondary Education.
Poor-quality accounting
practices can harm the
public.
Finding III
16
OFFICE OF THE AUDITOR GENERAL
standards and accounting principles. The results are forwarded
to Board staff, who generally open a complaint against the regis-trant.
As with any other complaint, the Board eventually deliber-ates
whether a violation has occurred and if disciplinary action is
warranted. The Board projects that it will expend approximately
$88,500 for investigators to conduct quality reviews in fiscal
years 2000 and 2001.
Effect of Current
Program Limited
Although the Program has a long history, its current effect is
limited. Most of the deficiencies noted by the investigators are
minor in nature, and as a result, the vast majority of complaints
are closed without action. Further, only a small percentage of
registrants are subject to this review, and many of them already
face another, similar requirement.
Program uncovers minor technical violations—Most of the defi-ciencies
currently noted by the investigators are minor in nature.
Auditor General staff analyzed information on filings assigned
for review in 1997 and 1998 for the Arizona Departments of
Banking and Transportation, which accounts for the majority of
Program reviews during this period.1 Eighty-nine percent of the
complaints opened as a result of quality reviews at the Depart-ment
of Banking and 93 percent of the complaints opened as a
result of the quality reviews at the Department of Transportation
were closed because the Board found that the violations were too
minor to warrant disciplinary action or, in some instances, be-cause
the Board lacked jurisdiction over the filing’s preparer (for
example, the preparer may have been a CPA in another state).
Program’s benefit is limited—The Program effectively applies to
only a small percentage of total registrants. In fact, auditors
found that only 163 of the Board’s more than 7,500 registered
practitioners and firms were subject to Program reviews (based
1 Filings from the Departments of Banking and Transportation ac-counted
for 65 percent of the 1,381 filings assigned for Program re-views
in 1997 and 1998. These two departments also accounted for
66 percent of the 129 subsequent detailed reviews of those filings
that appeared to violate generally accepted auditing standards and
accounting principles.
Current program princi-pally
identifies minor
violations.
Finding III
17
OFFICE OF THE AUDITOR GENERAL
on analysis of filings assigned for review at the Departments of
Banking and Transportation in 1997 and 1998).
Program sometimes redundant—The Program is also potentially
duplicative for some of the Board’s registrants. Registered firms
that choose to belong to the American Institute of Certified Pub-lic
Accountants (AICPA) and that perform attest work (auditing
and expressing an opinion on financial statements on which
third parties rely) are already subject to peer review once every
three years. Currently, approximately 65 percent of the Board’s
registrants are AICPA members.
Board Needs to Consider
Modifying or Eliminating Program
Because of the Program’s limited impact, the Board needs to con-sider
whether the Program should be modified or eliminated.
The Board could implement a peer review requirement that
could extend to those not already covered by such a require-ment.
Otherwise, it should consider discontinuing the Program
altogether.
Board could implement a comprehensive peer review program—
Auditor General staff identified several states that use a peer re-view
approach at the state level to systematically monitor and
educate practitioners in order to maintain high-quality perform-ance
throughout the profession. In addition, the American Insti-tute
of Certified Public Accountants has its own program. There
are some variations in how peer review programs are structured.
For example:
n Oregon’s accountancy board requires each CPA and PA pro-viding
attest services to participate in a board-approved peer
review program, either individually or as part of a firm, as a
condition of permit/license renewal. It is the licensee’s re-sponsibility
to comply with the peer review program when
scheduled. A CPA or PA is exempt from the peer review re-quirement
if he or she biennially represents to the board that
he or she does not engage in performing attest services and
does not intend to engage in performing such services for the
Other states require peer
reviews.
Finding III
18
OFFICE OF THE AUDITOR GENERAL
next two years. The licensees need only submit a signed form
to the board stating that they obtained a peer review and
giving the name of the reviewing organization.
n Ohio’s accountancy board requires all registrants providing
attest services to undergo a board-approved peer review
program at least once every three years, at the registrant’s
expense, and submit the findings to the board. Based upon
review of the peer reviewer’s findings, the board may impose
remedial actions. In the event the registrant is unwilling or
unable to comply with established standards, or the regis-trant’s
professional work is deemed egregious, the board
may take disciplinary action.
n Texas’ accountancy board requires registrants providing at-test
services to be peer reviewed every three years at their
own expense by either the AICPA, the state’s professional so-ciety,
or a national association of CPA practitioners, and re-port
the results to the board. If a registrant receives two con-secutive
negative reviews, the board will examine the regis-trant’s
accounting practices more closely.
n The American Institute of Certified Public Accountants re-quires
all of its members engaged in the practice of public ac-counting
to be enrolled in an approved practice monitoring
program, such as the AICPA’s peer review program, in order
to retain their membership in the organization. Members in
the peer review program need to have independent reviews
of their accounting and auditing practices at least once every
three years and take remedial action if needed. If a member
refuses to cooperate, fails to correct material deficiencies, or is
found to be so seriously deficient in his/her performance that
education and remedial corrective actions are not adequate,
the member’s enrollment in the AICPA’s peer review pro-gram
may be terminated or some other action taken.
A peer review approach could potentially broaden the Pro-gram’s
impact over Arizona practitioners. Already, approxi-mately
65 percent of the registrants in Arizona are potentially
subject to peer review once every three years as a result of be-longing
to the American Institute for Certified Public Account-ants.
A state peer review requirement could extend a similar re-quirement
to those who are not AICPA members. It could be
Finding III
19
OFFICE OF THE AUDITOR GENERAL
designed in such a way as to allow Arizona practitioners to use
the results of the AICPA peer reviews or the reviews of other
Board-approved organizations. Those registrants not currently
subject to peer review would need to arrange and pay for a peer
review or request an exemption based upon some valid criteria,
such as not having performed any audits or prepared any finan-cial
statements during the review period. In this way, the Board
would be ensuring that all of its active registrants receive sys-tematic
feedback on their accounting practices and recommen-dations
for improvement, if needed, and also eliminate the need
for the Board to expend several thousand dollars a year for con-tract
investigators to review the work of a limited number of
registrants.
To encompass all CPAs and PAs preparing audits or financial
statements but not currently subject to a peer review require-ment,
the Program would also need to apply to audits and finan-cial
statements beyond those filed with the nine Arizona agen-cies.
The Board has not widened the existing Program to include
audits and financial statements prepared for private organiza-tions
and corporations because it believes it lacks legal authority
to examine supporting documentation and work papers. A.R.S.
§§32-703(A)(1) and 32-749(B)(1) generally authorize the Board to
adopt rules for the Board and private professional organizations
to conduct practice review programs approved by the Board,
including quality and peer reviews, and to access supporting
documentation in conjunction with these programs. However,
these statutes are not as clear as they could be. Therefore, the
Board should also consider promulgating rules or asking the
Legislature to clarify its statutory authority regarding the Pro-gram.
Another option would be to eliminate the Program—Given the
limited effect of the Program as currently implemented, if the
Board should decide it does not want to reorient the Program to
a peer review approach, then it may want to consider eliminat-ing
it altogether. Several states, including Michigan, Missouri,
and Oklahoma, do not operate or require peer review or other
quality review programs.
Finding III
20
OFFICE OF THE AUDITOR GENERAL
Recommendations
1. The Board should consider changing its Quality Review Pro-gram
to a peer review approach to increase its impact on Ari-zona
practitioners. In order to do so, the Board should con-sider
promulgating rules or requesting a clarification of its
statutory authority by the Legislature. Specifically, A.R.S.
§32-703(A)(1) and 32-749(B)(1) should be clarified to allow
the Board to require registrants to participate in peer reviews.
2. If the Board should decide against changing the Program to a
peer review approach, it should then consider eliminating
the Program altogether.
21
OFFICE OF THE AUDITOR GENERAL
SUNSET FACTORS
In accordance with A.R.S. §41-2954, the Legislature should con-sider
the following 12 factors in determining whether the Ari-zona
State Board of Accountancy should be continued or termi-nated.
1. The objective and purpose in establishing the Board.
The purpose of the Arizona State Board of Accountancy
is to “regulate and license accountants and accounting
firms in the interest of protecting the citizens of Arizona
from inept and unlawful accounting practices.” To carry
out this responsibility, a seven-member board is statuto-rily
empowered to:
n Examine candidates seeking certification as CPAs;
n Certify persons and register firms meeting statutory
requirements as certified public accountants or certi-fied
public accountant firms;
n Initiate and process complaints alleging incompetent,
unethical, or unprofessional conduct and discipline
Board-certified practitioners; and
n Monitor practitioners through its quality review pro-gram
to ensure adherence to professional standards of
practice.
2. The effectiveness with which the Board has met its
objective and purpose and the efficiency with which
it has operated.
The Board has generally met its primary purpose and
objectives in an effective and efficient manner. Specifi-cally:
n Examination—The Board contracts with an exami-nation
service for on-site administration of the AICPA
Board is generally effec-tive
and efficient.
Sunset Factors
22
OFFICE OF THE AUDITOR GENERAL
n CPA Examination to those applicants who meet the
examination qualifications set out in statutes.
n Certification—The Board processes initial applica-tions
for certification in accordance with time frames
established in statutes and rules. Auditors reviewed a
random sample of 30 initial applications and found
that the Board issued, on average, certificates within
34 days of receiving the completed application mate-rials.
Additionally, the Board has streamlined the re-newal
process by going from an annual to a biennial
renewal schedule.
n Complaint handling—Although the Board resolves
many of its complaints in a timely manner, it could
still improve in this area. Auditors reviewed a sample
of 107 complaints and found that half took over 180
days to resolve. Therefore, the Board should study its
complaint-handling processes to determine if com-plaints
could be resolved in a more timely manner
(see Finding I, pages 7 through 10).
3. The extent to which the Board has operated within
the public interest.
The Board generally operates in the public interest. Spe-cifically,
it certifies CPAs and PAs to ensure that they
meet certain competency requirements and conduct their
work in accordance with AICPA standards. The Board
also registers CPA firms. Additionally, it receives and re-solves
complaints against certificate holders. The Board
also handles internally identified complaints generated as
a result of its quality review program and certification re-newal
process. Finally, it monitors CPAs’ work through
its quality review program.
Notwithstanding the Board’s general efforts, the Board
could better operate in the public interest by facilitating
the public’s access to information. Test calls made by
auditors and a visit to review information in person
showed that the Board readily released information about
licensure status and complaints resulting in formal disci-plinary
action. However, the Board could do more to in-
Sunset Factors
23
OFFICE OF THE AUDITOR GENERAL
form the public by seeking an amendment to its statutes
and rules to allow disclosure of its complaint delibera-tions,
as well as the number and general nature of all
pending and dismissed complaints. Finally, the Board
could simplify its automated telephone information sys-tem
to make it more user-friendly. (For further discus-sion,
see Finding II, pages 11 through 14.)
4. The extent to which rules adopted by the Board are
consistent with the legislative mandate.
In compliance with A.R.S. Title 41, Chapter 6, the Board
comprehensively reviewed and revised its administrative
rules, which became effective in November 1998. Al-though
current rules are generally consistent with stat-utes,
personnel from the Auditor General’s Office and
Governor’s Regulatory Review Council (GRRC) identi-fied
several statutes still requiring Board rules. For exam-ple:
n The Board needs to identify those colleges, universi-ties,
and courses appropriate for a bachelor’s or more
advanced degree in accounting or business admini-stration
for those individuals requesting certification
as certified public accountants A.R.S. §§32-721(A)(5)
and 32-723(B).
n The Board needs to establish equivalency require-ments
to use in certifying applicants by reciprocity
A.R.S. §32-727(A)(2)(b).
n The Board needs to establish standards for deciding
when to issue a letter of concern to registrants A.R.S.
§32-741(F).
5. The extent to which the Board has encouraged input
from the public before promulgating its rules and
regulations and the extent to which it has informed
the public as to its actions and their expected impact
on the public.
The recent five-year rule review undertaken by the Board
was completed in accordance with the Administrative
Procedures Act. Proposed rule changes were posted on
Some rules needed.
Sunset Factors
24
OFFICE OF THE AUDITOR GENERAL
the Board’s Web site and copies sent to all registrants
prior to a public hearing. Additionally, notices and agen-das
of upcoming Board and committee meetings ad-dressing
proposed rule changes were posted at various
locations around the State and provided to persons re-questing
them. During these meetings, public comment
was allowed on the proposed rule change.
In addition to keeping the public informed about rules,
the Board also provides the public with access to a variety
of other information through its Web site and a biannual
newsletter. For example, these two sources identify:
n Names of currently certified accountants and regis-tered
accounting firms;
n Enforcement actions taken by the Board since publi-cation
of its last newsletter; and
n Board action on initial and renewal certifica-tion/
registration requests.
Additionally, the Board holds monthly public meetings to
discuss regulatory issues impacting certificate holders.
These meetings comply with open meeting laws. Meeting
notices are adequately posted and open (as opposed to
executive session) meeting minutes are made available.
The Board also provides consumers with information
about certified professionals and registered firms by tele-phone
or review of Board files.
6. The extent to which the Board has been able to in-vestigate
and resolve complaints that are within its
jurisdiction.
A.R.S. §§32-741 through 32-751 provide for the regulation
of registrants including the Board’s authority, to investi-gate
and resolve complaints regarding unlawful and un-professional
practice by practitioners and accounting
firms. In fiscal year 1999, the Board opened 222 com-plaints
against practitioners and firms. Complaints are
investigated by advisory committees and contract inves-tigators.
If violations are found, the advisory committees
Sunset Factors
25
OFFICE OF THE AUDITOR GENERAL
make disciplinary recommendations to the Board, in-cluding
certificate/registration suspension or revocation,
administrative penalties, restriction on scope of practice,
peer review, continuing professional education, decree of
censure, and probation. Additionally, they may recom-mend
a letter of concern in those instances where the evi-dence
does not warrant disciplinary action, but where
continuation of the action under investigation may ulti-mately
result in Board action against the practitioner.
However, our review found that the Board is not always
timely in its resolution of complaints (see Finding I, pages
7 through 10). Specifically, a review of 107 complaints
found that half took over 180 days to resolve.
7. The extent to which the Attorney General of any other
applicable agency of state government has the
authority to prosecute actions under enabling legisla-tion.
A.R.S. §32-743(H) authorizes the Attorney General’s Of-fice
to appear and represent the Board at all hearings. The
Board is assigned two Assistant Attorneys Generals who
provide counsel to the Board at their meetings, and repre-sent
the Board in disciplinary matters.
8. The extent to which the Board has addressed defi-ciencies
in its enabling statutes which prevent it from
fulfilling its statutory mandate.
Over the last five years, more than a dozen pieces of
Board-initiated legislation have been enacted. They cover
such issues as reciprocity, registration, and continuing
education. Specific changes to the Board’s statutes ap-proved
during the 1999 legislative session included:
n Increasing the education requirement to qualify for
certified public accountant from 120 to 150 semester
hours;
n Modifying partnership qualifications in CPA or Pub-lic
Accountant (PA) firms so that only a majority of
accounting firm ownership remains in the hands of
CPAs or PAs and allows others to participate as part-
Sunset Factors
26
OFFICE OF THE AUDITOR GENERAL
ners as long as they participate in management of the
firm; and
n Restricting CPAs and PAs to performing the attest
function (performing an audit and expressing an
opinion on an organization’s financial statements)
only when working in a registered firm.
The Board also unsuccessfully sought legislation in both
1995 and 1996 requiring background checks of certifica-tion
applicants. Finally, Board policy currently allows
registrants to use their CPA and PA designations if they
work for accounting firms, including corporations. How-ever,
Arizona accountancy law does not include corpora-tions
in its definition of firm. Therefore, the Board should
seek statutory change to A.R.S. §32-701.01(6) to include
“corporation” in the definition of firm.
9. The extent to which changes are necessary in the
laws of the Board to adequately comply with the fac-tors
listed in the sunset review statute.
To better inform consumers, the Legislature should con-sider
modifying A.R.S. §32-749(C) to allow for public dis-closure
of the number and general nature of pending and
dismissed complaints. Additionally, it should consider
modifying A.R.S. §32-741(F) to allow for public disclosure
of letters of concern (see Finding II, pages 11 through 14 ).
Also, to better ensure consumer advocacy on the Board,
the Legislature should consider modifying A.R.S §32-
701(A) to increase the Board’s public membership to
closer to 50 percent. Currently, it is at 29 percent.
Finally, if the Board expands its Quality Review Program,
it should consider requesting a clarification of its statutory
authority by the Legislature. Specifically, A.R.S. §32-
703(A)(1) and 32-749(B)(1) should be clarified to allow the
Board to require registrants to participate in peer reviews
(see Finding III, pages 15 through 20).
Sunset Factors
27
OFFICE OF THE AUDITOR GENERAL
10. The extent to which the termination of the Board
would significantly harm the public health, safety,
and welfare.
Because Arizona law limits the Board’s authority to
regulating only the use of the CPA and PA titles, termi-nation
of the Board would not significantly jeopardize the
public’s health, safety, and welfare. However, the Board
does provide certain benefits. Specifically, it,
n Sets minimum education, examination, and experi-ence
requirements for certified practitioners;
n Helps ensure that CPAs and CPA firms conform to
professional standards of conduct by investigating
and resolving complaints, and conducting quality re-views
of state agencies’ public filings;
n Provides the public with information regarding certi-fied
practitioners’ qualifications and complaint his-tory;
and
n Provides oversight over CPAs and firms that perform
audits and that express opinions on the financial
statements of an organization.
11. The extent to which the level of regulation exercised
by the Board is appropriate and whether less or more
stringent levels of regulation would be appropriate.
Arizona law already provides less regulation than most
states impose. Under Arizona accountancy law, any indi-vidual
may provide the public with the same accounting
services provided by CPAs and PAs. Arizona law re-stricts
only the usage of the titles “certified public ac-countant,”
“public accountant,” their abbreviations, and
similar titles to persons who have demonstrated a mini-mum
level of skill and competency; and prohibits CPAs
and PAs working for nonregistered accounting firms
from providing attest services.
Sunset Factors
28
OFFICE OF THE AUDITOR GENERAL
12. The extent to which the Board has used private con-tractors
in the performance of its duties and how ef-fective
use of private contractors could be accom-plished.
The Board contracts with approximately 10 to 12 CPA in-vestigators
at any one time. These investigators allow the
Board to initiate quality reviews and complaint investi-gations
in a timely and cost-effective manner using in-vestigators
with the appropriate type of expertise. The
Board also contracts out the CPA examination admini-stration
using the procurement process. Finally, the Board
did look into the possibility of contracting with a private
law firm to investigate and litigate major cases. However,
the Board has chosen to pay for the establishment of a
litigation unit within the Attorney General’s Office as it is
believed this will be more cost-effective.
OFFICE OF THE AUDITOR GENERAL
Agency Response
OFFICE OF THE AUDITOR GENERAL
Accountancy Board
Page 1
Performance and Sunset Audit Response
Arizona State Board of Accountancy
September 21, 1999
FINDING I.
Recommendation.
The Board should formally study its complaint-handling processes to determine if complaints could
be resolved in a more timely manner. The Board may want to focus on complaints that are
eventually resolved by formal discipline, require an investigator’s assistance, or pass through a
Board committee.
Response: The finding of the Auditor General is agreed to and the audit recommendation will
be implemented.
FINDING II.
Recommendations.
1. The Legislature should consider revising the following Board statutes:
a. A.R.S. § 32-741(F), to specify that the letters of concern are not confidential and
are public records; and
b. A.R.S. § 32-749(C), to allow the number and nature of pending and dismissed
complaints to be public record.
Response: In view of the board’s agreement to examine the complaint process in Finding I,
it is the position that the Board cannot accept or reject the recommendation until
that process has been completed.
2. If statutory changes are made, the Board should develop a public information policy:
a. To direct staff regarding, what information will be automatically revealed and
available to the inquiring general public.
b. To protect the confidentiality of accused registrants and their clients and the
integrity of ongoing investigations.
Response: The finding of the Auditor General is agreed to and the audit recommendation will
be implemented if the statutory changes are made.
Accountancy Board
Page 2
3. The Board should maintain its Executive Session minutes longer as do other occupational
regulatory boards.
Response: The finding of the Auditor General is agreed to and the recommendation will be
implemented.
4. The Board should change the options in its automated telephone answering system so that
callers have a direct way to obtain information about registrants.
Response: The options will be investigated and one of the things that will be looked at is a
“direct way” to obtain information on registrants. Until the Board completes the
study, it cannot agree or disagree with the audit recommendation.
5. The Board’s staff should follow Board policy by no longer requiring members of the public
to provide a notarized statement when viewing registrants’ files for noncommercial use.
Response: The finding of the Auditor General is agreed to and the audit recommendation will
be implemented.
FINDING III.
Recommendations.
1. The Board should consider changing its Quality Review Program to a peer review
approach to increase its impact on Arizona practitioners. In order to do so, the Board
should consider requesting a clarification of its statutory authority by the Legislature.
Specifically, A.R.S. §§32-703(A)(1) and 32-749(B)(1) should be clarified to allow the
Board to require registrants to participate in peer reviews.
Response: The finding of the Auditor General is agreed to and the audit recommendation will
be studied to determine how it can be implemented, whether by rule or statute.
2. If the Board should decide against changing the Program to a peer review approach, it
should then consider eliminating the Program altogether.
Response: The audit recommendation will be considered after the Board’s study is
completed.
Accountancy Board
Page 3
Sunset Factors
4. The extent to which rules adopted by the Board are consistent with the legislative mandate.
In compliance with A.R.S. Title 41, Chapter 6, the Board comprehensively reviewed and
revised its administrative rules, which became effective in November 1998. Although
current rules are generally consistent with statutes, personnel from the Auditor General’s
Office and Governor’s Regulatory Review Council (GRRC) identified several statutes still
requiring Board rules. For example:
• The Board needs to identify those colleges, universities, and courses appropriate
for a bachelor’s or more advanced degree in accounting or business administration
for those individuals requesting certification as certified public accountants A.R.S.
§§ 32-721(A)(5) and 32-723(B).
Response: The Board adopted a Substantive Policy Statement for clarification at its
September 13, 1999 Board meeting.
• The Board needs to establish equivalency requirements to use in certifying
applicants by reciprocity A.R.S. § 32-727(A)(2)(b).
• The Board needs to establish standards for deciding when to issue a letter of
concern to registrants A.R.S. § 32-741(F).
Response: At its annual meeting, the Board addressed these factors. It is currently
studying these and anticipates taking action in the near future.
9. The extent to which changes are necessary in the laws of the Board to adequately comply
with the factors listed in the sunset review statute.
• To better inform consumers, the Legislature should consider modifying A.R.S. §
32-749(C) to allow for public disclosure of the number and general nature of
pending and dismissed complaints. Additionally, it should consider modifying
A.R.S. § 32-741(F) to allow for public disclosure of letters of concern.
Response: In light of the Board’s response to Finding II, it is premature to consider
modifying the statutes.
Accountancy Board
Page 4
• Also, to better ensure consumer advocacy on the Board, the Legislature should
consider modifying A.R.S. § 32-701(A) to increase the Board’s public
membership to closer to 50 percent. Currently, it is at 29 percent.
Response: Within the last year, the Board has doubled its public membership;
however, it unanimously believes that the technical expertise of the
professional members is required for the Board to fulfill its duty.
In view of the recent article in the newspaper pointing out the problems
that the Governor has in filling vacancies on a lot of boards, increasing the
size of the Board or its public membership would not necessarily “ensure
consumer advocacy.” Since the violations are technical in nature, the
professionals on the Board have to take the lead in determining whether
the violation took place and then the public members should weigh in more
on the discipline to be handed out than the technical aspects of the case.
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98-21 Department of Insurance
98-22 State Compensation Fund
99-1 Department of Administration,
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99-2 Arizona Air Pollution Control
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99-3 Home Health Care Regulation
99-4 Adult Probation
99-5 Department of Gaming
99-6 Department of Health Services—
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Impaired
99-15 Arizona Board of Dental Examiners
99-16 Department of Building and
Fire Safety
99-17 Department of Health Services’
Tobacco Education and Prevention
Program
99-18 Department of Health Services—
Bureau of Epidemiology and
Disease Control Services
98-19 Department of Health Services—
Sunset Factors
Future Performance Audit Reports
Department of Environmental Quality
Arizona Department of Transportation—A+B Contracting
