CBA changes: peer review, ethics and experience requirements.

• Author: Allen, Bruce C.
• Position: CapitolBeat

The CBA is preparing legislative and regulatory language to implement mandatory peer review for firms that perform audits, reviews and compilations.

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At its July meeting, the CBA voted not to exempt firms performing only compiled nondisclosure financial statements prepared on an other comprehensive basis of accounting (OCBOA) from peer review. The Society of California Accountants had requested that the CBA exempt firms providing these reports as their highest level of service from the peer review requirement and instead reinstitute the CBA's Report Qualify Monitoring Program that was discontinued several years ago.

The CBA's rationale for excluding only "plain paper financial statements" from the peer review process was that other states with mandatory peer review programs do require reviews of nondisclosure OCBOA financial statements and, in conversations with accountants' malpractice liability insurance carriers, approximately 10 percent of all claims relate to compilations. Since the nondisclosure OCBOA financial statements make up the majority of compilations, it was believed that mandating peer review could offer significant protections to consumers.

Continuing Education Ethics Requirement

The CBA has appointed a task force to study whether or not to change its ethics continuing education requirement. The task force had its first meeting in July and plans to hold five more meetings to study the effectiveness of its ethics education requirement and how it might be changed.

The effort was started by a comment from CBA member Manual Ramirez, CPA, who felt that ethics, as a cornerstone of the profession, was not being highlighted enough in the CBA's continuing education requirements.

California was the first state to adopt a mandatory ethics continuing education requirement--eight hours of an approved course every six years. Ramirez feels this requirement is not enough, and that the CBA should explore the feasibility of requiring more frequent exposure to ethical concepts.

The task force's next meeting is scheduled for Sept. 18, and it will consider how ethics classes could be re-formatted to provide a more meaningful experience for participants, and perhaps offered in smaller increments. As part of this effort, the ethics education requirements of other states are being studied to find a more effective model.

Additional discussion on continuing education requirements in general has led to consideration of requiring...