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U.S. Securities and Exchange Commission

Office of the Chief Accountant:
Letter from SEC Chief Accountant to Arleen Thomas, VP Professional Standards and Services, AICPA, re: Concerns about Changes to the CPA Exam

July 23, 2001

Ms. Arleen Thomas
Vice President of Professional Standards and Services
American Institute of Certified Public Accountants
1211 Avenue of the Americas
New York, NY 10036

Dear Ms. Thomas:

As usual it was a pleasure meeting with you in our offices last Monday. Your description of the new Certified Public Accountant (CPA) examination development process and content specification was very helpful and cleared up a number of issues that were of concern.

I have attached a copy of a speech I had previously given in June that touched on the CPA examination. As we discussed further in our meeting, I do support the belief that entry-level auditors need to have sufficient knowledge and skills in both accounting and business. However, testing of one cannot be done at the sacrifice of the other if the CPA examination is to have credibility.

I am concerned by the continuing reduction in the CPA Examination's emphasis on financial accounting theory and practice. You indicated that sometime during the mid-1990's the American Institute of Certified Public Accountants (AICPA) reduced the examination from a 2-1/2 day examination to a 2-day examination. In that process, it significantly reduced the emphasis on financial accounting theory and practice. This new revision proposes a four-part examination of some 12 to 14 hours and essentially eliminates any commitment to the testing of financial accounting theory and further reduces the commitment to financial accounting practice. I believe an analysis of current financial reporting problems as presented in the press and reflected by SEC enforcement actions will support my assertion that all entrants to the profession need a thorough grounding in financial accounting theory and practice. I strongly recommend that the AICPA reconsider this substantial reduction in emphasis of financial accounting theory and practice.

I believe it is also important that the test be administered with the public in mind. It is important that questions about business and financial conflicts that have been raised be dealt with to insure the needs of the public are protected. A focus on the generation of revenues or the reduction of costs does not properly place the investing public's interests where they should be, the very first priority.

I recognize that there are issues of cost and revenue generation and the burden this may place on candidates, state boards of accountancy, the AICPA and/or State CPA Societies. However, I believe that these matters must be worked out by the leadership of the profession, AICPA and NASBA in the interest of delivering an examination that will truly protect the public interest by testing potential new entrants to the profession on what they need to know when they start their first job.

Please do not hesitate to call if you have any questions or we can be of further assistance. Again, I want to thank you for taking the time out of your busy schedule to meet with us on this important issue.


Lynn Turner
Chief Accountant


cc: Mr. David Costello
Mr. John Morrissey
Mr. Charles Bowsher


Modified: 08/06/2001