Prepared for the 2008 NASBA Annual Meeting October 2008 Presented by Joseph T. Cote, CPA

Committee on National Examination Preparedness Recommended in 2006 by Special Examination Issues Task Force (Chair – Sam Cotterell) Began its work in 2007 Charge – Initiate a process to increase the influence of state boards of accountancy and NASBA in the CPA Examination process

Committee on National Examination Preparedness Advisors & Staff: Bob Pearson (CLEC) Psychometricians:  Bob Brennan  Alan Cohen  Jim Wollack Staff:  David Costello  Joe Cote  Ken Bishop Members: Chair, Wes Johnson (MD) Sheila Birch (OH) Dan Dustin (NY) Gary Heesacker (WA) Kathy Smith (NE)

Areas of Focus CBT Services Agreement – Should we wait until 2014 or can important enhancements be made sooner? Should we extend the current agreement beyond 2014 as the AICPA has requested? Cost Control – What steps might be taken to control costs now and into the future? Influence Over the Examination – How might/should state boards and NASBA increase their influence? Dealing with Contingencies – Should a contingency examination be developed that could be launched if the present operation were no longer available?

Cost Control Sample Total Candidate Fees for Four Sections YearAICPAPrometricNASBABoard*Total 2003 (PBT) Increase from % % % % % * Each board sets its own administrative fees. Under PBT, board fees covered the costs of hiring proctors and renting facilities. These fees are representative samples.

Conference on the State of the Examination Held on May 19, 2008 at the Grand Hyatt DFW Invitation-only for representatives of boards of accountancy 48 boards of accountancy were represented by 130 attendees

Agenda for May 19, 2008 Conference 1. Progress & Potential 2. Issues Related to the CBT Services Agreement:  Provisions of the Agreement  Cost Control  Control of the Examination  Contingency Examination 3. International Delivery of the CPA Examination

Feedback from Conference Participants, State Boards & Regional Meetings Discussion Consider an extension of the CBT Services Agreement, but only if NASBA can negotiate for changes such as:  More influence over the policies related to and the content of the Examination, and  Better controls over the rising cost of the Examination. NASBA should not develop its own contingency examination, but provisions for contingencies should be created. The plans for international delivery of the CPA Examination should provide that candidate applications continue to be processed by state boards or their agents.

Recommendations Coming Out of the July 2008 NASBA Board of Directors Meeting NASBA should meet with the AICPA to discuss an extension of the CBT Services Agreement. The following are principles that should be addressed in a future agreement.  Provide for State Board/NASBA effective control of the CPA Examination (through increased governance and contract prerogatives and rights)  Provide for development of a contingency exam under secure conditions  Shift the structure of the agreement such that State Boards/NASBA are in a role more like a purchaser party

Principles of a Future CBT Services Agreement (Continued)  Restructure and clarify the calculation, determination and timing of fee increases to assure greater input from State Boards/NASBA  Clarify and strengthen the test-prep business prohibitions as well as the consequences for breaches  Deal with contingency concerns by restructuring the escrow agreements or developing alternatives to make the process legally certain and efficient  Further strengthen the provisions protecting Candidate Data including biometric data

Plans for the Future A negotiating team of people is being established with representatives appointed by NASBA and the AICPA to discuss a possible extension of the CBT Services Agreement beyond This team will be meeting over the next few months.

Questions?