Nobody wants to fail a National Association of State Boards of Accountancy (NASBA) audit. And yet, the possibility of doing so is a prevalent fear among Continuing Professional Education (CPE) program sponsors.
As Lindsay Lane, NASBA’s Desk Audit Manager, assured the audience during LCvista’s recent “Ask Me Anything” webinar with NASBA, findings are an inevitable part of the audit process. “It’s not a bad thing,” she said. “Findings do not mean you failed the audit.”
But what exactly does it take to fail an audit? And as a sponsor, how can you be proactive in trying to avoid the kinds of findings that result in a failure?
In today’s blog post, we’ll aim to answer these questions. And in the process, we hope to lessen some of the fear associated with audit failure. So take a deep breath, and let’s dive in.
What does it mean to fail a NASBA audit?
First, let’s get very clear on the purpose of a NASBA audit. Contrary to what some may believe, the purpose of a compliance audit is not for NASBA to find mistakes.
As the National Registry of CPE Sponsors states on their website, audits exist “to confirm the responses provided to NASBA during the most recently submitted self-certification renewal.” To that end, they’re designed to check that Registry sponsors are adhering to NASBA’s Standards “in developing, presenting, measuring and reporting of CPE programs.” In other words, they exist to make sure CPE programs are compliant.
What does an audit failure look like?
Like we mentioned earlier, findings do not necessarily equal failure. In fact, in order to fail a NASBA desk audit, an auditor would have to find significant deficiencies within the submitted materials. As the Registry notes, “A sponsor does not fail a compliance audit unless matters are identified that are so significant to potentially impact the CPA when reporting CPE credits to a respective Board of Accountancy in satisfaction of requirements to maintain licensure.”
Hypothetically speaking, if your organization did fail a compliance audit, it wouldn’t be the end of the world. In the event of a failure, NASBA would send you a list of suggested corrective actions along with your audit report. From here, as the Registry explains, you would be required to submit “a written corrective action plan that adequately addresses all deficiencies and findings in the audit report within 30 days of receipt of the audit report.” NASBA would then review your corrective action and send an acceptance letter if your plan is deemed adequate.
After this point, the follow-up matters a lot. Again, from the Registry: “If additional modifications are required, you will be contacted by NASBA. Once the written corrective action plan has been accepted by NASBA, the audit is considered closed.” Closed, yes, but not over. NASBA always conducts a follow-up compliance audit in the following year to make sure the corrective actions the sponsor proposed are being taken. And here’s where things can get serious: “Failure of a follow-up audit will result in immediate removal from the National Registry of CPE Sponsors.”
So, failing a NASBA audit: not ideal, but often not disastrous. Still, it’s best to avoid this scenario altogether. So let’s take a look at the most common deficiencies NASBA finds during desk audits, and discuss how to avoid them.
Five of the most common deficiencies to avoid
Deficiency #1
Promotional material omissions
Like we mentioned earlier, findings do not necessarily equal failure. In fact, in order to fail a NASBA desk audit, an auditor would have to find significant deficiencies within the submitted materials. As the Registry notes, “A sponsor does not fail a compliance audit unless matters are identified that are so significant to potentially impact the CPA when reporting CPE credits to a respective Board of Accountancy in satisfaction of requirements to maintain licensure.”
Hypothetically speaking, if your organization did fail a compliance audit, it wouldn’t be the end of the world. In the event of a failure, NASBA would send you a list of suggested corrective actions along with your audit report. From here, as the Registry explains, you would be required to submit “a written corrective action plan that adequately addresses all deficiencies and findings in the audit report within 30 days of receipt of the audit report.” NASBA would then review your corrective action and send an acceptance letter if your plan is deemed adequate.
After this point, the follow-up matters a lot. Again, from the Registry: “If additional modifications are required, you will be contacted by NASBA. Once the written corrective action plan has been accepted by NASBA, the audit is considered closed.” Closed, yes, but not over. NASBA always conducts a follow-up compliance audit in the following year to make sure the corrective actions the sponsor proposed are being taken. And here’s where things can get serious: “Failure of a follow-up audit will result in immediate removal from the National Registry of CPE Sponsors.”
So, failing a NASBA audit: not ideal, but often not disastrous. Still, it’s best to avoid this scenario altogether. So let’s take a look at the most common deficiencies NASBA finds during desk audits, and discuss how to avoid them.
How to avoid this deficiency
Deficiency #2
Omission and/or inadequate information regarding bibliographic data
According to the Standards, CPE learning activities must be developed and reviewed by subject matter experts. Still, NASBA notes that sponsors often fail to:
- Specifically identify the instructor or reviewer, even if they do list each team member involved in the development and review process
- Include information regarding the qualifications and/or licensee information for these same individuals
How to avoid this deficiency
Deficiency #3
CPE calculation errors
As NASBA notes on their website, “Sponsors who provide continuing professional education credits to multiple audiences frequently calculate CPE credits incorrectly.” And indeed, many of the questions we received during the Q&A portion of our Ask Me Anything webinar were about CPE calculations. Most commonly, these deficiencies look like:
- Using both 0.2 and 0.5 rounding within a single program
- Failing to round down
- Counting CPE credits towards breaks, housekeeping instructions, or long introductory remarks
How to avoid this deficiency
Deficiency #4
Incomplete or inadequate attendance monitoring
Attendance monitoring has become an important part of CPE compliance. As the Registry notes, “Sponsors are required to monitor individual attendance at group programs to assign the correct number of CPE credits.” However, they often see deficiencies here in one of the following ways:
- Supporting documentation does not match attendance monitoring procedures
- Supporting documentation is incomplete—no indication of check in/out times or how late arrivals, early departures, and extended breaks are handled
- Sponsors allowing CPAs to self-report CPE credits
- Written attendance policy lacks sufficient detail
How to avoid this deficiency
Deficiency #5
Failing to note elements of engagement
As we discussed during the “Ask Me Anything” webinar, One of the newest additions to Group Live requirements is the element of engagement. It’s also a common item in NASBA audits, and one that often results in findings. This can look like:
- Failing to show that you reviewed a case study
- Failing to show that you asked an audience question
- Failing to show that you conducted the correct number of polls
How to avoid this deficiency
NASBA simply wants to see proof that you’ve added an element of engagement in your 50 minute Group Live class.
This could be as simple as noting an element of engagement in your speaker notes, listing it in your agenda, or including a slide that says “Case Study” or “Instructor Post Question.” Explaining that an element of engagement was included is not enough. Documentation is essential.
Being prepared is your first step in avoiding failure
We can’t tell you not to worry, but hopefully we’ve assured you that being prepared for an audit is your best defense against a possible failure.
Much of this comes down to having the right documentation and processes in place. A learning and CPE compliance management solution can help you immensely in these areas.
Learn more about how LCvista can help you stay compliant and avoid audit failures.
