UAA conformity: mobility, 150 hours, peer review and continuing ed.

CalCPA has had a long-standing policy of supporting measures that allow CPAs to represent client interests across state lines. Prior to 2006, out-of-state CPAs were allowed to provide temporary and incidental services to California clients without notifying the California Board of Accountancy or obtaining a license from California.

The CBA had a policy of requiring that CPA firms performing an audit of a California-based company be fully licensed by California, which did require that at least one partner hold a California CPA license, but all other services could be provided under the incidental and temporary exemption.

However, if the CPA had an office in California or spent an inordinate amount of time in this state, it could be argued that the services would not be considered temporary or incidental.

To ease mobility after the passage of Sarbanes Oxley by allowing for expedited entry into the state and to answer the concerns of a Governmental Accountability Office study that pointed out that state licensing laws were impeding the ability of smaller firms to compete with the multinational firms, California enacted a practice privilege provision that became effective in 2006.

California's statute was consistent with provisions of the Uniform Accountancy Act, but it did require that the CPA notify the CBA prior to providing services to California clients, unless the service was tax preparation for an individual or an estate tax return for a former client. All business tax returns, and all other services including consulting and audits, required advance registration.

Rather than provide expedited mobility, California's provision created additional mobility barriers, drove up costs to clients and applied to out-of-state CPAs whose clients had limited contact with California.

CalCPA-sponsored legislation last year would have exempted out-of-state CPAs providing tax services to clients from filing for a practice privilege, but we were forced to accept a compromise bill that allowed for incidental and temporary services and allowed a lower registration fee for CPAs providing non-audit services in California.

The California experience was a wake-up call to the nation that inspired the National Association of State Boards of Accountancy and the AICPA to revise the UAA to specifically allow CPAs to provide services across state lines with no notice, no fee and no escape from discipline.

Like a driver's license, the out-of-state CPA providing the cross border service would be required to obey the laws of the visited state and could be disciplined for any infraction. The CPA, simply by providing services in California, is agreeing to the jurisdiction of the CBA and is subject to its discipline and the discipline of the state where they are licensed.

The CBA has endorsed this provision of the UAA and is drafting legislation to implement the provisions in California. CalCPA's Council reaffirmed its support for the mobility provisions of the UAA at its November 2007 meeting. It is anticipated that legislation will be introduced in early 2008 to achieve the objective.

What About Substantial Equivalency?

While enacting the mobility provisions of the UAA would benefit out-of-state CPAs and their California clients, it would not solve mobility problems for California licensees who are experiencing difficulty providing services to clients in other states because California licensing laws are not considered substantially equivalent to those of other states.

The reason? California is one of the few states that allows candidates to become licensed with only a bachelor's degree.

All but a handful of states require that candidates have a bachelor's degree plus 30 units, or what is commonly referred to as the 150-hour requirement. This fact has required many California CPAs to obtain additional licenses from substantially equivalent states or prove that they, as individuals, meet the requirement--an awkward and time consuming process.

The CBA has endorsed the concept of requiring that all candidates meet the 150-hour requirement in 2012. CalCPA's Council also endorsed the proposal. Legislation will be sought next year to require that all candidates have 150 hours prior to licensure effective in 2012. It's anticipated that the legislation will still allow candidates to sit for the Uniform CPA Exam after completion of the bachelor's degree, but prior to licensing they would be required to complete any remaining units. Immediately upon passing the legislation, California would be considered a substantially equivalent state.

And Mandatory Peer Review?

CalCPA's Council also reaffirmed support for mandatory peer review. The CBA has already determined that it wants to pursue enactment of a statute to implement mandatory peer review for California firms performing audits, compilations and reviews. California is one of the few states where peer review is not mandated by the state board.

One of the key provisions of the UAA is that all CPAs complete continuing education to maintain competence. This provision of the UAA allows CPAs who are not current in continuing education to note CPA "inactive" on their business cards and correspondence. CalCPA's Council endorsed this concept as well. CalCPA will pursue implementation of a requirement that CPAs with an inactive license disclose that fact when they are using the designation so there is no confusion as to their status.

CalCPA's legislative and regulatory agenda for next year is an aggressive one that will elevate consumer protection and move the profession into the mainstream.

Bruce C. Allen is CalCPA's director of government relations.