World becoming a smaller place for U.S. CPAs with CPA mobility & growing standards convergence
With technology making it easier for clients to work across jurisdictions, there have been significant developments in the U.S. accounting profession to bring greater consistency to not only the licensing of CPAs, but also to requirements for continuing professional education and ethical standards. So is it a case of ‘The world is your oyster’ for CPAs with the time when a U.S. CPA can practise freely across state lines and even internationally, not too far away?
Firms are going mobile too
Big steps forward in CPA mobility in the last decade
While admitting it is a somewhat loose analogy, Daniel J. Dustin, CPA, Vice President of State Board Relations at NASBA and a panellist at Alliott Group’s 2018 North America Leadership Conference, described the benefits of the new CPA licensing model (‘CPA mobility’) as similar to those of the driver’s license i.e. the ability to carry one license but go anywhere. In the case of the CPA, this translates to a universal license that would grant the individual practice privilege outside of their home state without the need to get an additional license in the state where he or she will be serving a client or employer. This is of course provided that the CPA’s license is active and in good standing in his or her home state!
CPA mobility is truly a national effort to adopt a uniform CPA licensing system – under the wider umbrella of the Uniform Accountancy Act (UAA), these changes are endorsed by the AICPA and NASBA. Other moves towards consistency are well under way too, with significant results already achieved in a short space of time to align CPE requirements across states and sign mutual recognition agreements with foreign jurisdictions to allow U.S. CPAs to practice on an international basis.
Rapid adoption of individual CPA mobility
Dustin explained that CPA mobility has been accomplished in little over a decade, having grown from only two states having adopting it pre-2006 to all states except Hawaii having signed up by 2018.
Firms are going mobile too
A new concept of ‘firm mobility’ has also been added to the Uniform Accounting Act that enables firms to practice across state lines. Dustin explained:
“If you are licensed and in good standing as a firm in a jurisdiction, you can practice in another jurisdiction that has adopted firm mobility without registering your firm or obtaining a licence. The only requirement being that if you practise in another jurisdiction and you establish a fiscal location in that jurisdiction, you need to have a registration in that state.”
According to Dustin, a growing number of states do not require firm registration under mobility and others have legislation filed. It should be noted that whether your firm needs to register in a different state may depend on the type of services your firm provides.
International pathways and mutual recognition agreements (MRAs)
Big steps forward have also been taken on the international front with NASBA and the AICPA entering into MRAs with other regulatory bodies internationally: “The majority of U.S. states have entered into MRAs with Australia and New Zealand, Canada, Mexico, Hong Kong and Ireland, with an agreement with Scotland also set to be approved very soon.” Dustin also expressed his hope that an equivalency agreement with England and Wales could be agreed very soon.
A MRA allows a U.S. licensed CPA to seek licensure in different overseas jurisdictions if he/she has to practise there, and vice versa. To practice in the U.S., an accountant from one of these countries needs to be in good standing and pass the international qualifications exam in the U.S. In Dustin’s view, mutual recognition is part of the process of finding a common standard across the U.S. and worldwide.
Closer to home, Dustin updated Alliott Group members on another development affecting practise between Canada and the US: “Vancouver does a lot of business with Seattle – the accountancy boards in British Colombia and Washington have entered into a mutual understanding to share data regarding disciplinary complaints about CPAs from the two jurisdictions.”
While Washington state wants to develop reciprocity further by pushing for an agreement that will allow CPAs from both sides to operate under a mobility model where they wouldn’t need to have a Canadian or U.S. licence to carry out attest and compilation services, Dustin pointed out that the lack of mobility between Canadian provinces is likely to curtail this, at least for now: “Until there is federal legislation in Canada that will allow this, it is doubtful that British Colombia will allow Washington CPAs to practice in BC without a local license.”
Just recently however, bills have been introduced in Washington to allow Canadian accountants to practice in Washington with their BC licence with no need to acquire a local licence: ”This could be the first time we have a model for international mobility,” commented Dustin.
Dustin also confirmed his view that accountancy is well on its way to becoming a ‘global profession’ and that the international model will expand:
“The U.S. CPA exam is given in multiple foreign countries, and possibly in China and India in the future.”
International differences of opinion prevail on ethics and CPA responsibilities
Dustin also provided a quick update on legislative developments regarding ethics and the responsibilities of the CPA who discovers that a client is committing a crime.
NOCLAR (Non-Compliance with Laws & Regulations) is an international standard developed by the IAASB (International Auditing and Assurance Standards Board) which sets out a framework to guide auditors and other professional accountants in what actions to take in the public interest when they become aware of a potential illegal act. It is currently being looked into at committee level in the U.S.
Dustin outlined the current divergence in the U.S. position: “In the U.S., a CPA cannot report the crime to a third party. Instead, you are supposed to go to the appropriate level of management above where that potential crime occurred and tell the client. However, international bodies feel that this should be handled differently in public accounting than in industry, particularly where audit is concerned as an audit is in the public trust, and the CPA should have the ability to report illegal actions to the authorities.”
Dustin commented that opinions on the nature of the action to be taken vary around matters such as the type of work being carried out by the CPA, and whether, for example, if providing services related to tax or consulting, it would be for the CPA to report the incident to the client.
Divisions of opinion around codes of conduct
Dustin’s comments led neatly onto a conversation about which code of conduct CPAs working in multiple states need to follow and moves by NASBA and the AICPA to develop consistency using a common Code of Conduct. According to Dustin, while 24 states now recognise the AICPA Code of Conduct, there is a clear difference in opinion across the U.S. on issues such as whether client work product should be withheld until payment of fees has been received. Another difference, explained Dustin, is firm naming conventions: “In some jurisdictions, you cannot include ‘Tax’ in your firm name as it is viewed as a specialty designation that your firm may not have proven it is qualified to provide.”
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Consistency is also a key objective in terms of the profession’s continuing professional education standards. Under UAA Model Rules, nearly half of U.S. states and jurisdiction have adopted some form of CPE reciprocity. The current position, according to Dustin, is that if a CPE is licensed in multiple jurisdictions, he or she only has to meet the CPE requirements in their state of licensure / main place of business: "This would satisfy the other states."