CPA Mobility

Freedom of Choice is Good for Businesses and Consumers

BY PATRICK C. LYNCH AND BOB MCDONNELL
October 1, 2008

(Editor’s note: Advocates for licensing reform approached two state attorneys general for their bipartisan perspective on the mobility issue.)

In an increasingly global economy, business no longer stops at national borders much less at state lines. With advancements in technology, even relatively small companies have little difficulty extending operations across the nation. All businesses— big and small—need the services of certified public accountants. But should CPAs’ ability to provide services to their customers end at the state line? We think not.

As more businesses expand their operations into multiple states, it is increasingly vital to the efficiency of those companies that their CPAs have the ability to cross the same state lines to provide highquality services. Virginia and Rhode Island have been leaders in taking a regulatory approach that allows licensed, out-of-state CPAs to enter our states freely to provide services. At the same time, regulators have important new tools for tough disciplinary action against CPAs who violate the rules. We believe that all states should embrace such a regulatory policy, which is good for consumers and is simple to put in place.

For more than a decade, the AICPA and the National Association of State Boards of Accountancy (NASBA) have worked to create and refine a model statute, called the Uniform Accountancy Act (UAA), that establishes a comprehensive national regulatory framework.

Although the UAA covers all aspects of the regulation of accountancy in a state, one key innovation has been the concept of “substantial equivalency.” A state that adopts substantial equivalency recognizes that an out-of-state CPA can practice in the state if he or she comes from a state with CPA licensure requirements that are substantially equivalent to the rigorous education, experience and examination requirements in the UAA (or individually meets those requirements).

Adopting substantial equivalency will permit all CPAs from substantially equivalent states, and an individual CPA from any state who demonstrates the same level of personal qualifications, to practice within its borders. Broad adoption of substantial equivalency ensures that consumers can retain the CPA of their choice; allows CPAs to respond to the needs of consumers who transact business in multiple states; and frees regulators to focus on other enforcement priorities.

Over time, however, the effort by the AICPA and NASBA to promote mobility through substantial equivalency policies has become compromised by burdensome notification rules—requiring out-of-state CPAs to complete lengthy forms or seek official approval prior to entering a state to provide accounting services. In many states, CPAs who provide necessary services for companies with operations in multiple states are forced to wait for forms to be processed. These arcane notification rules do not assist businesses or consumers in search of the best available professional services from CPAs.

Recognizing that the benefits of substantial equivalency had been undercut by patchwork notice requirements, the AICPA and NASBA developed amendments to the UAA that eliminate these outdated notification requirements for CPAs who wish to provide certain accounting services. Arizona, Colorado, Connecticut, Delaware, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, New Jersey, New Mexico, Ohio, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wisconsin have already adopted a uniform change to their law. Additionally, Georgia, Oklahoma and Pennsylvania have enacted legislation that provides for mobility practice privileges for CPAs from states that have passed mobility. At least 15 states have indicated that they will consider mobility legislation in the 2009–2010 sessions.

Regulators’ ability to discipline out-of-state CPAs is not dependent on notification, and eliminating the notice requirement will not harm states’ ability to oversee out-of-state CPAs practicing within their borders. The amended UAA provides that individual CPAs licensed in one state who enter another state to practice pursuant to the substantial equivalency practice privilege automatically consent to the disciplinary authority of the second state’s accountancy board and to comply with that state’s accounting statutes and board regulations. If an out-of-state accountant must be disciplined by regulators or the courts, the amended UAA has given the states expansive disciplinary authority—and guaranteed jurisdiction to exercise it. This automatic jurisdiction over out-of-state CPAs the UAA provides is bolstered by the fact that state courts have traditionally exercised jurisdiction over professionals, including attorneys, who enjoy the privilege of practicing within the state. State courts that have considered the question have regarded jurisdiction over out-of-state accountants the same way. Our offices will work with the proper authorities to pursue any person who enters our state and violates the law, and eliminating a notice requirement that generates needless paperwork will not impact our ability to protect consumers.

We also believe that eliminating the notification requirement would increase regulators’ ability to enforce high standards for the practice of accounting and thereby protect the public. Currently, regulators are forced to process the notifications submitted by out-of-state CPAs, shifting time and resources away from enforcement and oversight, and focusing on the essentially bureaucratic task of administering notification systems. Less time spent on paper-pushing means more time devoted to actually protecting the public.

Therefore, the amended UAA simultaneously helps consumers by eliminating barriers to the free choice of accounting professionals, while also offering regulators a powerful tool to oversee the practice of accounting in their state. CPAs’ clients will no longer be limited by varied state licensing and notification regimes, and state regulators will be sure that they possess jurisdiction and disciplinary authority over out-of-state CPAs. In the fast-moving and diverse modern economy, we believe that implementing a regulatory approach that allows freedom of choice in accountants—and is coupled with tough oversight by state accountancy boards—is the best choice for everyone.

Patrick C. Lynch is attorney general of Rhode Island, and Bob McDonnell is attorney general of Virginia.

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