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AUDITING

AICPA advises CPA firms to review state registration and compliance

 

By Ken Tysiac
August 1, 2014

CPA firms are being urged by the AICPA State Regulation and Legislation team to review their registration compliance procedures to ensure that they are complying with out-of-state registration requirements when performing attest engagements.

The AICPA advisory was issued after recent activity by some state boards of accountancy to ensure that out-of-state firms operating in their states have met their registration obligations.

Several state boards have examined recent information on employee benefit plan audits provided by the National Association of State Boards of Accountancy (NASBA) and the U.S. Department of Labor and compared it to the list of licensed firms in their respective states, according to the AICPA alert.

Some of those state boards have begun to send letters to CPA firms included in the Department of Labor data that appear not to be appropriately licensed. The individual boards’ actions and requests of CPA firms have varied. For example, according to the AICPA alert:

  • Texas sent 120 letters to firms requesting that they sign a cease-and-desist order to close the investigation with no administrative penalty or costs.
  • Arkansas sent firms a license application form and a short questionnaire.


Some state boards may opt for more punitive actions, including monetary penalties.

The AICPA is urging CPA firms performing any attest engagement to review their registrations in any state in which they perform these services.

This issue originally arose as a result of a heightened focus by regulators on CPA firms performing employee benefit plan audits. The Department of Labor several months ago identified a number of firms that failed to properly include an employee benefit plan audit in their peer reviews, according to the AICPA alert.

The AICPA Peer Review team has been working collaboratively with state boards’ peer review administrators to investigate and address that matter. Some state boards examined data provided to them by the Department of Labor and NASBA and decided to also assess whether firms performing employee benefit plan audits in their state are also complying with state registration requirements.

Under most state accountancy statutes, out-of-state CPA firms must register when performing most attest engagements in a state that is not their home state. They do not need to register, however, when providing nonattest services such as tax or consulting advice.

Approximately one-third of the states have “CPA firm mobility” laws, allowing out-of-state firms performing audits to perform any service, including attest services, as long as they are registered in their home state and meet the peer review and firm ownership requirements of the mobility state. Those firms remain subject to the regulatory oversight of both their home state and the mobility state.

To navigate state-by-state requirements, CPA firm representatives can visit cpamobility.org, a joint AICPA/NASBA website. The site explains state registration requirements for the performance of various attest services.

For more information, contact AICPA Vice President–State Regulatory & Legislative Affairs Mat Young at myoung@aicpa.org.

Ken Tysiac (ktysiac@aicpa.org) is a JofA editorial director.

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