California tightens restrictions on CPAs

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It’s not often that a bill passes unanimously.  But when the California legislature voted on AB117, a bill that will regulate the state’s CPAs, there was not a single “no” vote cast.  The bill was introduced at the request of CalCPA, which shares with legislators the goal of increased transparency.

Basically this bill requires CPAs who have inactive licenses to disclose that fact when referring to themselves as certified public accountants. The alternative is... to do what they need to do to renew their licenses.

AB117 was authored by CPA Assembly members, Roger Niello and Fiona Ma. Its passage brings California into agreement with the majority of other states in the expectations that CPAs must meet in order to call themselves CPAs.  That allows the public, employers and lenders to rely on CPA as professionals with up-to-date knowledge.

 “As a former CPA,” says Niello, “I am aware that a distinction exists between CPAs who actively maintain their licenses through continuing education and those who do not. This is an important measure to end misrepresentation and ensure appropriate disclosure so clients know exactly who they’re dealing with when making investment and employment decisions. I have enjoyed working with CalCPA and my co-author, fellow CPA and Assemblywoman Fiona Ma, on this necessary measure to enhance consumer protection.”

According to the California Board of Accountancy, 15,000 of California’s 65,000 licensed CPAs were inactive (using 2004 statistics). That means 23 percent were not completing the continuing education requirements necessary to maintain active licenses. Most small businesses in the United States depend heavily on the guidance of their accountants, which is a key reason why AB117 was necessary. Those CPAs who have not kept up with knowledge of industry developments and reporting standards threaten the integrity of the  financial marketplace, according to CalCPA.

 CalCPA does acknowledge that not all accounting situations require continuing education. Those individuals are permitted to call themselves certified public accountants, provided they include the modification, “inactive.”  For CPAs who do not expect to have activated their licenses before 2010, CalCPA states that they need to indicate in all representations to the public – such as business cards, signature lines, Web sites, etc. – that they are inactive.

Another bill, SB819, brings to an end California’s nonconforming Pathway 1, which consists of a bachelor’s degree with 24 semester units in accounting and 24 in business. This change is effective January 1, 2014. After that date, all CPA candidates in California who have met those requirements will be permitted to sit for the CPA Exam. But candidates for licensing will also have to meet ethics education requirements. In addition they will have to complete concentrated education intended to increase the competency of practitioners. This is part of a total 150 hour requirement. As it is, more than 70 percent of California’s CPA candidates already qualify under the 150 hour pathway. 

Why the change?

The purpose of the new law is to ensure that all CPAs licensed in California are able to fully participate in the nation’s economy by making them “substantially equivalent” with CPAs from other states. Until now, California’s CPAs have been at a competitive disadvantage because of outdated barriers.   Eliminating those barriers gives them added mobility so they can represent taxpayers from other states as well as provide services outside of California.

CPAs who are licensed before 2014 will be grandfathered as meeting the substantially equivalent rules. For more information on this subject, visit the CalCPA Web site.

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