We Have the Technology — We Can Rebuild the CPA. The $6M Question is “How?”
Should the government have a role in regulating professional service providers?
If not, who should set the standards?
Should there even be standards?
If you’re starting to worry, no, this isn’t a political opinion piece. It’s about more than politics, and it’s about more than accounting — It’s about trust.
Currently, over half the country is discussing legislation to change CPA licensing standards. This could involve breaking off national standards so each state regulates its own CPAs with its own exam and requirements (Some have unique requirements already, but all have the same exam and require experience, a minimum amount of education, and CPE).
Some states are even considering cutting out the licensing requirement and allowing non-CPAs to perform audit and attestation, as long as the client understands they’re non-CPAs. So, what would a lack of licensure or standardization do to accountants and business in general?
Loss of mobility
Currently, a CPA can work across state lines fairly easily because of the Uniform Accountancy Act’s mobility provision, which allows a CPA in good standing to serve individuals and businesses in states that differ from their home state. This is becoming more important than ever, as technology makes remote work more common and many accountants serve clients in several states. They can also easily move for a job and transfer their CPA license with no major hassles, as most states have adopted UAA and are substantially equivalent. The job market for accountants is great right now and that mobility is critical to finding great people to fill roles.
If each state has completely different standards, it’s unlikely a state with strong requirements will accept the work of a CPA from a state with comparatively weaker requirements. Working with clients in several states would require a CPA to be licensed separately in multiple states, which gets expensive quickly.
Passing the CPA exam in just one state is a huge undertaking for most accountants. The need for multiple licenses could cause the number of qualified CPAs to plummet and the cost of their services to soar.
Loss of trust
The big-picture problem is a loss of trust. The marketplace counts on CPAs to follow certain standards and ethics, be competent, and do things in a uniform way. If those standards are gone, companies lose trust in the information they’re getting and the public loses trust in the financial statements companies release.
As far as audits and attestation go, the purpose of a CPA is having an independent outside expert confirm your financial condition. If your accountant’s training in ethics, technology, and accounting theory are in question, we quickly lose expert and independent status. That just leaves outside, which doesn’t mean much on its own.
Who’s taking action?
To counter the shift toward deregulating professionals, the AICPA and NASBA have introduced the Alliance for Responsible Professional Licensing. The alliance aims to educate the public and policymakers on the importance of licensing standards for professionals like accountants, architects, and engineers.
The AICPA hopes to have a tentative plan to discuss at their October Council meeting and possibly finalize that plan in 2020.
Along with protecting the CPA license, the AICPA is also working to modernize it by updating the exam and education process to include more technology. Technology plays such an important role in the future of accounting and everything we’ve seen shows the need for this new emphasis.
How will you be affected? What can you do?
As each state’s board of accountancy works with its state government, you can reach out to your representatives and voice your concerns about regulatory changes. Check your state board’s website to find out when important decisions are being made.
We already discussed the impact on mobility and employment for CPAs, but there is an increasing number of quality accountants in the industry who aren’t CPAs. These changes can still have a huge impact on your company’s audits, and the trust and transparency between your company and your customers or investors. It’s also likely to have an impact on the general accounting job market, whether you’re a CPA or not.
We’d love to hear what effects you anticipate for your role, your industry, or the accounting industry in general. Follow FloQast on LinkedIn and let us know your thoughts on the future of the CPA.