CPA Licensure Pathways Must Adapt to Change

Marty Green, Esq. Senior VP and Legislative Counsel, Illinois CPA Society
The Latest on Advocacy and Legislation

Pipeline issues, shifting demographics, and changing environments of financial and audit standards have been creating headwinds for the current certified public accountant (CPA) licensure framework—a structure that’s been in place since 2001.

Over the past year, the Illinois CPA Society (ICPAS) has taken part in important discussions on the existing licensure framework, attempting to eliminate barriers and deterrents to prospective CPAs, all while preserving the profession’s coveted reputation as a learned profession and retaining its mobility practice privilege. Many states are now poised to propose legislation to adapt the existing framework to today’s realities.

ADAPTING TO CHANGE

Currently, the Illinois Public Accounting Act and Uniform Accountancy Act (UAA) require candidates to pass all portions of the CPA exam, complete 150 credit hours of qualifying education, and gain one year of relevant work experience before becoming licensed. In 1991, Illinois became the 18th state to adopt the 150-credit-hour requirement to sit for the exam in 2001. The impetus to this enhanced educational requirement was the belief that the growing complexity of accounting and auditing standards demanded enhanced education.

For the past two-plus decades, the AICPA and National Association of State Boards of Accountancy (NASBA), the two primary national organizations that provide leadership and stewardship to the accounting profession and CPA credential, have maintained their posture on this matter.

Now, with accountancy programs struggling more than ever to attract students and encourage graduates to pursue the CPA credential, the support for the 150-credit-hour mandate is waning. Both national and state-based organizations, including ICPAS, are now examining the CPA pathway more closely to look for ways to eliminate the barriers that may be making the profession less attractive to current and future generations of prospective CPAs.

THE PROPOSALS IN PLAY

State Societies and NPAG

Many state CPA societies have formed their own working group to discuss steps that could be taken for a new licensure framework while preserving the mobility practice privilege. Similarly, AICPA launched the National Pipeline Advisory Group (NPAG) to shape a national strategy to address the profession’s talent shortage (Illinois was represented by former ICPAS Board Chair and KPMG partner Jonathan Hauser, CPA). Notably, the state society CEOs and NPAG have yielded similar but differing proposals to the CPA licensure framework.

Many states, like Illinois, will be pursuing legislation that maintains the existing pathway to CPA licensure but also provides additional pathways to licensure. For example, here in Illinois, we’re proposing an amendment to the Illinois Public Accounting Act that would create a pathway to licensure for CPA candidates that earn a bachelor’s degree with an accounting concentration, pass the CPA exam, and complete two years of experience, while also adding provisions to support long-term practice mobility.

An important consideration in any pathway proposal is automatic mobility for all, which preserves mobility practice privilege for a licensed CPA in good standing in their respective jurisdiction. This latter part of the proposal eliminates the reliance on substantial equivalency to obtain mobility. Currently, four states have automatic mobility for all: Alabama, Nebraska, Nevada, and North Carolina. Generally, the automatic mobility provision applies if a person is licensed as a CPA in another state and is in good standing. These individuals will have the privileges of a CPA in the state, directly analogous to the way our driver’s licenses work when we cross state lines: “No notice, no escape.”

National Organizations

From the national side of things, the AICPA and NASBA have embarked upon a two-tiered approach to the licensure framework. First, they’ve issued an exposure draft on the CPA Competency-Based Experience Pathway, which is available for stakeholder comment. Second, and redundant with the first, they’ve released a UAA exposure draft to include the additional Competency-Based Experience Pathway and clarify the process by which a CPA can practice under mobility. Since this latter course of action is a UAA exposure draft, the formalized processes for stakeholder comments and considerations will have to be followed.

• AICPA Exposure Draft: The CPA Competency-Based Experience Pathway requires successful completion of all portions of the CPA exam, a bachelor’s degree, one year of competency- based experience, and one year of general experience. Candidates would have to complete their bachelor’s degree fulfilling state board education requirements for accounting and business before embarking on the licensure pathway. Competency-based experience consists of providing any type of services or advice using accounting, attestation, compilation, management advisory, financial advisory, tax, or accountancy by a licensee of a CPA evaluator. After a minimum of one year, a candidate’s competencies are certified by a CPA evaluator using a competency-based experience certification form or on a state accounting board-approved form.
• UAA Exposure Draft: Includes the adoption of the AICPA’s competency-based pathway outlined above and maintains reliance on substantial equivalency for mobility practice privilege. This reliance on substantial equivalency (which is now in place) adds additional, and in my opinion, unnecessary steps for CPAs who are licensed and in good standing with their respective states to have mobility in another state. Substantial equivalency includes education, exam, and experience.

With 55 different state and territorial jurisdictions having to adopt a licensure pathway, NASBA and its member state boards of accountancy remain the gatekeepers of the substantial equivalency framework. Therefore, either a state board would have to review a CPA’s licensure and education pathway to determine substantial equivalency for mobility practice privileges, or the CPA could subscribe to NASBA’s National Qualification Appraisal Service (NQAS) for a review and recommendation to the state board of accountancy. If a state were to adopt a pathway that wasn’t substantially equivalent to the UAA under the AICPA and NASBA proposal, the state would have to go through NASBA’s national licensee database to verify whether the CPA meets the licensure requirements of their state.

A couple of my general thoughts on this, if I may. First, the UAA isn’t the law but rather a model act for uniformity that the states can follow for guidance. Second, the insertion of NQAS and the national licensure database is an unnecessary barrier. Regardless of substantial equivalency, if a CPA enters another state and performs services under mobility for all, that CPA is subject to that state’s jurisdiction. Therefore, the intermediary step of substantial equivalency evaluation is unnecessary. It’s an automatic jurisdiction with no need for an intermediary step. Think about it—could you imagine being pulled over in another state for speeding and a review would have to occur to make sure that your driver’s license was substantially equivalent to the state you were driving in? I didn’t think so. Third, there’s a $250 fee for licensees to subscribe to NQAS evaluations. Lastly, with 55 jurisdictions moving toward additional pathways to licensure, it’s an open question as to whether NQAS’ capacity can handle an influx of timely evaluations.

ICPAS will be providing formal comments on the Competency-Based Experience Pathway by responding to the 16 formulated questions included in the exposure draft. Additionally, we’ll be responding to the UAA exposure draft with our licensure pathway recommendation.

We’re cognizant that additional pathways aren’t a panacea to the profession’s talent woes. However, we believe meaningful additional pathways could eliminate barriers and provide more attractive routes to licensure. As always, we’ll continue to keep you informed on this matter as we move forward.

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