Alternate Track.

Guide to California's Proposed CPA Licensing Changes

Effective Jan. 1, 2002, CPA candidates may have new options for entering the profession if AB 585 (Nation, Campbell) and SB 133 (Figueroa et. al) are signed into law.

The measures are halfway through the legislative process. They would allow candidates who have earned a bachelor's degree, including 24 units in both b business and accounting, and passed the CPA exam, to obtain their CPA license after completing 1-2 years of experience working under a CPA's supervision in government, private industry or public practice.

Candidates who wish to begin sitting for the Uniform CPA Exam after Jan. 1, 2002, will be required to possess, at minimum, a bachelor's degree and the business and accounting concentration. Candidates who are in the process of qualifying under the existing requirements that allow entry without a bachelor's degree will have until 2006 to complete any remaining experience or exam passage requirements.

Conforming to UAA 

The proposed experience requirement conforms to the Uniform Accountancy Act standards and meets or exceeds standards already in place in 30 states. California would require CPAs qualifying under this general experience requirement, who subsequently want to sign audits or reviews, to present satisfactory evidence of qualifying attest experience to the California Board of Accountancy prior to offering these services.

To be eligible for the one-year experience requirement, candidates will have to pass the Uniform CPA Exam by sitting for all parts at the same time; pass at least two parts and obtain a minimum score of 50 on the parts not passed and sit for all unpassed parts in subsequent sittings. Additionally, these candidates must possess at least 150 hours of education prior to licensure.

This entry method will qualify candidates to obtain a "portable" CPA license; one that the National Association of State Boards of Accountancy will designate as substantially equivalent. Candidates who choose this track would be able to avoid the reciprocity issues that have hindered California CPAs who have been unable to transfer their certificate to practice in other states because they did not meet those states' exam conditioning requirements. The 150-hour requirement is in effect in 39 states, so future candidates would be well advised to meet this minimum educational standard.

Making the Right Choice

Candidates who possess a bachelor's degree, but fail to sit for the exam by taking all unpassed parts and achieving a minimum score on any parts not passed, still will be granted a California certificate, but may have limited interstate reciprocity.

"The profession has a tremendous opportunity and responsibility to inform students about the new requirements so that we can make sure the candidates understand the potential ramifications of their choices," says CalCPA President Don Gursey. "When we enter the profession, none of us know where we will eventually practice, or who our clients will be. The only way to guarantee that we can continue to serve client needs and grow with the profession is to ensure that we build the proper foundation."

The new experience requirement also means that for the first time in decades, even small firms that don't perform audit services will be able to provide candidates with qualifying experience. And candidates will have more choices about where to obtain their experience. Previously, candidates were forced to forego experience in small firms or government if those entities could not provide qualifying audit experience. These changes could actually encourage thousands of new people to enter the profession, which would help firms resolve staffing issues by increasing the pool of qualified applicants.

After 2006, all firms with the exception of small firms (four professionals on staff) will be required to undergo mandatory peer reviews if they perform audits or reviews. This is an important UAA consumer protection. The majority of firms performing these services already undergo peer reviews, as a condition of AICPA membership. Under the California proposal, sole practitioners and small firms will be required to participate in the CBA's Report Quality Monitoring Program if they do not undergo a voluntary peer review.

The CBA is developing proposed regulations to implement these changes quickly. Those regulations will address the kinds of college courses that would qualify to fulfill the 24 units in accounting and business and other transition issues.

Inner Workings

AB 585 and SB 133 are the result of negotiations between representatives of CalCPA, the Big Five, the Legislature and the Department of Consumer Affairs that began during the CBA's Sunset Review. Initially the DCA and Joint Legislative Sunset Review Committee opposed CBA-recommended and CalCPA-supported changes to the Accountancy Act that would bring California into conformity with national licensing standards. At the time, the committee recommended performing a two-year study of the proposed licensing changes in lieu of making changes. This could have delayed implementation for up to a decade.

However, Sen. Mike Machado (D-Linden), understanding the potential impact that this delay would impose on clients and the California CPA profession, suggested that candidates be given the option of obtaining a CPA certificate that would meet national standards. AB 585 and SB 133 are the result of that conversation. The Joint Legislative Sunset Review Committee is requesting that the CBA present it with information on how the licensing changes are working during its next sunset review committee which will begin in 2004.

Bruce C. Allen is CalCPA's director of government relations.