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The California Supreme Court and the "A" word.

The California Supreme Court on July 2, 1992, issued its long awaited opinion in the case of Bonnie Moore and the California Association of Independent Accountants v. California State Board of Accountancy. Even among the seven justices of the California Court, there was a noticeable lack of unanimity on permitted use of the "A" word. Four justices of the court, in a 41-page opinion written by justice Baxter, affirmed the judgment of the Court of Appeal and upheld the validity of contested Regulation 2, under which the Board claimed authority to prohibit an unlicensed accounting practitioner from using the title "accountant" or the term accounting." Three justices joined in separate dissenting opinions written by Justice Mosk and Justice George, and would hold contested Regulation 2 invalid as a barrier to commercial speech protected by the constitution.

To the extent that the three dissenting justices could not persuade another justice to go along, thus making the minority dissenting opinion the majority opinion and hence the law of the land in California, the Bonnie Moore decision is disappointing.

To the extent that the four majority justices, even while upholding the validity of Regulation 2, provided a safe-harbor for unlicensed accountants to practice their profession, Bonnie Moore decision is encouraging and represents a giant leap forward for the unlicensed California accounting practitioner.

Until July 2, 1992, the date of the Bonnie Moore decision, the California State Board of Accountancy refused to recognize the "A" word under any circumstances. The use of the title "accountant" by an unlicensed individual was prohibited. Moreover, the Board refused to recognize decisions of the United States Supreme Court that the state has a heavy burden to justify a categorical prohibition against the dissemination of accurate factual information to the public. In brief, the Board on its own determined that the "A" words, the terms "accountant" and "accounting," were allegedly misleading to the public and hence issued its infamous Regulation 2 prohibiting the use of those terms by individuals not licensed by the Board. We say "allegedly misleading" for there is ample reason to believe that the Board's 12 members (consisting of six CPAs, two PAs and four public members) were more interested in eliminating competition to its licensees by denying the use of the "A" word by unlicensed individuals than they were in protecting the public.

Despite the opinion upholding the validity of Regulation 2, it is clear that the majority of the court, at the same time, reached the conclusion that Regulation 2 was overly broad. The majority concluded the Board's regulatory scheme may constitutionally ban only those uses of the terms "accountant" and "accounting" that may potentially mislead the public regarding the user's licensed or unlicensed status.

Accordingly, the opinion stated, where the terms "accountant" and "accounting" are used in conjunction with a modifier or modifiers that serve to dispel any possibility of confusion, use of the "A" words is constitutionally permissible. An example of a modifier that would dispel confusion would be an express disclaimer stating the "accounting" services being offered do not require a state license. A disclaimer that the individual is not licensed by the state board of accountancy would appear to serve the same purpose. Thus, the majority opinion is clear that the California Board of Accountancy may not prohibit absolutely (as the Board has continued to do for a great many years, threatening unlicensed accountants with contempt actions, fines and imprisonment) the right of unlicensed accountants to use the title "accountant" if the unlicensed accountants used the disclaimer or caveat fashioned by the California Supreme Court.

In order to satisfy the First Amendment to the U.S. Constitution, unlicensed accountants must be permitted to use the terms "accountant," "accounting," or "accounting services," if the use of those terms is further qualified by an explanation, disclaimer or warning stating the individual using those terms is not licensed by the state or the services being offered do not require a state license.

The four-member majority opinion also seems to construe the California accountancy law to provide for two types of accountancy practices. First, the practice of public accountancy may be engaged in only by a licensee of the Board, according to section 5050 of the California accountancy law. However, Section 5052, commonly referred to as the "bookkeeping exception," provides that any person may perform various accounting functions, such as keeping books, making trial balances, statements, making audits or preparing reports, all as a part of bookkeeping operations, provided that such accounting functions, statements and reports are not issued over the name of such person as having been prepared or examined by a certified public accountant or public accountant.

Accordingly, the four-member majority opinion reemphasized and distinguished the permissible categories of basic accounting services unlicensed accountants may offer to the public. The majority opinion in no way limits the California unlicensed accountants' scope of practice. On the contrary, the majority recognizes unlicensed persons" not holding a valid permit issued by the Board to practice public accountancy may nevertheless engage in the practice of basic accounting services "as part of bookkeeping operations" under the California accountancy law.

The two dissenting opinions by Justices Mosk and Justice George, joined in by Justice Kennard, would have held Regulation 2 invalid, if not as a matter of statutory construction, then as a violation of the First Amendment of the United States Constitution. In addition, Justice Mosk, in his dissenting opinion, would question the validity of Regulation 2 on additional grounds that the Board's majority of eight licensed members "has an obvious pecuniary interest in preventing those without a license from advertising to the public that they are performing accounting services." Justice Mosk observes the law has long looked with disfavor on rules adopted by a regulatory body the majority of which consists of members of a profession with a pecuniary stake in restricting the rights of competitors.

Justice George would hold that the legislature has authorized unlicensed accountants to perform a wide range of accounting services and did not intend to prohibit them from accurately referring to themselves as accountants or describing the services they provide as accounting services. The Board, by its administrative regulation, expanded the scope of the statute by prohibiting unlicensed accountants from using the terms "accountant" and "accounting." Accordingly, Justice George would hold Regulation 2 invalid on its face and not find it necessary to to into the question of constitutional validity. When the Board prohibited the use of the terms "accountant" and "accounting, it effected a significant alteration of the statutory scheme and such action should be held invalid. The Board may not prohibit by regulation what the Legislature permits by statute.

How can we summarize the Bonnie Moore decision in a few words? First, the ability of unlicensed accountants to engage in a broad statutory permissible scope of practice remains unchanged. Second, unlicensed accountants may use the formerly forbidden "A" words if a caveat or disclaimer is used. Precisely what the caveat or disclaimer may be is not known at this writing. Certainly, the Board will have to reissue Regulation Two to conform to the Supreme Court's majority opinion. In any case, it would appear that the Board's harassment of unlicensed accountants for the use of the "A" word should cease.

Third, the decision is bound to be influential in other Jurisdictions. Perhaps not as forceful and with the precedential effect that a decision on pure constitutional grounds would have had. Unquestionably, we can argue that if the three minority justices had prevailed as the majority, we would have a better and stronger opinion with great precedential value among the remaining states that seek to prohibit the "A" words. Opinions of the Supreme Court of California are highly respected among the states' judiciaries.

It is disappointing that the majority of the court failed to hold Regulation 2 invalid, either on constitutional or statutory construction grounds. The Supreme Court, like the Appeal Court whose decision it was reviewing, retained the right of the court to engage in Judicial editing by suggesting the language of the disclaimer or caveat. We respectfully submit that the function of the court was to find Regulation 2 either valid or invalid without the suggestion of remedial language to give the Regulation validity.

Texas now remains the only state where a single intermediate appellate court has held (on either statutory or constitutional grounds) that the use of the "A" word by unlicensed persons is absolutely prohibited.
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Washington Comment; decision on the use of the title 'accountant' and term 'accounting' for unlicensed accounting practitioners
Author:Sager, William H.
Publication:The National Public Accountant
Date:Aug 1, 1992
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