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The walls are tumbling down.

In 1964, the National Society of Public Accountants adopted the national policy that accountancy laws should regulate on a continuing basis persons who, in addition to CPA's and grandfather PAs, offer or perform accounting services for the public and further, that a suitable descriptive title be available for those persons clearly reflecting that accounting services are being performed. The most suitable title is "accountant."

Since 1964, state CPA societies, encouraged by the legislative policy of their national association and their model accountancy bills, have thwarted efforts to attain the title "accountant" by persons not licensed or regulated by the state accountancy boards. The basic question is: May unlicensed accountants who perform services permissible under state accountancy laws refer to themselves as "accountants" and use the terms "accounting" and "accountancy?" Twenty-eight states continue to prohibit outright any reference by an unlicensed individual to these titles or description. They have become known among NSPA's affiliated state organizations as the prohibited "A" words.

This is not a case where the unlicensed accounting practitioners want to perform prohibited accounting services (the certified audit, for example) or where the unlicensed accountants want to hold themselves out as licensed. It is simply unlicensed individuals wanting to use the generic title best describing the services they are permitted to provide.

In 1979 there was a landmark case putting state accountancy boards on notice that accountancy laws prohibiting the use of the title "accountant" and the descriptive phrase "accounting services" by unlicensed practitioners is unconstitutional. (Comprehensive Accounting Service Company v. Maryland State Board of Accountancy [397 A.2d 1019, 1979].) Comprehensive was the first accounting title case decided on the grounds of protection of commercial free speech. The famous quote from this decision bears repeating:

"... to prevent the possibility of public confusion and deception, the legislature cannot consistent with the First Amendment choose the most drastic remedy - the complete suppression of the use of certain words to describe the lawful activity of non-certified accountants..."

Most states continuing to prohibit the use of the "A" word ignore the Comprehensive decision because it is a state court, rather than a Federal court, decision. Other states prohibiting the "A" word continue to hold (erroneously, in our judgment) that its use by an unlicensed individual is "inherently misleading." Therefore, its use is excluded from the commercial free speech doctrine since the state has the authority to prohibit misleading commercial speech.

The Bonnie Moore case in California involves this very point (Moore and the California Association of Independent Accountants v. California State Board of Accountancy). Arguments in the Moore case were held in the Supreme Court of California on April 8, 1992. Moore's basic contention is enforcement of the California Board of Accountancy's rule prohibiting non-licensed practitioners of accounting from using the terms accountant," "accounting" and "accounting services" violates the First Amendment right of commercial speech of those same practitioners to truthfully describe and advertise accounting services they are lawfully permitted to provide to their clients. NSPA has provided substantial technical and financial assistance in the Moore case to its CAIA affiliate on the basis that a decision in favor of unlicensed accountants use of the "A" word will have a greater effect nationwide than the 1979 decision of the Maryland court in Comprehensive. Two state supreme court decisions supporting the same point are better than one.

The major defense of the California State Board of Accountancy in Moore is that use of the "A" word by unlicensed persons is inherently misleading and therefore may be prohibited absolutely. What the Board seems to be saying is that the California consumer of accounting services cannot distinguish between a licensed and an unlicensed practitioner of accounting and therefore needs the Board's protection to prevent the consumer from being misled and deceived. This argument appears to say that the California consumer of accounting services is an uninformed individual who lacks the intelligence to distinguish between a practitioner who is licensed and one who is unlicensed.

We submit that consumers of accounting services are more sophisticated. Loan officers, credit officials of companies extending credit to their customers and members of the financial and insurance communities know quite well how to read a balance sheet, to recognize competent accounting services and to distinguish it from inadequate and incompetent accounting work, whether performed by a licensee or an unlicensed accountant.

That the public might potentially be misled is not sufficient grounds for the state to prohibit protected commercial speech in an absolute manner. When the U.S. Supreme Court ruled the states could prohibit commercial speech that was deceptive or misleading, it raised a question of definition - exactly what kinds of speech were deceptive or misleading.

If the commercial speech is "actually misleading," that is, there is overwhelming evidence to show an individual or individuals were misled, then the state may absolutely prohibit the commercial speech.

If it is "inherently misleading," that is, in and of itself it leads people to believe something that isn't so, then the state may prohibit the commercial speech.

If the speech is "potentially misleading," that is, there is a chance, however remote, that the public might possibly be misled, the U.S. Supreme Court has ruled the state cannot prohibit it absolutely. This is the ruling in the Peel case (496 U.S , 110 S.Ct. 2281, 1990). For a discussion of the Peel decision, see "What's in a Name - On The Letterhead" by Gerald J. Thain, Associate Dean and Professor of Law at the University of Wisconsin Law School (National Public Accountant, January 1991).

The recent decision of Abramson v. Gonzalez (949 F. 2d. 1567, 11th Circuit, 1992) the U.S. Court of Appeals (a Federal court just one step below the U.S. Supreme Court) relied on the peel decision. The Abramson decision is supportive of the arguments NSPA has been making since 1964. Abramson does not involve accountants, but rather psychologists in Florida. However, identical principles of law apply. When the Abramson decision became known, a supplemental brief on behalf of Bonnie Moore and CAIA was filed in the Supreme Court of California on the basis of new authority to support the issues and arguments advanced on behalf of the unlicensed accountants.

Florida's law allowed unlicensed individuals to practice psychology. However, the law also prohibited unlicensed psychologists from calling themselves psychologists, using the title "psychologists" and from advertising themselves as psychologists. Anyone not licensed as a psychologist in Florida using the terms or titles reserved for licensed psychologists committed a misdemeanor under Florida law, punishable by a criminal fine not exceeding $1,000 and/or imprisonment not exceeding one year. Such penalties are typical of those also found in the accountancy laws of states prohibiting the "A" word.

Apparently, anyone may currently practice psychology in Florida, but only those individuals who met the academic and examination requirements of the law can say they are practicing psychology or holding themselves out as psychologists in advertising, telephone directories, office signs or stationery. This is similar to unlicensed accountants in the states prohibiting the "A" word. Those individuals may practice accountancy within the permissible limits of the law, but they dare not call themselves accountants without risking the danger of a criminal fine or possible jail sentence.

The Abramson case commenced in 1981 by several persons who wished to practice psychology and hold themselves out as psychologists. The plaintiffs sought prospective injunctive and declaratory relief to restrain Florida from enforcing criminal penalties. This is the same action for relief brought by Bonnie Moore and CAIA to restrain the California Board of Accountancy from enforcing their prohibition and imposing penalties on the use of the "A" word.

The Court in Abramson concluded that as long as commercial speech describes lawful activity, is truthful and not fraudulent or misleading, it is entitled to the protection of the First Amendment. This is judicial doctrine pronounced in a number of cases by the U.S. Supreme Court. The problem area, as we referred to it earlier, is to determine a definition of what "misleading" means. Is the use of the title by the unlicensed individual "actually misleading," "inherently misleading" or "potentially misleading?" If actually or inherently misleading, the state may ban the commercial speech. If potentially misleading, the state may not prohibit it absolutely if the information may also be presented in a way that is not deceptive. That is the rule of the Peel decision (referred to earlier) when five of the nine justices of the U.S. Supreme Court ruled that while the particular advertising in issue was "potentially misleading," the possibility that truthful advertising would be misleading to the public is insufficient to justify the state's categorical prohibition on all such speech.

If speech is only "potentially misleading," the state must craft some narrow restriction on the speech short of an outright ban, which restriction will directly advance the states' interest in protecting the public while encouraging a free flow of commercial information. This, also, is doctrine from the Peel decision.

Accordingly, then, where individuals are engaged in a professional activity permitted under state law, the state may restrict rights of those individuals to disseminate truthful commercial speech, but may not cut it off completely. To repeat an earlier statement, the state must adopt narrowly tailored means for directly advancing the state's interest while reserving the individual's right to disseminate truthful commercial speech.

The Abramson decision, like the Peel decision, is supportive of Bonnie Moore and CAIA's position. Indeed, you could contend convincingly that the Abramson and Peel decisions are controlling. As argued in the supplemental brief filed on behalf of Moore and CAIA, the Abramson decision is affirmation that First Amendment protection for commercial speech does not permit the state to sanction professional activity by unlicensed individuals while at the same time reserving to the licensees the exclusive use of all generic terms which truthfully and accurately describe their professional activity.

We shall not have long to wait for the decision of the California Supreme Court in Moore and CAIA's action against the State Board. A decision is expected momentarily. NSPA members and National Public Accountant readers will be kept informed as developments occur. In any case, we can see the light at the end of the tunnel. The 1964 NSPA policy statement calling for a permissible descriptive title clearly reflecting the accounting services performed by an individual seems closer to realization than ever before. Restrictions on the use of the "A" word will be eventually removed in all of the jurisdictions because a dedicated group of NSPA members applied their energies and resources to that goal.

William H. Sager is Legal Counsel for NSPA. Previously, he held positions as director of practice, U.S. Treasury Department, and deputy director, Executive Office for U.S. Trustees, Department of Justice. He has served as a technical assistant in the Office of Chief Counsel, IRS, and chief counsel for revenue shoring, U.S. Treasury Department. A graduate of the University of Virginia, he holds BA, masters in economics as well as accounting and law degrees. He is a member of the Virginia State Bar and admitted to practice before the U.S. Supreme Court.
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Title Annotation:Special Report: Restrictions on the "A" word; law prohibiting unlicensed accountants from performing services
Author:Sager, William H.
Publication:The National Public Accountant
Article Type:Industry Overview
Date:May 1, 1992
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