Provisions of the Uniform Accountancy Act

John Ribezzo, Professor
Community College of Rhode Island

A major initiative of the American Institute of Certified Public Accountants (AICPA) and the National Association of State Boards of Accountancy (NASBA) has been the Uniform Accountancy Act (UAA). The UAA is a model bill and set of regulations designed to provide a uniform approach to regulation of the accounting profession. A movement for change began with the problem of cross-jurisdictional practice. With 54 licensing jurisdictions, the requirement for acquiring reciprocity in another jurisdiction is a serious impediment for CPAs who want to expand their practices and compete on a global level. Eventually a number of other issues arose that were incorporated into the final draft of the document.

A review of the major provisions of the UAA follows.

Substantial Equivalency: Although all CPAs must pass the Uniform CPA Exam, each jurisdiction has its own set of licensing requirements. Substantial equivalency addresses two issues. The first is for a CPA who wishes to relocate or open an office in another jurisdiction, and the second is for a CPA who desires to temporarily practice in, or provide services via electronic technology to, another jurisdiction. If a CPA would like to practice in a UAA-adopting jurisdiction, and practices in a state that has licensing criteria that are substantially equivalent to the provisions of the UAA, or the CPA’s home state does not have substantial equivalency but the CPA personally qualifies under the UAA criteria, then the following situations would hold true: (1) for those CPAs who temporarily practice in or provide services via electronic technology to another jurisdiction, only notification to the visiting state’s board would be required; (2) if the CPA is moving to or opening an office in another jurisdiction, then a reciprocal license would be required. However, the process of acquiring a reciprocal license is much more simplified than the present system. If the CPA’s home state does not have licensing criteria substantially equivalent to the UAA, or the CPA personally does not meet the criteria, then the present system governs.

Consistency in the CPA Title: Jurisdictions differ on who is allowed to use the title of CPA. In some cases certification and licensure are separated. The UAA requires only those individuals who (1) possess a valid, current license and (2) meet the requirements of their state’s board of accountancy (especially regarding experience and continuing professional education requirements) to be allowed to use the CPA designation. As a result, all licensees are subject to licensure and regulation by the state board regardless of whether or not they work in public accounting.

Services Offered by a CPA Firm: Currently, CPAs are required to provide all services through a CPA firm and although only attest services require licensure, all services offered to the public are subject to state regulation. Some CPAs circumvent this requirement by setting up separate entities to offer services other than the attest function. Under the UAA, CPAs are required only to offer attest services to the public, whereas, other services may be offered through a CPA firm or a separate entity established by a CPA firm. Another aspect of this provision is to define attest services to include not only audits and reviews, but also compilations.

Commissions and Contingent Fees: The UAA will allow for CPAs to accept commissions, as long as they are disclosed and they are not from clients for whom the CPA performs attest services. The UAA also enables CPAs to accept contingent fees for services except from clients for whom they perform attest services and for preparing an original tax return.

Simple Majority of CPA Firm Ownership: The UAA requires only a simple majority of owners of CPA firms to be CPAs. This standard would assure control of the firm by CPAs and maintain the interests of the public regarding the performance of traditional attest services.

Experience Requirement: The UAA would require only one year of experience to be licensed. Any type of professional experience in accounting, not just attest experience, would be acceptable. However, for those CPAs who supervise an attest engagement or sign or authorize the signing of attest reports, additional experience in the area of attest services must be received.

Continuing Professional Education: The UAA makes no changes to the requirement for 120 hours of CPE during a three-year period preceding renewal, with a minimum of 20 hours per year. However, it does reference the Statement on Standards for Continuing Professional Education Programs issued jointly by NASBA and AICPA.

With 54 licensing jurisdictions, the AICPA has a goal of 40 adoptions of the UAA by the year 2000.

Conclusion

As accounting educators it is important that we understand the major provisions of the UAA and disseminate this information to our students. For the most part, the provisions broaden the horizon for the certified public accountant and provide increased opportunities for our accounting graduates.

References

American Institute of Certified Public Accountants (AICPA) and National Association of State Boards of Accountancy (NASBA). 1998. The New AICPA/NASBA Uniform Accountancy Act—What Does It Mean? New York, NY: AICPA/NASBA.

Huefner, Ronald J. 1998. The new uniform accountancy act. The CPA Journal (August): 12–17.