A State By State Accounting Guide

Uniform Accountancy Act and the Role of NASBA and AICPA

The two most influential organizations to the accounting profession are responsible for the development of the Uniform Accountancy Act (UAA):

The National Association of State Boards of Accountancy (NASBA) is a nonprofit organization that provides national leadership to state boards of accountancy and promotes high standards in professional accounting. It is NASBA that is responsible for administering and scoring the CPA exam for all states and jurisdictions. In fact, 32 state boards of accountancy refer directly to NASBA’s CPA Exam Services (CPAES) to determine candidate eligibility to sit for the exam.

The American Institute of Certified Public Accountants (AICPA), originally established in 1939, is more than just the most influential and relevant professional association advocating for CPAs. AICPA is also instrumental in implementing updates to the Uniform Accountancy Act and Uniform CPA Exam as practice standards for CPAs evolve to be fully inclusive of global commerce in the 21st century.

Creation of the Uniform Accountancy Act

The first joint bill designed by the two organizations to regulate the practice of public accountancy was approved in 1984 and finalized in 1997 as the Uniform Accountancy Act (UAA). The Uniform Accountancy Act includes UAA Model Rules designed to offer all jurisdictions a uniform approach to licensing CPAs. This uniformity among jurisdictions is termed substantial equivalency and involves a process comprised of three major components known as the Three Es: education, examination, and experience. The UAA also brings uniformity to the regulations governing professional practice in all jurisdictions, in part by limiting attestation and auditing functions to CPAs exclusively.

The 55 separate U.S. licensing jurisdictions —including the 50 states, the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, and the Commonwealth of Northern Mariana Islands—have each adapted the UAA model in a way that suits their practical and political needs. The move towards total uniformity has been a gradual one, and is, in fact, still underway as some jurisdictions still make allowances for CPAs who were educated prior to the creation and implementation of the Uniform Accountancy Act.

The UAA itself is evolving. Motivated by evidence of professional accounting practice changes that developed as a result of expanded globalization and the universal use of information technology, the AICPA and NASBA made changes to the Uniform Accountancy Act as recently as 2007, as well as changes to the Uniform CPA Exam in 2011 so as to be inclusive of International Financial Reporting Standards (IFRS).

How the UAA impacts CPAs and CPA firms

CPA Requirements, the Three E’s (education, exam, experience) - For CPA candidates pursing credentials after the year 2000, the basic criteria for initial licensure includes: 1) a baccalaureate degree with 150 semester hours of education, 2) successful completion of all four parts of the Uniform CPA Exam, and 3) one year of general accounting-related experience. Although all state boards of accountancy adhere to licensing requirements within this general framework, each board ultimately determines the specific distribution of accounting and business credits within the 150 total semester hour requirement, as well as the specifics for fulfilling experiential requirements. Currently, Puerto Rico is the only jurisdiction that has not adopted the UAA model of experience before initial licensure, and the U.S. Virgin Islands has yet to pass the 150-semester hour education requirement.

CPA=CPA - The AICPA supports the concept, known as "CPA=CPA", which follows a one-tier model asserting that a CPA candidate is certified and licensed only after the required work experience has been completed. This structure is currently adopted nearly all jurisdictions. Only Alabama, District of Columbia, Hawaii, Illinois, Kansas, Montana, Nebraska and Oklahoma still maintain a two-tier process.

In these jurisdictions, certification without practice rights is granted upon completion of the CPA exam, and a permit to practice is then applied for after completing the experiential requirements. It is expected that these outlying jurisdictions will eventually seek uniformity to eliminate the confusion and regulatory challenges that come with having two separate CPA designations: certified without practice privileges, and licensed with practice privileges.

Practice Mobility - Practice mobility is based on the concept of substantial equivalency, and allows CPAs in good standing to practice in states other than the one in which they were licensed. A CPA in good standing is one who has maintained a current license through renewal and by meeting CPE requirements. The current UAA Fifth Edition includes model language, modified in 2007, that gives state Boards of Accountancy jurisdiction over out-of-state CPAs practicing in their state. Forty-seven jurisdictions have enacted a mobility provision and at least 2 other states have pending legislation.

A CPA who wants practice privileges outside of his or her own state should be careful to evaluate the standards of the state in question by consulting with the respective Board of Accountancy. Mobility is typically available only when a place of primary residence or employment is located in a state other than the one that granted licensure. The Regulations vary among jurisdictions and some still require registration and fees from out-of-state CPAs.

Peer Review - Peer review requirements are promoted by the AICPA as a means of maintaining and improving quality accounting and auditing services. A peer review of the work performed by firms providing attestation services is required every 3 years.

CPA Firm Names - In late 2010, the AICPA/NASBA Uniform Accountancy Act Committee proposed UAA changes related to criteria for CPA firm names and the addition of definitions for the terms "network" and "network firm". The changes are aimed at providing language to provide guidance to state boards of accountancy and firms regarding acceptable CPA firm name configurations so as to protect the public from names which may misleading by suggesting all accountants with a firm are indeed CPAs. To date, a decision has not been announced.

Ownership of CPA Firms – There have been concerns about whether non-CPAs can be allowed ownership interests in CPA firms. In 1997, the UAA adopted a recommendation that firms marketed as CPA firms be owned by a simple majority of licensed CPAs. Most jurisdictions have adopted a provision similar to the simple majority ownership practice.