Texas Adopts Rules on CPA Designation; AICPA to Seek Broad Resolution

By Friedman, Selma | Journal of Accountancy, July 1995 | Go to article overview

Texas Adopts Rules on CPA Designation; AICPA to Seek Broad Resolution


Friedman, Selma, Journal of Accountancy


In the midst of a growing controversy over the proper use of the CPA designation, one state has come to a resolution. The Texas State Board of Public Accountancy (TSBPA) has adopted licensing requirements it says will clarify regulations for the state's 58,260 CPAs and practice units and protect the interests of those who use CPAs' services. At the same time, recognizing its "responsibility to two constituencies, the public and the more than 400,000 CPAs practicing in the United States," the AICPA has established a special committee on regulation and structure of the profession to seek a solution to the thorny issue of regulating who call "hold out" is a CPA and under what circumstances, according to J. Curt Mingle, senior executive partner of Clifton, Gunderson & Co., Peoria, Illinois, and a member of the Institute's board of directors. Mingle is chair of the new committee, which is scheduled to meet July 25 in Washington, D.C. "The board of directors recognizes the seriousness of the problem and intends to provide leadership through this committee," he said. The committee is made up of 12 members from firms of all sizes and various other constituencies that are concerned with the issue, such as state boards of accountancy and state CPA society boards of directors. "If we can get this diverse group of people to agree on a solution--which I think should be a uniform law as opposed to state laws, which vary throughout the country--others including the state boards, state societies, the National Association of State Boards of Accountancy and the Institute) will probably buy into it as well. As chair, I am going to push for the committee to develop proposals as fast as possible. It won't be easy, but I think that ill a year to a year and a half, we should have a resolution to bring to the board of directors."

The Texas solution

The Texas state board has amended its accounting regulations in response to the growing number of CPAs who practice as employees of various types of business entities, rather than in CPA firms.

In revising the Texas rules of professional conduct, the TSBPA divided the practice of public accountancy into two categories--client practice and industry or government practice (sections 501,2, definitions, and 501.3, applicability.) Section 501.4 (practice of public accountancy) states that any licensee in good standing may use the CPA designation, regardless of whether he or she practices public accounting or is employed in industry or government accounting.

The most heavily debated of the rules, section 501.40) (licensing/registration requirements), describes when the CPA designation can be used and clarifies which firms are qualified to register with the Texas board as public accounting firms. It reserves attestation, including audits, reviews and compilation services, for CPAs in registered firms. It requires CPAs who practice public accounting in nonregistered entities and who use the CPA designation to add a disclamer next to the entity's name that would appear on business cards, stationery and in radio ads and other print or electronic material. Law firms and banks that offer some public accounting services are exempt from entity registration requirements. (See the exhibit on page 28 for a summary of the regulations' requirements.)

According to William Treacy, executive director of the state board, by adopting section 501.4, Texas is now in compliance with the U.S. Supreme Court ruling in Ibanez v. Florida Board of Public Accountancy. In that decision, the court said that under principles of commercial free speech, a CPA can use the CPA designation as long as he or she is licensed. "We believe it is fair to allow CPAs who don't work in traditional accounting firms to use their duly-earned designations as long as the public is not misled that the employer is a CPA firm," Treacy said.

The revision of the Texas rules of professional conduct also has relevance to recent developments in a pending Florida case, IDS Financial Services, Inc. …

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