Freedom of Choice Is Good for Businesses and Consumers

By Lynch, Patrick C.; McDonnell, Bob | Journal of Accountancy, October 2008 | Go to article overview

Freedom of Choice Is Good for Businesses and Consumers


Lynch, Patrick C., McDonnell, Bob, Journal of Accountancy


In an increasingly global economy, business no longer stops at national borders much less at state lines. With advancements in technology, even relatively small companies have little difficulty extending operations across the nation. All businesses--big and small--need the services of certified public accountants. But should CPAs' ability to provide services to their customers end at the state line? We think not.

As more businesses expand their operations into multiple states, it is increasingly vital to the efficiency of those companies that their CPAs have the ability to cross the same state lines to provide high-quality services. Virginia and Rhode Island have been leaders in taking a regulatory approach that allows licensed, out-of-state CPAs to enter our states freely to provide services. At the same time, regulators have important new tools for tough disciplinary action against CPAs who violate the rules. We believe that all states should embrace such a regulatory policy, which is good for consumers and is simple to put in place.

For more than a decade, the AICPA and the National Association of State Boards of Accountancy (NASBA) have worked to create and refine a model statute, called the Uniform Accountancy Act (UAA), that establishes a comprehensive national regulatory framework.

Although the UAA covers all aspects of the regulation of accountancy in a state, one key innovation has been the concept of "substantial equivalency" A state that adopts substantial equivalency recognizes that an out-of-state CPA can practice in the state if he or she comes from a state with CPA licensure requirements that are substantially equivalent to the rigorous education, experience and examination requirements in the UAA (or individually meets those requirements).

Adopting substantial equivalency will permit all CPAs from substantially equivalent states, and an individual CPA from any state who demonstrates the same level of personal qualifications, to practice within its borders. Broad adoption of substantial equivalency ensures that consumers can retain the CPA of their choice; allows CPAs to respond to the needs of consumers who transact business in multiple states; and frees regulators to focus on other enforcement priorities.

Over time, however, the effort by the AICPA and NASBA to promote mobility through substantial equivalency policies has become compromised by burdensome notification rules--requiring out-of-state CPAs to complete lengthy forms or seek official approval prior to entering a state to provide accounting services. In many states, CPAs who provide necessary services for companies with operations in multiple states are forced to wait for forms to be processed. These arcane notification rules do not assist businesses or consumers in search of the best available professional services from CPAS.

Recognizing that the benefits of substantial equivalency had been undercut by patchwork notice requirements, the AICPA and NASBA developed amendments to the UAA that eliminate these outdated notification requirements for CPAs who wish to provide certain accounting services. Arizona, Colorado, Connecticut, Delaware, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, New Jersey, New Mexico, Ohio, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia and Wisconsin have already adopted a uniform change to their law. …

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