Licensing Update

In a Surprise move, the California Board of Accountancy's Committee on Professional Conduct recommended that the CBA consider requiring all California

Before 2001, all CPA candidates were required to gain attest experience prior to licensing. The requirement had proven unworkable for numerous reasons, including that performing 500 or even 1,000 hours of supervised attest experience did little to ensure a candidate's quality or ability to perform audits unsupervised.

Most states have abandoned the attest experience requirement and instead have moved to peer review as a method of ensuring auditor experience and compliance with standards. It's surprising that the CBA is proposing dus move when it's finally embracing peer review as an important consumer protection.

Background

Under California law, CPA candidates have several options for completing their experience requirements.

California allows candidates to qualify for licensure after meeting educational and examination requirements by completing one or two years of general experience working in industry, government or public practice under the supervision of a CPA with an active license. Candidates who want the ability to sign audits and reviews also must complete a qualifying attest experience requirement. CPAs who have not fulfilled this requirement may not sign an audit or review.

Additionally, any CPA signing an audit or review is required to complete 24 hours of focused accounting and auditing continuing education and eight hours of fraud detection CPE every two years.

When California law was changed in 2001, it was acknowledged that the attestonly option discouraged candidates from entering the profession due to the difficulty of obtaining audit experience because of a decreasing number of audits being performed; a lack of interest in auditing as a career; and the length of time it took to obtain attest hours. Some legislative critics complained that the attest-only option constituted an unreasonable barrier to entry to the CPA profession without providing real public protection.

A majority of states have adopted the general experience requirement described in the Uniform Accountancy Act rather than retain an attest experience requirement. CPA firms and sole practitioners performing audits and reviews are then required to undergo mandatory peer reviews designed to evaluate adherence to professional standards as well as the auditors' competence.

California chose not to implement mandatory peer review and instead requires candidates to provide documentation that they can plan and conduct an audit with minimum supervision, as well as log a minimum of 500 audit hours.

Qualifications Committee Chimes In

The CBA's Qualifications Committee, made up of audit partners who interview candidates for licensure, also is recommending that the attest experience requirement be changed. Its initial recommendations include increasing the minimum number of attest hours from 500 to 1,000 and disallowing compilations. The committee also is asking that the requirement be reviewed to determine whether or not SOX compliance work should be allowed for qualifying experience.

Additionally, the committee is recommending that the CBA begin issuing distinctive licenses to those who are qualified to sign reports and to those who are not. There is a notation on the CBA's website under its "License Lookup" section, http://dca.ca.gov/cba/lookup.shtml, which indicates whether a CPA completed the attest experience requirement, but there is no distinction on the wall certificate or the pocket license. These issues have been referred to the CBAs Committee on Professional Conduct for consideration.

Historically, CaICPA has supported conformity with the UAA, including the 150-hour requirement for becoming licensed, mandatory peer review for those who conduct audits and reviews and an experience requirement consistent with the UAA. Deliberations will continue on experience requirements for some time and changes will require legislation.

New Requirement

The CBA also plans to pursue statutory language that would require CPAs employed by a firm where the majority of the licensed owners are not licensed to provide attest services to provide a written notice to prospective clients prior to accepting any attest engagements.

CalCPA will evaluate this proposal as it develops.

Mandatory Peer Review Progresses

At its January meeting, the CBA continued with the development of the final language to implement mandatory peer review for firms performing audits, reviews and compilations. A Feb. 25 meeting was devoted to finalizing the language for legislation.