Regulatory Realities for CPAs

Prior to the 2023 Arkansas legislative session, a CPA appointed to the Arkansas State Board of Public Accountancy (ASBPA) could not serve consecutive terms in office. The State Legislature, with the support of the ASBPA and the Governor’s office, passed an amendment to the state’s Public Accountancy Act that now allows two consecutive terms to be served. I was the first CPA reappointed to a second term by Governor Sarah Sanders.

This extended service has allowed me to continue my second year on the National Association of State Boards of Accountancy’s (NASBA) legislative committee – an opportunity that would not have been possible under the previous limit. Likewise, fellow ASBPA members Christina Ellis, CPA and Shane Warrick, CPA have been reappointed to serve second five-year terms. This continued service will allow them to participate on NASBA committees and, hopefully, serve on a national level by being elected as a NASBA board or regional director.

By the time this article is published, I will have presented to my peers at the annual UCA CPE Conference for CPAs an overview of what the NASBA legislative committee is currently working on for the betterment of the CPA profession at a state and national level. Further, through the guidance of UCA Department of Accounting Chairman Dr. Stephanie Watson, CPA, I, along with many guest speakers, will teach an upper-level class on Regulatory Policy for Accountants. It is my hope that the class will grow into a learning opportunity for CPAs who wish to audit the course to keep abreast of accounting regulatory issues.

As former managing partner Mike Carroll, CPA with the former Beall Barclay firm (now Landmark) has suggested, CPAs should take an active interest in serving on public boards, in local government, and on a state or federal legislative level. Mike and I agree our boomer generation did a great job of advising our clients on law and rule changes in attest and tax work, but we did little to actually help write the laws themselves. Hopefully, this will change in the future. Raising awareness and encouraging participation is a worthy goal by the ASBPA and NASBA.

What are the current regulatory matters to which CPAs should be concerned?

The Pipeline Challenge

The accounting profession has a shortfall in the number of students entering college to study and obtain a degree. The national topic of conversation – highlighted in the Arkansas Business Accounting issue - discussed the proposed changes in reducing the 150 hours of study requirement, which led to a master’s degree or an extra 30 hours of college hours, to a Bachelor’s degree that can be obtained in four years.

In 2024, the ASBPA was one of the first states to propose rule changes for this additional pathway to licensure. To date, twenty-six states have enacted similar legislation allowing for this additional pathway that includes a bachelor’s degree and two years of professional experience. The 150-hour rule, requiring one year of work experience, is still a viable pathway.

The cost savings for the future CPA utilizing the bachelor’s-plus-experience model is approximately $100,000 or more, when considering the expense of an additional year in college and foregoing a year of salary. Initially, this new pathway was hotly debated and was not favored by national groups such as NASBA or the AICPA. I am very proud of our state board and our executive director, Tim Montgomery, CPA, for being one of the early leaders for change at the state and national level.

We Are Accounting

To further address the short fall of students entering the accounting college doors, four accounting firms - HCJ, Landmark, Hogan -Taylor, and Bell and Company - contributed seed money to form a new entity named We Are Accounting, under the guidance of Dr. Stephanie Watson, CPA. The goal is to educate and raise awareness of the career opportunities that the CPA profession provides.

The ASBPA has earmarked funds to assist in this endeavor and has the backing of the Department of Labor and Licensing through its leadership of Secretary Darryl Bassett. Dr. Watson needs volunteers of time by CPA’s along with the State Board of Education involvement to make this a success. As Mike Carroll suggested - get involved.

Substantial Equivalency and Mobility

Several buzz words, namely substantial equivalency and mobility, have become key issues with the passage of an additional pathway in becoming licensed as a CPA by the 26 states. This means that 24 states and 5 territories that NASBA serves have not passed legislation for this additional pathway.

Can you imagine the current challenge by each state board, the AICPA, and the state societies, when a CPA is licensed in one state, yet their accounting firm does work in 10 states? Do they now have to obtain a reciprocal license for each state that they service clients, as I did 40 years ago? Or do they have the mobility to practice in that state that they are not a resident of, yet provide professional services? The answer could be different for each state.

Over the past year, the ASBPA has rewritten its 120-page administrative rules, submitting proposed updates that have been approved by the Department of Labor and Licensing and the Governor’s office, and will soon be published for public comment. If these proposed changes gain legislative approval, they will allow for full mobility and substantial equivalency within the state of Arkansas for out of state CPAs holding valid licenses in their state of residence.

Private Equity Ownership

Practice Ownership for CPA firms has changed. Private Equity (PE) companies are now investing in several very large national CPA firms and expanding to regional and local firms. The issue of ownership by a PE company, as well as testing the limits of confidentiality and the rendering of independent attest financial services, will be a current ongoing issue with the ASBPA as well as other state boards. Expect white papers to be published by NASBA and the AICPA as both entities have committees working on the subject matter. The regulatory aspects of monitoring and governance of these PE type entities will be an ongoing current topic in our Board meetings.

Consolidation of Professional Boards

Legislative efforts in Nevada and Florida to eliminate or consolidate professional boards – including Boards of Accountancy - as to regulatory and licensing powers are ongoing. In reviewing various studies on the matter, there is room for efficiencies and consolidation of administrative tasks. However, as to hearings on violations of ASBPA board rules or accountancy laws, a certain amount of experience and knowledge of the subject matter, as well as having an experienced professional board would be hard to duplicate with consolidation. The discussion on this matter in all state legislatures and state boards will be ongoing.

In conclusion, this article was not written by AI – and that itself is an emerging topic by our profession. The use of artificial intelligence in accounting raises serious concerns about data confidentiality and client privacy, both of which are protected under state law.

I am confident that NASBA and the ASBPA will continue providing guidance in this evolving area. As CPAs, we must continue to serve as the most trusted advisors to our clients and upholding the public interest.

Author: Richard Bell, CPA, JD, CVA