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Friday, Feb 3, 2023
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State’s Two-Tier Accounting Accreditation Criticized

California has a dirty little accounting secret. At least that’s according to some who want to add a “warning label” to the examination material for a type of Certified Public Accountant license that does not authorize licensees to do audits. “Currently there are two pathways in California to becoming a CPA,” said Marissa Bueno, outgoing president of the local chapter of the California Society of Certified Public Accountants (CalCPA). “One only requires 120 hours (units) of college credit, with a B.A., in addition to at least two years working with a CPA. The other track requires 150 hours.” Bueno and CalCPA support state Senate Bill 691, which would attach language to California’s CPA test that informs candidates they may have trouble working across state lines if they have taken the 120-hour track. Furthermore, the disclaimer would declare, a candidate must ” acknowledge at the time he or she sits for the exam that licensure under their pathway may not be considered substantially equivalent for purposes of practice privileges in other states ” But, according to long-time San Fernando Valley CPA, Mel Kohn, partner at Kirsch, Kohn and Bridge LLP, there’s a good reason California has a two-track system in the first place: It allows more disadvantaged accounting students to more easily get a toehold in the industry than might without it. “I was against what was once called the Illinois plan,” Kohn told the Business Journal, noting Illinois no longer offers a two-track licensing system. “But over the years, I came to believe more people should have the opportunity to practice accounting.” Kohn worries that if AB 691 passes, it may discourage some disadvantaged students, especially those who lack the means to continue their education long enough to garner another 30 semester units in addition to the 120 they have already amassed when they take the CPA exam. But Bueno believes the two-license system is wrong. “I don’t believe this system is good for minorities, or anyone else in the state especially accounting firms and their clients,” Bueno said. California is joined only by New Hampshire, Vermont and Colorado in having a two-track CPA licensure system. SB 691 falls short of eliminating the current system, as Bueno would have preferred the bill did. At the same time, she acknowledges that the differences between the two tracks to a CPA license are relatively insignificant. “It isn’t really about the quality or the substance of education between track one and track two,” Bueno said. “There really isn’t that much difference, but it’s about credentialing; that’s what is important here making sure California CPAs are considered equivalent with those in other states.” Because accounting firms often have large, multi-state companies as clients they need CPAs who can practice across state lines on paper, a system known as interstate practice privilege. Practice privilege is not the same as having a license to practice in another state. Rather, it allows CPAs to make formal attestations to audits and other reports even when the operation in question is located out of state. However, California CPAs whose license is of the 120-hour variety are not qualified to do so in most states. “Really, this issue is coming out of Sarbanes Oxley,” said Grant Thornton LLP tax partner, Andrew Gantman, who is based at the firm’s Woodland Hills office. “It has the requirement that you rotate auditors every so many years. Certain (accounting) offices may not have enough auditors, especially when they have clients with multistate offices, so they sometimes need to bring in new auditors from their own out-of-state offices.” For that reason, Gantman supports AB 691. “Overall I agree with it,” he said. “California should have some consistency with other states, especially if we want to be able to hold CPAs from other states to our own standards.” In addition, he believes the bill’s provisions will empower accounting students to make better career decisions. Yet, Gantman conceded the SB 691 disclaimer could stop some disadvantaged candidates from pursuing careers as a CPAs. “That could apply to some of them, but how many people who plan to become California CPAs would really be stopped by a disclaimer,” he said. “I don’t know.” Gantman pointed out that provisions of SB 691 direct the State Board of Accountancy to investigate other states’ licensure rules, and to report back to the legislature on findings to bring the California CPA designation as much national standing as possible. “The California CPA brand is at stake,” said Bueno, who in addition to her CalCPA title, is also a partner at Rosenfeld and Bueno Accountancy in Los Angeles. From her perspective, and that of CalCPA, passage of 691 will go far to promote the 150-hour track in the state, all the while enhancing what it means to hold a California certified public accountant license in other states. “It will also help accountants looking for work out of state,” Bueno said. Andrew Gantman doubts whether CPAs looking for work at accounting firms in different states truly experience negative bias because California has a two-track licensing system. “I worked in a senior position at a Big-Four firm in Washington D.C.,” he said. “And I don’t think personally, I would have been biased. Other people’s perspectives may be different, but it’s really the individual’s experience I would look at.”

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