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States May Liberalize CPA Licensing

by October 9, 2024
October 9, 2024
States May Liberalize CPA Licensing

Marc Joffe

As I’ve discussed in this space previously, state licensing requirements are contributing to the shortage of Certified Public Accountants (CPAs). Recently, the American Institute of Certified Public Accountants (AICPA) and the National Association of State Boards of Accountancy (NASBA) proposed a licensing reform that promises to diminish the problem. But more radical change may be needed.

Fewer aspiring accountants are pursuing a CPA because states require one year of graduate education in addition to a bachelor’s degree and a passing score on a nationwide exam to become certified. Some state accounting societies have suggested an experiential alternative to the one year of graduate school. Now, the AICPA and NASBA appear to have listened.

The organizations have issued an exposure draft entitled “CPA Competency-Based Experience Pathway” and are seeking stakeholder comments through the end of 2024.

Under the AICPA/NASBA proposal, CPA license applicants can avoid the post-baccalaureate education requirement by completing 2,000 hours of work involving “accounting, attestation, compilation, management advisory, financial advisory, tax or consulting.” The experience must be certified to the state’s accountancy board by a “CPA Evaluator.”

The proposed evaluation requirement, which does not apply to the one year of work experience now needed for a CPA, seems unnecessary. As Sharon Lassar, director of the School of Accountancy at the University of Denver, told me, “I’m concerned that the experience verification process could become unwieldy and ineffective. A costly infrastructure has emerged around continuing professional education requirements for license renewal, and it is not clear that the exercise of accumulating and verifying CPE Is effective. The same could happen with experience verification.”

Lassar was among the speakers at a Cato webinar on CPA licensing restrictions we held in April.

Another concern with the proposal is implementation. The NASBA provides model state legislation that only becomes effective once state legislatures modify their laws to conform to its legislative model.

Assuming NASBA moves forward with the exposure draft, CPA societies in various states will look for sympathetic assembly members or senators to propose reforms. This recruitment process and the rate at which eventual legislation progresses will vary across states.

One way to speed the implementation of this and future reforms in CPA licensing is for states to adopt Universal Licensing Recognition. Under ULR, CPAs licensed in one state can quickly obtain licenses in other states. Legislatures in at least twenty states have adopted ULR for certain occupations and should consider including Certified Public Accountants if they have not already done so.

By pushing the envelope on experiential pathways and including ULR, state legislatures can build on the AICPA/NASBA reform and thereby alleviate the CPA shortage.

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