Pennsylvania is one of only three states in the country to still require a specific amount of attest function experience for every CPA candidate. This can be a hardship.
Twenty-six states to date have made changes to their requirements that allow for a broad base of experience, as recommended in the Uniform Accountancy Act (UAA), a model CPA bill developed by the American Institute of CPAs and National Association of State Boards of Accountancy.
In May, as a result of a recommendation made by the Pennsylvania Institute of Certified Public Accountants’ Statute Revision Task Force, Republican Rep. Gordon Denlinger, who represents Lancaster County and is a CPA, introduced House Bill 2354 to amend the Pennsylvania CPA statute. The primary goal of this legislation is to update the type of experience required to become a CPA in Pennsylvania.
The legislation would not change the one-year experience requirement found in the UAA, but it would eliminate the dated provision that requires 25 percent of that experience within the attest function, which encompasses all research done in an audit. While this new bill might seem to affect only the CPA profession, it can affect other areas, such as Pennsylvania’s business climate and brain drain.
Pa.’s business climate
CPAs are segmented from other accountants by the level of education and experience required in order to obtain their license. A CPA candidate with a bachelor’s degree needs to have two years of professional experience, including 800 hours of attest activity; must pass a four-part Uniform CPA Examination; and complete 80 hours of continuing professional education every two years, in addition to other requirements and peer review. The amount and type of experience varies from state to state, with current requirements ranging from no experience to more than two years, with specific accounting and auditing provisions.
Due to these diverse requirements, licensees often find it difficult to obtain reciprocity in other jurisdictions.
Reciprocity and mobility for CPAs are important issues that become even more critical in a global economy. Individual CPAs who practice across state lines, or who serve clients in other states via electronic technology, need to meet the regulations in the states in which they practice. Substantial equivalency and mobility have addressed many of these issues. But registration is still required in most states if a licensee is providing attest services.
“Pennsylvania is one of three states that has an attest experience requirement for all CPA candidates, including those who don’t currently plan to provide attest services,” says Kevin Mitchell, CPA, a partner with PricewaterhouseCoopers LLP in Harrisburg. “We need to make sure the state’s accountancy statute does not include barriers to entry beyond those of other states while still protecting the public. The proposed amendment achieves that goal.”
Changes to the CPA statute can also counteract “brain drain” — the term used for young intellectuals, many of them college graduates, who leave the state after they’ve finished school, taking their valuable education and talents elsewhere.
The attest experience requirement in the current Pennsylvania CPA statute does not reflect today’s environment for CPA services, and it is restrictive. Many opportunities exist for new graduates both within and outside public accounting. More than half of today’s accounting graduates pursue initial employment outside traditional public accounting, while those in public accounting have many diverse practice areas to pursue.
Pennsylvania, as one of three states in the country still requiring attest hours, is at a competitive disadvantage when it comes to retaining our accounting graduates and moving them into the CPA ranks.
Even experienced CPAs are drifting away from the attest function. When AICPA conducted its brand research in 2011, it discovered that fewer CPAs are selecting the financial auditing function as their main role, down 8 percent from its 2008 research. Internal auditing is down 7 percent.
Research also revealed a decline in young professionals who are pursuing a CPA license. Pennsylvania’s current, more restrictive experience language could be contributing to this decline. Eliminating the attest requirement for potential Pennsylvania CPA candidates will help young professionals develop the core skills and expertise that will best serve their clients, their employers and their own professional pursuit of the CPA designation.
Taking the attest function out of CPA licensure requirements does not make it easier to become a CPA. Candidates will still need the same amount of hours of education and experience. If the changes to the statute are approved, it will allow those firms with candidates sitting for the exam to allow those staff to focus on practice areas or tasks that are their areas of expertise or specialization rather than moving them to an attest area to get a minimum number of hours.
In addition, future CPAs would no longer need to work in a public accounting firm. Individuals working in industry may also be able to earn the license, depending upon their experience and whether they are supervised by a CPA.
Mike Colgan is CEO and executive director of Pennsylvania Institute of Certified Public Accountants.