Changes ahead for accounting certification

Whether you’re already a Certified Public Accountant (CPA) or looking to become one, three proposed changes in the rules governing CPAs could have a major influence on your career.

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State accounting boards are considering (and in some cases have already made) changes in three areas of accounting certification: mobility, testing and International Financial Reporting Standards (IFRS).

Out-of-State Clients

Since states license them, CPAs who want to work for out-of-state clients have to navigate the licensing rules and regulations of other states. In 2006, the American Institute of Certified Public Accountants (AICPA) began lobbying states to create more uniform rules on mobility.

Sheri Bango Cavaney, AICPA vice president for practice mobility, says the new rules would act like a driver’s license. Once you’re licensed in one state, your license is good in any other state, but if you permanently move to another state, you need to apply for a new license.

There are two caveats in states’ practice mobility laws. First, a CPA who wants to serve an out-of-state client must notify the client’s state board of accounting that he intends to practice in the state. Second, accountants serving out-of-state clients agree to be regulated by the client’s state accounting board.

So far, 28 states have passed uniform CPA mobility legislation, three states have passed similar but not identical laws and another 15 are expected to join in by 2010, Cavaney says.

Sit at 120, License at 150

Another area where CPA licensing rules are changing involves CPA education and the timing of the CPA examination. Currently, most states require those who want to become CPAs to accumulate 150 hours of accounting education, including five states with an alternate licensing option. California, Vermont and New Hampshire require only 120 hours of education. Colorado now requires CPA candidates to have 120 hours of education for licensure but will require 150 hours starting in 2010.

CPA candidates from the 120-hour states can take advantage of the new mobility rules if they meet the 150-hour education requirement on their own, pass the CPA exam and then go through a qualification process offered by the National Association of State Boards of Accountancy (NASBA).

States also differ over when candidates can take the CPA exam. In 2008, 19 states allowed candidates to sit for the CPA exam after 120 hours of education and then to certify after 150 hours. “Many state boards that allow candidates to sit for the exam with less than 150 hours believe it is advantageous to candidates,” says NASBA CEO David Costello.

Data the NASBA collected from 14 states show that students allowed to test after 120 hours had higher passing rates on the audit and financial sections of the CPA exam than those who had to complete 150 hours. “However, candidates in [the 120-hour] states took some number of hours above 120 hours [because they needed 150 to certify],” Costello says. “We currently have no way of knowing the actual number hours they had taken prior to sitting for the exam.”

Denise Probert, CPA, vice president of CPA education for Kaplan Schweser and an associate professor in the Dahl School of Business at Viterbo University in La Crosse, Wisconsin, says CPA candidates should take the exam after 120 hours if they can. “Whether you’re 22 and you just finished your accounting classes, or you’re 57 and you’re just taking accounting classes now, taking the CPA exam as soon [as possible] after completing those college classes will improve your score, because that’s when the material is most familiar,” she says.

IFRS Not on the Exam -- Yet

A final trend that will affect CPA licensing is IFRS. Now that the Securities and Exchange Commission has announced a road map for moving from US Generally Accepted Accounting Principles to IFRS, CPA candidates will eventually need IFRS education.

However, accounting programs may not be ready to teach IFRS at this time. A survey done in July 2008 by the American Accounting Association and KPMG LLP found only 22 percent of 535 professors were ready to incorporate IFRS into curricula; 62 percent said they had taken no steps to include it in a significant way.

IFRS won’t be on the 2009 CPA exam. “After that, we don’t know, but it will be on the CPA exam eventually,” Probert says. “It could be as early as 2010.”

Students now in university accounting programs that don’t teach IFRS will want to sit for the test by 2009 or plan to pick up IFRS knowledge from a CPA review provider or as part of their coursework, Probert says.