Win Win - accountants licensure

California CPA, Oct, 2001 by Tom Dalton

2 Pathways for CPA Licensure in California

Patiently awaiting signature, somewhere among the heaps of IF bills on Coy. Davis' desk in Sacramento, lay AB 585 and SB 133. These two laws-in-waiting dramatically change the licensing requirements for California CPAs. They don't make it easier to become a CPA, instead they reflect the natural evolution of the profession and offer two similar, yet distinctly different licensure pathways.

In response to this legislation, the California Board of Accountancy has proposed new regulations to implement the changes in CPA licensing requirements that take effect next year These regulations address several issues including transition rules, education requirements, examination elections and qualifying experience. If adopted, both the new law and proposed regulations will take effect Jan. 1, 2002.

Relying heavily on task force recommendations, the CBA will substantially revise current regulations to reflect AB 585 (Nation, Campbell) and SB 133 (Figueroa et al.). Further, the new law extends California's present requirements until Dec. 31, 2005 for candidates already in the CPA pipeline.

Two New Pathways

AB 585 and SB 133 offer candidates two new pathways for certification. Both pathways require candidates to complete a bachelor's degree with 24 semester units of accounting-related courses and 24 semester units of business-related courses before sitting for the Uniform CPA Examination. However, after that point, the two pathways diverge.

THE EXAM

Pathway 1 allows candidates to pass the exam under the current format: A candidate must sit for at least two parts of the exam initially. Once passed, candidates may sit for the remaining sections individually.

Pathway 2 follows the Uniform Accountancy Act (UAA) format and requires a candidate to sit for all unpassed sections concurrently. To receive passing credit for a section under Pathway 2, a candidate must pass at least two sections, and receive at least 50 percent on all unpassed sections.

Conditional credit under both pathways is good for only three years.

EDUCATION

Pathway 1 requires no additional education for licensure beyond that needed to sit for the exam (i.e., a bachelor's degree with the required accounting and business units).

Pathway 2 requires 150 total semester college-level units for licensure. The extra units (beyond those required to sit for the exam) can be in any subject.

EXPERIENCE

Pathway 1 requires two years of accounting experience for licensure.

Pathway 2 requires only one year of accounting experience for licensure.

In both pathways, the experience can be general (including non-public accounting experience) and must occur under a CPA licensed to practice in a valid jurisdiction.

RECIPROCITY

Pathway 2 provides reciprocity with other states under the UAA, whereas Pathway 1 does not. This is an important consideration for candidates choosing a licensure pathway.

The UAA has been enacted in 46 states as well as the District of Columbia. In an increasingly global environment, a CPA license earned under UAA conditions (Pathway 2) offers a significant career advantage. CPAs whose licenses are UAA-compliant also will be substantially equivalent in all but four states, a factor that will continue to increase in importance for CPA firms and businesses as they consider job candidates.

CHANGING PATHWAYS

A candidate can switch from Pathway 2 to Pathway 1 at any time, however a candidate cannot switch from Pathway I to Pathway 2 without retaking the entire CPA exam. The CBA considers the implications of reciprocity and pathway switches so important that it has designated Pathway 2 as the default option. Candidates are automatically in Pathway 2 unless they elect -- in writing -- to follow Pathway 1. Additionally, the CBA is considering talking to candidates who choose Pathway 1 to ensure that they understand the ramifications of their choice.

The present CPA requirements will remain in effect for only those candidates who applied, qualified and sat for the May 2002 or prior examination until Dec. 31, 2005. All other candidates will be placed in Pathway 2 unless they elect Pathway 1.

AUTHORITY TO SIGN AUDITS AND REVIEWS

Although audit experience is not required under either Pathway 1 or Pathway 2 for licensure, at least 500 hours of supervised audit experience is required before a CPA has the authority to sign audit and review reports under either pathway.

Of course, candidates qualifying under the old rules are required to obtain at least 500 hours of audit experience anyway and will therefore have signing authority (although not reciprocity under the UAA unless all the UAA requirements were met).

Transition Rules

CBA-proposed regulations clarify several points in the new law.

First, there is a question of equity for candidates who will have passed the entire CPA exam under the old rules prior to end of 2001, but have not completed the experience requirement. These candidates may have fulfilled all the requirements for qualifying under Pathway 1 or Pathway 2 except that when they passed the CPA exam, they did not have a bachelor's degree Or, they may have passed the exam by taking only two sections at a time (without earning at least a 50 percent score on all unpassed sections) and therefore do not meet Pathway 2 requirements (the UAA path).