In May 2014, the AICPA and National Association of State Boards of Accountancy (NASBA) released the 7th edition of the Uniform Accountancy Act (UAA). The UAA is an "evergreen" model licensing law developed to provide a uniform approach to regulation of the accounting profession. The changes made in the new UAA are designed to ensure protection of the public interest and to respond to evolving changes in the practice of accountancy. Specifically, the 7th edition contains important revisions to the definition of attest and CPA firm mobility.
Changes to the Definition of Attest
Attest services generally include audits, reviews of financial statements, examinations of prospective financial information, or any engagement required under the U.S. securities laws (i.e., Public Company Accounting Oversight Board engagements). They are limited to licensees and CPA firms, and licensees can only perform these services through a CPA firm. Performing attest services in a CPA firm ensures for quality control protocols and processes inherent to CPA firms. It also ensures that these services are performed under robust regulatory oversight by state (and sometimes federal) agencies, in addition to a robust peer review process.
Despite the narrowly targeted focus of the definition of attest, the scope of the definition of attest can change unexpectedly through a change in the referenced AICPA standards. Indeed, that is exactly what happened when the Statement on Auditing Standards (SAS) 70, Reporting on Controls at a Service Organization, was rewritten and reissued as SSAE 16. This reclassification of a standard by the AICPA had the unintended effect of moving the standard out from under the definition of attest.
In addition, over the past decade, the marketplace and needs of clients have been changing. CPAs increasingly have been asked to provide, and have been providing, attest services on engagements not originally contemplated when the AICPA’s Statement on Standards on Attestation Engagements (SSAE) were written (examples include sustainability reports, greenhouse gases, the use of XBRL, and reports on service organizations). In responding to these evolving needs, CPAs have been able to apply generally the basic concepts underlying audits and review to these attest services. Because the attestation standards are a natural extension of the ten generally accepted auditing standards, they require the need for technical competence, independence in fact and appearance, objectivity and integrity, due professional care, adequate planning and supervision, sufficient evidence, appropriate reporting, and the application of professional judgment, all of which are unique hallmarks of a CPA.
Definition of Attest Timeline
In July 2013, the AICPA and NASBA exposed language for public comment to amend the definition of attest so that all engagements performed under the AICPA’s Statement on Standards on Attestation Engagements (SSAE) could only be performed by licensed CPAs operating within a CPA firm licensed in the United States. At that point, the only SSAE included in the UAA definition of attest was examinations of prospective financial information.
Based on the comment received, in December 2013, the joint AICPA/NASBA UAA Committee voted to recommend to the AICPA and NASBA Boards of Directors that the UAA’s definition of attest be amended as proposed in July 2013 Exposure Draft.
In early 2014, both the AICPA and NASBA Boards respectively voted to approve the changes made in the UAA. The approved language was inserted into the new 7th edition of the UAA and released in May 2014.
Addition of Firm Mobility
The second major change to the new UAA is the inclusion of a CPA firm mobility provision. A CPA firm mobility initiative was originally proposed in conjunction with individual CPA mobility initiative in 2006. However, any action to move forward with firm mobility was deferred because many states still did require peer review or did not have simple majority ownership of CPA firms at that time. Based on the incredible success of that initiative (to date, 50 of the 55 U.S. jurisdictions have passed individual CPA mobility legislation and are in the implementation phases), and many states have moved forward with peer review and firm ownership, it is appropriate to address adding firm mobility language to the UAA. In addition, to date, nearly one-third of U.S. jurisdictions have CPA firm mobility language in their statutes.
CPA firm mobility allows a CPA firm to provide attest services in another state where it is not registered and does not have a physical office, under a "no notice, no fee, no escape" regime. Under firm mobility, a firm does not need to give notice to the State Board of Accountancy nor pay a fee when coming into the state to provide services. However, the firm is subject to the full regulatory oversight of the state it is visiting as well as the firm’s home state. Under the previous UAA, CPA firms had this privilege only for non-attest services. In addition, in order to qualify for firm mobility privileges, a CPA firm must meet the peer review requirements and CPA-ownership requirements of the state in which it is seeking to practice. If the firm cannot meet those requirements, then it must obtain a license in the practice privilege state before providing attest services there. In conjunction with the CPA firm mobility language changes, the new UAA also contains a provision requiring that non-CPA owners of CPA firms be of "good moral character." This new language, while not directly related to mobility, is an important provision in protecting the public interest.
Under firm mobility, CPA firms would now be able to enter a mobility jurisdiction, where they are not registered, offer services and not have to pay any fees or give any notice to the mobility jurisdiction’s Board of Accountancy. However, just as with individual mobility, should the CPA firm be found to have engaged in wrong doing, by virtue of entering that mobility jurisdiction, it would be subject to the regulatory jurisdiction of that Board of Accountancy as well as its home state jurisdiction.
CPA Firm Mobility Timeline
In October 2013, the AICPA and NASBA exposed proposed UAA language for public comment to allow for firm mobility. The proposal exempts out-of-state firms from registration requirements and fees when providing attest services, while ensuring that they are subject to accountancy laws and regulations in both the state in which they are providing services and the state in which they have a physical presence.
In February 2014, the UAA Committee gave unanimous approval to new language allowing for CPA firm mobility within the UAA.
In Spring 2014, both the AICPA and NASBA Boards respectively voted to approve the changes made in the UAA. The approved changes were inserted in the new 7th edition of the UAA and released on May 2014.
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