By David L. Crawford

Boards of accountancy in each of the 54 U.S. licensing jurisdictions have been established to protect its citizens from receiving inadequate or incompetent accounting services. Each jurisdiction has regulatory language regarding the use of the titles “Certified Public Accountant” and “CPA.” Jurisdictions that allow a second class of licensed accountant (e.g., Public Accountant) also restrict the use of related titles. Nevertheless, restrictions on the use of titles such as “accountant” by nonlicensed practitioners are by no means uniform across jurisdictions.

While there is a movement toward uniformity under the Uniform Accountancy Act (UAA), a considerable amount of variation among the states remains with respect to CPA certification, reciprocity, classes of accountants, use of titles, and practice. Although many states have adopted portions of the UAA, none has adopted every one of its provisions. An unattributed article on the UAA in the January/February 1999 issue of the National Public Accountant noted
the amount of disparity:

Some states restrict the function of accounting while others rely on … acts which permit the rendering of accounting services, but prohibit the use of nomenclature normally associated with those services. A few states permit both the function and the use of specified language by nonlicensed individuals. Other states restrict the function and language to certified practitioners, while some recognize additional classes of licensees and permit varying levels of practice. With the exception of the audit function (which is generally restricted to certified public accountants), practitioners in each of these practice situations perform basically similar services.

All but four states restrict the types of reports and the language that can be used in those reports to licensed accountants. This restriction helps regulate the practice of accountancy but is not a complete solution. Nonlicensed practitioners can find different language or other means of communication that purport to say the same thing as language “restricted” to licensed CPAs.

Heretofore, no one, including the AICPA and the National Association of State Boards of Accountancy (NASBA), which published the Digest of State Accountancy Laws and State Board Regulations in 2000, has published comprehensive data on title regulations. But the public has a right and a need to know where certain titling is permitted and where it is restricted. Because public protection is the reason for licensing accountants in the first place, publicly available information that clarifies how accountants are regulated is a reasonable expectation. In addition, most accountants are aware of restrictions in the states in which they practice but may be uncertain about the regulations across state lines. Finally, state boards may be interested in such information, and indeed some boards requested a copy of the findings upon completion of this research.

To obtain information related to this issue, all 54 boards of accountancy were asked to answer a short survey. Forty of the 54 jurisdictions responded with a written answer or provided appropriate regulatory language. Follow-up telephone surveys and additional research provided information for the 14 nonresponding jurisdictions. The Exhibit (section 1 and section 2) presents each jurisdiction’s answers to the four questions in the survey.

The first question addresses the regulatory language used in the UAA. This language is meant to ensure that anyone using certain titles and designations adheres to an appropriate level of professionalism. The UAA considers the issue of nonlicensed practitioners in section 14(h)(2) by prohibiting titles that may be misleading and thus suggest licensure:

No person or firm not holding a valid certificate, permit, or registration issued under Sections 6, 7, or 8 of this Act shall assume or use any title or designation that includes the words “accountant,” “auditor,” or “accounting,” in connection with any other language (including the language of a report) that implies that such person or firm holds such a certificate, permit, or registration or has special competence as an accountant or auditor, provided, however, that this subsection does not prohibit any officer, partner, member, manager, or employee of any firm or organization from affixing that person’s own signature to any statement in reference to the financial affairs of such firm or organization with any wording designating the position, title, or office that the person holds therein, nor prohibit any act of a public official or employee in the performance of the person’s duties as such.

The research results indicate that four states have passed section 14(h)(2) of the UAA and thereby restricted usage of “accountant,” “auditor,” or “accounting” to licensed accountants. These states would automatically have answered yes to questions 3 and 4 which dealt with the terms separately.
In addition to these four states, another 18 jurisdictions answered yes to question 2, meaning they have adopted language similar to the UAA and, therefore, similar restrictions. This means that a total of 22 states have regulatory language close to that suggested by the UAA. Indeed, many states have very similar language that predated the UAA.

Analysis of questions 3 and 4 shows that nine more states have restrictions pertaining to use of the term “auditor” but have not chosen to restrict the term “accountant” to licensed practitioners. This makes a total of 31 jurisdictions that in some way restrict and regulate the use of titles by accounting practitioners. The remaining 23 jurisdictions have little or no regulation of the terminology. From the survey results, jurisdictions fell into three general groups: the 22 states that regulate the titles and designations similar to the UAA, the 23 states that have little or no regulation, and the nine states that have chosen to restrict auditing titles only.

The survey revealed the wide variety of regulatory language currently in existence. This inconsistency among states leads to reasonable questions to which there are no simple answers:

The recent controversy surrounding the AICPA’s global credential initiative underscores the importance of the CPA’s professional title and the value of uniformity within the profession.

Accounting is an information system. While CPAs want to be recognized as the premier information professionals they are, when performing traditional accounting services they often face the burden of competition from those outside of the profession. In the decades-long debate between licensed and nonlicensed practitioners, nonlicensed accountants usually oppose regulation by saying that restrictive language, such as that found in the UAA, creates artificial barriers to practice. CPAs counter that the barriers of the certification and licensing process exist to protect the public.

Another oft-heard argument is that there is a need for another class of accountants that are unlicensed and affordable to small-business owners. The problem with that argument is trying to put a price on competency. While it is safe to say there are competent unlicensed practitioners, measuring the competency of their work is impossible, because—

Therefore, it is unreasonable and impractical to protect the public’s best interest with another class of accountants that are not licensed.

Licensed practitioners in small firms might benefit more from uniform titling language than those in large accounting firms. Nonlicensed and unregulated practitioners in the small-business environment possess a competitive advantage: They have no prescribed requirements to meet and often are only answerable to their clients.
The disparity among the states regarding restrictive titling illustrates the CPA community’s political influence or lack thereof from one jurisdiction to another. Some would say that the accounting profession has achieved as much uniformity as is possible. Others believe that more public education, even political lobbying, on the issue is needed.

The accounting profession should continue seeking uniformity among the 54 jurisdictions to pave the way for UAA language that will better serve the public interest. CPAs must press for legislation, where needed, in order to ensure their exclusive right to use terminology basic to the public accounting profession.

©2002 CPA Journal. Legal Notices