The statutes governing the CPA profession in New Jersey have not been updated in nearly 20 years. They need to be updated to reflect changes in the business environment and CPA profession and to conform to the Uniform Accountancy Act (UAA). Working with the AICPA and NASBA, the Society drafted legislation to update the state’s accountancy law to make it conform with the UAA as much as possible. The bill was passed by full Assembly in June.
There are many changes in the bill, but most of them are technical. The most substantive are the following three changes:
UPDATE THE DEFINITION OF ATTEST
Revising the definition of attest to include any examination, review or agreed-upon procedure engagement performed utilizing the Statement on Standards for Attestation Engagements (SSAE). Currently, the only SSAE under the New Jersey Act’s attest definition is examinations of prospective financial information. This presents a potential risk to the public because some non-CPAs interpret it to mean that they are not restricted from using the SSAE language or standards. However, non-CPAs are not required to have the same experience, education and competencies, nor are they regulated by Boards of Accountancy like CPAs are. They do not have to provide the same protections to clients that CPAs do.
Clients and third parties, including the general public, rely on attest reports issued under the SSAEs and they need to be able to trust the quality of the information contained therein. Furthermore, the demand for attest services by CPAs has been changing over the past decade, and the proposed change to the definition of attest reflects that evolution while also respecting the rights of marketplace competitors. Under the proposed change, non-CPAs can continue to offer these services, but they can no longer reference professional accounting standards and benefit from the implied quality and oversight accompanying those standards. Thirty-five states now have this revised version of attest (including NY, CT and DE) and more are expected to follow suit in the near future.
The current law’s mobility provisions allow for out-of-state CPAs providing tax and non-attest accounting services to practice temporarily in NJ without registering with the state or getting a NJ CPA license. However, out-of-state CPAs who provide attest services must still register with the NJ State Board of Accountancy. The revised UAA eliminates that restriction. Currently, 15 states permit firm mobility and many more are expected to do so in the near future. None of the 15 states has experienced any problems with permitting out-of-state CPAs to do attest work.
The bill allows an out-of-state CPA to provide attest services in NJ without registering with the state and without having to have a physical office here. They can do attest work here under a process known as the “no notice, no fee, no escape” regime. The out-of-state CPAs do not need to give notice to the NJ State Board of Accountancy nor pay a fee when coming into NJ, but the CPAs will be subject to the full regulatory oversight of the Board as well as the CPA’s home state. All of these out-of-state CPAs must also follow NJ’s peer review requirements.
CONTINUING PROFESSIONAL EDUCATION RECIPROCITY
The bill allows for CPE reciprocity, which exempts CPAs who hold multiple state licenses from having to meet the individual CPE requirements of each state so long as the licensee meets the CPE requirements of their home state. Currently, 22 states allow for CPE reciprocity and none has experienced any problems with it. More states are expected to follow suit.
For CPAs with multiple licenses, it has increasingly become a challenge to maintain CPE compliance in jurisdictions where a license is maintained, but that is not the primary place of his or her business. The paradox that currently exists is that under legislation enacted several years ago, CPAs without a license in NJ are allowed to practice here without having to fulfill NJ-specific CPE requirements. Thus, most of the out-of-state CPAs doing work in NJ already do not have to meet NJ’s specific CPE requirements.