Regulation of Accountants

An accountant is a practitioner of accountancy, which discloses or assures about financial information that helps managers, investors, tax authorities and other decision makers to make resource allocation decisions.  In other words, an accountant is a person who is competent to design and control the systems of accounts required for records of diverse transactions of business, trade, and finance.

In the U.S., legally practicing accountants are known as Certified Public Accountants (CPAs).  Other non statutory accountants are Certified Internal Auditors (CIAs), Certified Management Accountants (CMAs) and Accredited Business Accountants (ABAs).

The practice of accountancy is regulated by the state under the police power of the state[i].  Several states have enacted accountant or accountancy acts for the purpose of regulating accountants[ii].  The underlying purpose of a state accountancy act is public protection[iii].

In the U.S., most of the states have statutes that provide for a state board of accountancy or a board of certified public accountants.  Statutes may require the registration of accountants and accounting firms with the state board of accountancy[iv].

The National Association of State Boards of Accountancy (NASBA) serves as a forum for the state boards of accountancy.  NASBA’s mission is to enhance the effectiveness of state boards of accountancy.

The American Institute of Certified Public Accountants (AICPA) is the certified professional association of Certified Public Accountants (CPAs) in the U.S.  AICPA deals with rule making, standard setting and legislative bodies, state CPA societies, and other professional organizations

It is well established through case laws that a state has the right to restrict the use of the words “certified public accountant,” “public accountant,” to those who have complied with statutory requirements for licensing or certification[v].

In Forget v. State ex rel. State Bd. of Pub. Accountancy, 265 Neb. 488 (Neb. 2003), the issue was whether an attorney, who had taken the CPA examination, but not completed the experience requirement which was necessary to obtain a CPA permit, can be considered as an “inactive” CPA.

The court observed that the attorney had not met with the requirements because the attorney failed to have the experience requirement.  Hence, the court concluded that the attorney was not an inactive CPA and his conduct violated the Public Accountancy Act and the regulations of the Board concerning the unlawful use of the designation “CPA.”

[i] Junco v. State Bd. of Accountancy, 390 So. 2d 329 (Fla. 1980)

[ii] Project Control Servs. v. Reynolds, 247 Ga. App. 889 (Ga. Ct. App. 2001)

[iii] Colo. State Bd. of Accountancy v. Paroske, 39 P.3d 1283 (Colo. Ct. App. 2001)

[iv] Colo. State Bd. of Accountancy v. Paroske, 39 P.3d 1283 (Colo. Ct. App. 2001)

[v] Forget v. State ex rel. State Bd. of Pub. Accountancy, 265 Neb. 488 (Neb. 2003)

Inside Regulation of Accountants