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State Board Report

May 2016

In the March 2015 President’s Memo entitled "Changing Our International Thinking," I began the discussion of how the U.S. Boards of Accountancy currently recognize non-U.S. accountants holding professional designations, and how this limited model might need to change. This April we passed an important milestone in that discussion when the Boards of NASBA and AICPA approved the exposure of Uniform Accountancy Act (UAA) proposed language that would add to the existing mutual recognition agreement (MRA) model a new unilateral pathway, which I described in the March Memo.

While a 14-month development period may seem overly long, it is actually expeditious when considering the significance of the change being exposed. We have had the current MRA procedures in place since about 1991, so 14 months to work through a change does not seem excessive. Last year I explained that the current MRA guidelines do not allow for granting a CPA to a professional from a country that has not made reciprocal provisions for U.S. CPAs. As an example, consider a country that has a large number of well-educated accountants who would like to have practice privileges in the U.S., but because their country requires six years of attest experience before they are granted audit practice privileges, the auditing oversight body will not enter into an MRA, as it is possible that a U.S. CPA might have only one year of experience. Without an MRA, an accountant from that country would have to file an initial application for licensure, be individually evaluated, and ultimately sit for all four parts of the Uniform CPA Examination. This puts the State Board in the position of determining equivalence of that credential and discourages senior experienced professionals from trying to become licensed. When IQAB was formed it was with the idea that one body would take the time and resources to do in-depth research on non-U.S. credentials to determine if they were substantially equivalent to the U.S. CPA, so that individual Boards would not be faced with this challenge. In turn, those coming from other countries would know that their professional qualifications would be recognized based on a State Board’s adoption of the MRA developed by IQAB.

In early 2015, the leadership of NASBA and AICPA asked the NASBA/AICPA International Qualifications Appraisal Board (IQAB) to develop a different approach for identifying and accepting qualified international accountants from countries where a mutual recognition agreement is not in place. For lack of a better term, we are calling this process a unilateral approach to recognition. The language presented and approved at the April Boards of Directors’ meetings fulfilled that request.

Some Boards of Accountancy may wonder why an expanded and realigned reciprocal model is necessary, particularly states that see very few applicants for license from international locations. However, all Boards should be interested in the arguments behind this effort to ensure all professionals practicing public accounting are under the regulation of the State Boards.

Many of us have heard that the number of new CPA applicants is somewhat flat at a time when firms are hiring record numbers of candidates while a significant population of baby-boomer CPAs are retiring. We know that thousands of international accountants are living and working in the U.S. in accounting firms and private industry. In our discussions with organizations like the Association of Chartered Accountants in the United State (ACAUS) we have seen surveys and evidence that many of these individuals would seek state licensure if there were a viable pathway available to them that would readily recognize their foreign credential coupled with years of professional experience and the passing of the U.S. International Qualification Examination (IQEX).

We will be discussing the relevant UAA language at our Regional Meetings in June. A part of that discussion will be an explanation of the current global practice privilege environment and how the traditional MRA model has been a barrier to recognition of highly qualified professionals. It is our hope that all Boards of Accountancy will consider the soon-to-be exposed language and will reach out to NASBA with any questions or for support that we can provide. This effort will be spearheaded by State Board volunteers, with NASBA Vice Chair Telford Lodden (IA), who serves as Chair of NASBA/AICPA IQAB, leading this program.

I hope everyone had a very successful "busy season", will have a great summer, and be able to attend one of the NASBA Regional Meetings. There are several very important issues to be discussed. Plenty to talk about — including "thinking internationally!"

Semper ad meliora. (Always toward better things.)

— Ken L. Bishop
President and CEO

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