Updating New Jersey's Accountancy Act

Two Pro-CPA Bills Pass Assembly, Senate

Posted: October 30, 2018
Bills that address New Jersey's accountancy act and protection for New Jersey State Board of Accountancy members progressed in the legislative process on Oct. 29.

NJCPA Urges Yes Vote on S2962 to Update Accountancy Statutes

Posted: October 15, 2018
NJCPA provides testimony in support of bill that would update and modernize New Jersey's Accountancy Act.

Three NJCPA-Supported Bills Pass Legislative Committees

Posted: September 20, 2018
Bills that address Section 1202 capital gains tax breaks, New Jersey's accountancy act, and protection for New Jersey State Board of Accountancy members passed legislative committees on Sept. 13.

Bill Would Update New Jersey's Accountancy Statute to Conform with the UAA

 – September 20, 2018
Bill Would Update New Jersey

The statutes governing the CPA profession in New Jersey, (Accountancy Act of 1997, P.L. 1997, c.259), have not been updated in almost 20 years. They urgently need to be updated to reflect changes in the business environment and CPA profession and to conform them to the 2014 edition of the Uniform Accountancy Act (UAA). The UAA is model legislation written jointly by the National Association of State Boards of Accountancy (NASBA) and the American Institute of CPAs (AICPA).

The UAA is an "evergreen" model licensing law developed to provide a uniform approach to regulation of the accounting profession. It is designed to ensure protection of the public interest, respond to evolving changes in the practice of accountancy, and make the interstate practice of accounting efficient. All of the states in the country adhere as much as possible to the UAA.

Most of the changes to New Jersey's accountancy statute that are in A935 are technical in nature. The changes that are substantive include provisions that would change the definition of attest, reduce the administrative burden facing out-of-state firms that perform attest services in New Jersey, and reduce the burdens that CPAs with licenses in other states face when they try to fulfill New Jersey's continuing professional education requirements.

The NJCPA urges the Legislature to pass A935 so that the laws governing the profession are modernized to reflect the changes that have taken place over the past 20 years and so that our laws better conform to the accountancy laws of other states. This will benefit all parties: the public, the business community, the CPA profession and the state of New Jersey.

Below are the three most significant changes to the Accountancy Act that are in A935.

Update the Definition of Attest

A935 revises 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 our 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 our 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.

Firm Mobility

A935 updates the current statute’s “mobility” provisions to make them conform to the UAA. The current law’s mobility provisions allow for out-of-state CPAs providing tax and non-attest accounting services to practice temporarily in New Jersey without registering with the state or getting a  CPA license. However, out-of-state CPAs who provide attest services must still register with the New Jersey State Board of Accountancy. The revised UAA eliminates that restriction. Currently, 17 states permit firm mobility and many more are expected to do so in the near future. None of the 17 states have experienced any problems with permitting out-of-state CPAs to do attest work.

[For historical reasons, eliminating the restrictions on out-of-state CPAs providing attest services is known as “firm mobility.” However, firm mobility is really a misnomer as it applies to CPAs who are sole practitioners as well as firms and its focus is only on attest services. A more accurate description would be “Attest Mobility.”]

A935 allows an out-of-state CPA to provide attest services in New Jersey without registering with the state and without having to have a physical office here. These CPAs 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 New Jersey State Board of Accountancy nor pay a fee when coming into New Jersey, 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 New Jersey's peer review requirements. In addition to making it easier for CPAs to practice in New Jersey, this should remove some of the paperwork that the already overburdened New Jersey State Board of Accountancy must handle.

[There are currently 155 out-of-state accounting firms registered with the Board, which means that the loss of revenue from enacting this provision would be only about $8,500 annually.]

Continuing Professional Education Reciprocity

A935 changes the provisions regarding continuing professional education (CPE) to allow for what is often called “CPE reciprocity.” CPE reciprocity 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, 24 states allow for CPE reciprocity and none have 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 New Jersey are allowed to practice here without having to fulfill New Jersey-specific CPE requirements. Thus, most of the out-of-state CPAs doing work in New Jersey already do not have to meet New Jersey's specific CPE requirements.