CPA Mobility: Separating fact from fiction

Mobility is critical for CPAs, allowing them to serve clients and provide services across multiple state lines without getting individually licensed in each jurisdiction. The accounting profession's mobility rules are also complex and often misunderstood. This confusion can foster unnecessary fears that any state-level changes to licensing rules (such the "150-hour" rule) could automatically restrict the cross-border practice abilities of CPAs.

In reality, the guidelines around mobility contain far more flexibility than is commonly realized. The Uniform Accountancy Act that underpins CPA licensing prioritizes adaptability, not rigid uniformity. As David Knoble, chair of the South Carolina Association of CPAs, points out, "The ultimate goal is flexibility. The key is flexibility."

Knoble shared his detailed analysis on an episode of The Accounting Podcast. He provided clarity around CPA mobility by separating fact from fiction. He busted myths around mobility and shed light on the wiggle room for states to modify their licensing requirements without impeding the cross-border practice rights of accountants.

Here is a summary of key points from my interview with Knoble. By the end, I hope you'll understand what mobility truly means and how the accounting profession can thoughtfully adapt licensing rules to best serve the public interest.

Why South Carolina wants to modify the 150-hour rule

The SCACPA has proposed changes to South Carolina's accountancy laws to clarify the flexibility provided to the Board of Accountancy in determining the requirements for initial licensure of CPAs.

According to the SCACPA, the goal is to offer a zero-day benefit to working accounting graduates that might otherwise not see a clear path to becoming a CPA. This change allows for innovative educational options that offer more flexibility than current solutions. It also reduces the cost of entry into the profession, making it more attractive for first-generation college students.

The SCACPA believes that access to the profession should align with the changing world — both in terms of flexibility and expectations. The association also believes it can bring about this change without compromising license standards or limiting CPA mobility.

Knoble explains that the proposed bill maintains the 150-hour requirement. And it clarifies the authority of South Carolina's Board of Accountancy to accept alternatives like lower-cost certificate programs in place of 30 semester hours on a college transcript. Knoble says, "Why would we not take our universities across the country, let them use their executive programs and come up with lower cost education processes that are the same types of classes" as those that are taught in traditional programs?

Leveraging the flexibility within the UAA, South Carolina provides an example of adapting licensure requirements while sustaining commitments to equivalency and mobility across states. Their approach aims to balance innovation, pragmatism, and the maintenance of high professional standards.

What is CPA license mobility?

CPA mobility refers to the ability of CPAs to practice across state lines without getting licensed in each jurisdiction. Mobility is made possible through mutual recognition of licensing requirements by states under substantial equivalency rules or through individual state mobility laws.

With mobility, properly licensed CPAs can perform services like audits, reviews, compilations, and tax preparation for clients in other states without needing a separate license in each state. Certain conditions must be met around agreeing to follow the destination state's rules, but the overall framework aims to facilitate cross-border practice. 

Mobility enables firms to better serve clients with multistate needs and allows individual CPAs to broaden their professional reach.

Substantial equivalency's role

How does mobility work across different state licensing requirements? This is where substantial equivalency comes into play.

Substantial equivalency refers to a determination that the education, examination and experience requirements for licensure in a given state are essentially equivalent to the national standard embodied in the UAA. If CPAs are licensed in a state deemed substantially equivalent, they can practice using mobility without applying for an additional license. 

Many states rely at least partially on the National Association of State Boards of Accountancy to make substantial equivalency determinations for mobility purposes. It is unknown how many states rely on NASBA in this regard. (However, all states rely on the concepts of Appendix B of the UAA, which include education, experience and the exam.)

As we'll explore later, substantial equivalency is not required for mobility in all cases. But it is the primary mechanism for facilitating reciprocal recognition of license portability across states.

Now that we've defined mobility and substantial equivalency, let's dispel some of the common myths around this topic.

Myth: All states have identical experience requirements

A common myth is that CPA licensing works seamlessly across states because all jurisdictions have identical education, exam and experience requirements for licensure. An example is the one year of experience required to become a CPA. However, as Knoble points out, "'One year' means many different things" among the states.

Required hours range from 1,000 to 2,000 across states. For example, Hawaii requires 1,500 hours of experience — without saying how long you can take to earn it. Yet North Carolina requires a minimum of 30 hours per week for 52 weeks. That's 1,560 hours, but if you miss one week, you have to start all over. Arkansas, on the other hand, requires 2,000 total hours of work experience.

There are also differences among the states as to the type of work experience required. Supervision policies fluctuate, too. North Carolina requires one year under the direct supervision of a CPA, or four years of experience without direct CPA supervision. While many states require audit hours, California allows general accounting work experience to fully substitute for any requirement of specific attest hours.

The notion of a uniform one year experience requirement is certainly fiction.

Myth: All states have identical education requirements

When it comes to education, states range from accepting 120 semester hours up to requiring 150 hours with constraints on accounting, business, and other coursework. Exam requirements also vary, with some states mandating additional sections beyond the Uniform CPA Exam. 

Some states permit experience to directly substitute for education time. In New York, the first state to establish a CPA license, you can become a CPA without any formal education — not even a bachelor's degree! If you have 15 years of public accounting experience and you pass the CPA exam, you can become a fully licensed CPA in New York.

States also have leeway in interpreting acceptable coursework. The courses and transcripts that are accepted for initial CPA licensure vary widely.

So, uniform requirements for CPAs are certainly not universal among all states. The reality is that states have considerable flexibility in shaping their initial licensing requirements within the framework of the UAA.

Myth: Education requirements are set in stone

Education requirements are also not set in stone across states. That's because the UAA does not specifically mandate 150 semester-hours. Knoble points out "Appendix B [of the UAA] explicitly removes the term semester. It says '150 hour education requirement.'" The 150-hour rule has inbuilt flexibility, despite assumptions.

Hood, Daniel

Myth: States rigidly follow the UAA

States don't rigidly follow the Uniform Accountancy Act verbatim. The UAA is a "suggested rule because NASBA can't set state statutes," says Knoble. The UAA sought to provide flexibility, not rigidity. 

States adopt UAA provisions selectively based on local needs. According to Knoble, "Each state at the end of the day has their own choice as to how they're going to take care of licensing." The UAA offers an adaptable framework, not prescriptive uniformity.

Myth: NASBA alone determines substantial equivalency

Many believe substantial equivalency decisions come solely from NASBA's National Qualification Appraisal Service. But state boards often have a role too. Knoble says, "Some states rely on the board or NASBA, and either one could determine substantial equivalency." 

Alaska gives its board exclusivity in equivalency judgments. Other states empower boards to override NASBA. Judgments involve both entities in many cases, allowing for greater adaptability.

Myth: Any change breaks mobility

Another myth is that any licensing change immediately restricts mobility. However, changes to initial licensure requirements do not necessarily trigger a domino effect limiting mobility. It all depends on the nature of the change.

This is because mobility rules are implemented differently by each state. Outbound mobility of their own CPAs is beyond the control of a state, but they have full control over the inbound mobility of CPAs from other states.

To some extent, mobility is already fragmented since it lacks perfect consistency among states. CPAs utilizing mobility must take the initiative to research and understand the requirements of the state they are working in.

Myth: Mobility is ironclad

Mobility is not an airtight system preventing unauthorized multistate practice. Knoble says, "I think mobility to a degree is already broken. There's so many different laws." 

Mobility relies heavily on voluntary compliance. States have limited ability to monitor and enforce compliance by mobile CPAs. As Knoble notes, one can "fly under the radar across borders." 

While a discipline framework exists, enforcement is inconsistent. In practice, mobility rules are far from watertight.

The flexibility already exists to modernize the 150-hour rule

The truth is considerable flexibility exists within mobility rules. Mobility does not hinge on identical regulations or rigid adherence to model provisions. Quite the opposite — adaptability is ingrained in the UAA framework underpinning mobility. 

The UAA seeks to "allow maximum mobility of CPAs" through reasonable flexibility, not rigid uniformity. With this foundation, thoughtfully adapting requirements need not jeopardize ethical cross-border practice.

Conclusion

Mobility relies on state cooperation, not lockstep conformity. The UAA provides extensive flexibility to update requirements while sustaining license portability. Nuance matters in licensing. 

And that gives South Carolina the flexibility it needs to make a change to improve the CPA pipeline. As Knoble says, proposed requirement changes are "not changing our initial licensure process at all." And therefore, the mobility of South Carolina's CPAs should not be impacted by the changes SCACPA is proposing.

Considered innovation aligns with current mobility frameworks. Through clarity around mobility, the profession can adapt licensing in a balanced manner to meet evolving needs while protecting the public interest and continuing to enable multistate practice.