By Michael D. Colgan, CEO and executive director
The PICPA has received inquiries from several firms regarding the interpretation of Pennsylvania’s new CPE requirements, which were effective Jan. 1, 2018. Specifically, firms are asking for clarification on which licensees are now required to obtain 24 CPE hours of accounting and auditing (A&A).
Generally, the new regulations eliminate the minimum eight-hour tax requirement for all licensees, but require 24 hours (increased from 16) of A&A credits for those CPAs participating in attest activities. Licensees not participating in attest activities will have no A&A minimum. The four-hour biennial ethics requirement remains in place for all licensees. The changes allow licensees to select and complete CPE in the areas most related to their own professional development needs. The question firms have raised, however, is how to define “participating in attest activities” to determine whether or not licensees need to meet the expanded A&A requirement.
Examples raised have included a licensee who is a tax professional, but audits the tax provision included in the financial statements of a company; or a tax professional who completes an uncertain tax position checklist for a pass-through entity, corporation, or nonprofit, and may perform an analysis to determine if any uncertain tax position exists.
The PICPA requested clarification from the Pennsylvania State Board of Accountancy (SBOA) as to how to interpret the new regulations with respect to A&A. Here is the response, but in brief the SBOA is relying on the definition of attest activity in the CPA Law, but does not define the term “participating.”
From our discussions with the SBOA prior to these changes being adopted, I am confident that its intent on eliminating the minimum CPE requirements for A&A and tax for most licensees was to allow CPAs to determine which CPE would best help them maintain and build competencies in the areas in which they practiced. The SBOA included the 24 hours of A&A CPE for those participating in attest activities due to changes in the experience requirements to become a CPA, which no longer required a portion of the experience gained to come from the attest area. The intent, I believe, is not to require licensees who do not work in the attest area to increase their required A&A CPE from 16 to 24 hours.
The SBOA has verbally communicated that “participating” will likely be a firm-by-firm interpretation. Some firms may conclude that any service charged to an audit code defines participation, and will require their licensees to get 24 hours of A&A; others may deem the review of a tax provision as incidental and not fully participating in attest activity, so they will not require their licensees to get 24 hours of A&A.
The PICPA will work to add more clarity to the next revision of the CPA regulations, but that will not arrive prior to the end of the licensing period that concludes in December 2019.
Licensees will self-report on their license renewal applications in December 2019 on whether they participated in attest activities, which would trigger the 24-hour A&A requirement.
If you have additional questions, please do not hesitate to contact me.
For A&A courses provided through the PICPA, visit our Accounting & Auditing CPE page.