How to Select a CPA
A Certified Public Accountant (CPA) is a person who has met the requirements of California state law and has been issued a license to practice public accounting by the California Board of Accountancy.
A Public Accountant (PA) is a person who has met the requirements of California state law and has been issued a certificate of public accounting from the California Board of Accountancy.
Only persons who are licensed by the CBA may call themselves a Certified Public Accountant or Public Accountant.
CPAs and PAs are required to complete appropriate continuing education in order to be eligible to practice public accounting. A licensee who completes the required continuing education is renewed as "active." A licensee who does not complete the required continuing education is renewed as "inactive" and may not practice public accounting.
Word-of-mouth referrals from individuals who have used the services of a particular CPA are probably the best way to select a CPA.
When selecting a CPA, you should consider the following:
- Check the license status from our Web License Lookup or call the California Board of Accountancy at (916) 263-3680. Specifically, make sure the license is current and active (renewed with continuing education).
- Check whether there have been any enforcement actions against the licensee and how long he or she has been licensed.
- Interview the prospective CPA either by telephone or in person. A common inquiry is "what type of accounting work do you typically perform?" Compare the CPA's experience to your service needs.
- Ask about the office hours of the CPA; determine whether the office is open year-round; inquire if the CPA is available to take telephone inquiries. Ask what type of continuing education the licensee has taken recently.
- If the services you require include either reviewed or audited financial statements, ask the CPA if he or she participates in a peer review or quality review program? If yes, ask the year and month - and the result - of the most recent review.
- Effective January 1, 2002, some CPAs are authorized to perform a full range of accounting services including signing reports on attest engagements. Attest engagements include an audit, a review of financial statements, or an examination of prospective financial information. Others will be authorized to perform a full range of accounting services, including accounting, compilation preparation, management advisory, financial advisory, tax and consulting services, but will not be authorized to sign reports on attest engagements.
- Licensees are required to comply with Section 54.1 of the California Board of Accountancy Regulations. This regulation provides that no confidential information obtained by a licensee shall be disclosed without the client's permission. Therefore, you should ask whether the CPA discloses any of your confidential information to persons or entities outside the United States in connection with outsourcing any services provided by the licensee on your behalf. While other persons or entities may provide you with financial services, including tax preparation, it is important to be aware that Section 54.1 of the CBA Regulations pertains only to licensees of the California Board of Accountancy.
- Be aware that if your CPA prepares your tax return and offers you a Refund Anticipation Loan (RAL), the CPA must comply with disclosure requirements specified in the California Accountancy Act and CBA Regulations. An RAL is a loan that allows a taxpayer to borrow against an anticipated income tax refund. These loans actually are made by banks, but are frequently offered by tax preparers including CPAs in conjunction with preparation of the tax return. While these loans are most frequently described as an instant tax refund - as if they come directly from the California State Franchise Tax Board or Internal Revenue Service - they are in reality short-term loans that often have very high costs associated with them. Both the tax preparer and the lending institution often take commissions against the calculated tax refund - so the RAL is less than the amount of the actual tax return refund. CPAs offering RALs are required by Section 56 of the CBA's regulations to make specified written disclosures to consumer, including the dollar amount the CPA will receive for facilitating the loan. These disclosures must be made at or before the time of making the referral to the lender or performing other activities to facilitate the loan. These disclosures must be made at or before the time of making the referral to the lender or performing other activities to facilitate the loan, regardless of whether the taxpayer actually accepts the loan.
- Before any work is done by the CPA, it is important to make certain that you receive an engagement letter detailing the work to be performed for you, who will specifically be performing the work, including whether the work is outsourced, confirming that all private and personal information is secure, and specifying the cost of the services.
Attest Engagement: One in which the practitioner is engaged to issue, or does issue a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party. Attest services include an audit, a review of financial statements, or an examination of prospective financial information; however, attest services do not include the issuance of compiled financial statements.
Audit: Examination of a client's accounting records by an independent Certified Public Accountant (CPA) or Public Accountant (PA) to formulate an opinion on financial statements and/or financial information. The auditor must follow generally accepted auditing standards.
Continuing Education: Acceptable continuing education (CE) is a formal program of learning that contributes directly to the professional competence of a licensee in public practice. For additional information on acceptable CE see Continuing Education.
Financial Statement: Contains financial information about an organization. The required financial statements are balance sheet, income statement, and statement of cash flows. They may be combined with supplementary information to depict the financial status or performance of the organization.
Peer Review: The study, appraisal, or review conducted in accordance with professional standards of the professional work of a licensee or registered firm by another licensee unaffiliated with the licensee or registered firm being reviewed.
Review of Financial Statement: To perform an inquiry and analytical procedures that permit a Certified Public Accountant or Public Accountant to determine whether there is a reasonable basis for expressing limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles or, if applicable, with other comprehensive basis of accounting.