00;00;01;26 - 00;00;23;15 Speaker 1 Hello and welcome to another episode of the California Board of Accountancy Accounting for California podcast. My name is David Hemphill. I'm an information and planning officer here at the CBA, and I'm happy to be joined by our chair of one of the CBA's advisory committees, the Qualifications Committee. Mr. Michael Williams, CPA. Hello, Michael. How are. 00;00;23;15 - 00;00;25;03 Speaker 2 You? I am well, David, how are you? 00;00;25;05 - 00;00;52;21 Speaker 1 I'm doing very well today. Thanks. I hope we're going to have an episode here that'll be beneficial to consumers, as they're looking to either select a CPA or, determine if their CPA can perform some services that they may request of them. So one of the things that we're always encouraging consumers to do, as they're selecting or choosing their CPAs, go to the CBA website to verify someone's license with the license lookup feature, which is right there on the front page. 00;00;52;23 - 00;01;02;26 Speaker 1 One of the fields is experience completed, and there are two possible options which could come up, which are A and G. Can you explain to us what those different options mean? 00;01;03;03 - 00;01;25;10 Speaker 2 Sure, David. An A means the CPA can perform all accounting services and is authorized to sign reports on a test engagement. And so let's we call it an a test authority going forward. here for this podcast. And a G means a CPA can perform all accounting services, but they're not authorized to sign a report, a test type engagement. 00;01;25;15 - 00;01;31;12 Speaker 1 Okay. So what then? Can you explain what signing reports on a test engagements entails? 00;01;31;12 - 00;01;55;16 Speaker 2 Then a test is to certain things that you have, you've agreed upon with the client to perform what type of, reporting to perform. And that many times our audit report or, agreed upon procedures, review of reports. There's there's different kind of reports that CPA is issue for clients. So the a test authority is is a signer of those reports. 00;01;55;21 - 00;02;04;27 Speaker 2 The person with a G cannot sign those. They can do all the other work, but they cannot sign the reports. That's left to, a person with a test authority. 00;02;05;03 - 00;02;15;02 Speaker 1 So if your CPA was able to prepare the reports but not able to sign them, then what would what could they do? They would have to go to another CPA to sign them. Or how does that work? 00;02;15;03 - 00;02;36;22 Speaker 2 Well, it would need to be a CPA with a test authority. And, you know, in order to sign, they would review the work that was performed to ensure that it met all standards. CPA commonly work together depending on on, if they have a test authority or not for reporting, but it would have to be a CPA with the A test authority they would review. 00;02;36;22 - 00;02;42;06 Speaker 2 The reporting was that needs to be, signed off to ensure that it met all standards. 00;02;42;11 - 00;02;47;25 Speaker 1 Sure. So why would a consumer need a CPA with a test authority versus one without. 00;02;47;29 - 00;03;17;06 Speaker 2 You know, it always comes to mind are banks. Banks require from clients audits or review work performed when they're making loans. And that probably reduces their risk if they see that the client financials are in order and strong so that they can make a loan. But different types of entities will require their clients to have audits, reviews agreed upon, a procedures for assurance purposes, for whatever, kind of business they're transacting with the client. 00;03;17;09 - 00;03;26;15 Speaker 1 Are there any times where an individual consumer, let's say not a business owner, would need some of these reports that would require a CPA with the test authority? 00;03;26;18 - 00;03;49;18 Speaker 2 Well, I think I know what it comes up, but, you know, someone's getting a divorce or something. And then there's people want to know how to split the assets and what assets there are. I mean, you would probably have a CPA do something with, certain agreed upon procedures. I don't know why that comes up, but there's a lot more than just a bank asking for that, for example. 00;03;49;18 - 00;04;12;02 Speaker 2 I mean, SEC reporting, right. publicly traded companies have to have audit reports, LLC, in some cases, probably have to have audit report. So there's a lot out there that that require services from a CPA that makes sense. I just think of things about, you know, needing a report and having a trusted professional sign off on that report. 00;04;12;02 - 00;04;28;28 Speaker 2 And what comes to mind is a trusted professional to me is a CPA. And what that attests experience. And so that gives the consumer greater, confidence that whatever those agreed upon procedures are or whatever that that audit is, is done properly and follows, all guidance. Right? 00;04;28;28 - 00;04;52;25 Speaker 1 I like that you know, the word trust because that's something that we really want consumers to feel about CPA is because in order for someone to obtain their CPA license, they have to get quite a bit of education. They have to have experience, they have to pass some ethics requirements. And then even as they move forward, there is continue education that comes along with their renewal cycle every couple of years. 00;04;52;25 - 00;05;02;24 Speaker 1 So a CPA should be someone that the consumers feel that they can trust. So what are the requirements for an applicant to get licensed with the attest authority. 00;05;03;01 - 00;05;22;08 Speaker 2 So it's a ten year licensure for test authority. There's a minimum of 500 hour requirement under a licensed CPA with a test authority. And, you know, typically there's more hours worked than that. But that's the minimum requirement. And that's how the individual obtains the knowledge and experience to perform a test audit. 00;05;22;13 - 00;05;33;27 Speaker 1 So we can be confident and trust again that if someone does have that license with a test authority that they've spent many, many hours doing this work previously and are ready to do it for you, essentially. 00;05;33;27 - 00;05;54;00 Speaker 2 Yeah. And that that gives you the confidence they have the requisite skills and education and work that has allowed them to be able to attest. And so it's kind of a robust amount of work that needs to be completed before you know that type of licensure. So you should have a very good confidence that a person, has been vetted, so to speak, to enable them to do that type of work. 00;05;54;00 - 00;05;54;12 Speaker 2 Right. 00;05;54;12 - 00;06;15;03 Speaker 1 The CDA actually had a task force. they looked into this experience requirement about a year, a couple of years ago for a test authority. It was called the consideration of the CPA Experience Requirements Task Force. It was called CERT for short. And I know you were actually a member of CERT. So can you briefly, just tell us what were the findings of that task force in the end? 00;06;15;05 - 00;06;42;01 Speaker 2 Yes, I was a member and I there were questions about, the requirements for a test experience, whether they were too difficult for people to obtain the test designation. So we look to determine what are the requirements that the state has now, should they be modified, should they be reduced, expanded, etc.. And we determined that they were that what is required now is the way it should go. 00;06;42;02 - 00;07;04;19 Speaker 2 And there were going to be no changes to the requirements. we did a lot of in-depth, we had, discussions with outside groups, within people in the profession and came to the conclusion that what the state is asking or requiring, is important for the test experience, and it's important for the trust of the community. 00;07;04;19 - 00;07;05;21 Speaker 2 So we kept it. 00;07;05;22 - 00;07;25;27 Speaker 1 Right. So at the end of the day, like you said, that trust and confidence that if they have that a test authority, that a designation, then they should know that these this is a very high bar, very high standards that, the CBA is ensuring that these people have gained this experience before they can get that, have the ability to sign these reports. 00;07;26;00 - 00;07;28;05 Speaker 1 So that should make the the consumer feel good. 00;07;28;05 - 00;07;54;28 Speaker 2 I agree 100%. you know, every state is different and their requirements. And I like to think I think California and is probably the leader on that as far as the expectations and the requirements for a test. And I think that's why, you see, and I'm on the qualification committee, as you mentioned, we have a lot of out of state and a lot of international applicants that, want to be licensed in the state of California because I think, it is it's a high bar. 00;07;55;00 - 00;08;25;19 Speaker 2 Yeah. Part of the cert recommendation, was, was, to to keep the, requirements as is, were for the consumer. And so what we're trying to do is educate the consumer that as I said earlier, we we have a very, robust process to ensure that, test experience is met and, performed so that consumers understand the difference between CPAs with and without a test facility, which is one reason for doing the podcast. 00;08;25;19 - 00;08;46;02 Speaker 2 Right? Because there's there's some confusion when people, you know, story when when I tell people I'm a CPA, most times they think, oh, you do taxes? Well, no, I don't even do taxes. I never have been an auditor for a long time. And that's the consumer needs to understand there's a difference between tax and audit, and there are requirements for both right now. 00;08;46;02 - 00;08;53;18 Speaker 1 Here's another wrinkle, I suppose. So as every CPA with the attest authority qualified to sign reports on a test engagements. 00;08;53;21 - 00;09;07;12 Speaker 2 Having a test experience doesn't mean that you're you can do everything you know. At the end of the day, the individual has to determine whether they have the skills and the qualifications to perform that those procedures or reporting for the client. 00;09;07;16 - 00;09;17;19 Speaker 1 So I guess it would be possible that there could be a CPA with the attest authority that may not be fully qualified to do a specific report that I was interested in getting. 00;09;17;23 - 00;09;42;10 Speaker 2 That certainly is a possibility, and that a CPA may not have experience in that type of industry or that kind of work. Now, at the end of the day, the CPA would always determine whether they have the requisite skills and knowledge and education and experience to perform that kind of work. If that CPA, accepts that engagement, they would have the, the ability to perform that, that type of audit. 00;09;42;12 - 00;09;49;01 Speaker 1 So the onus is kind of on the CPA for them to evaluate whether they're able to do the certain things. Right. 00;09;49;03 - 00;10;13;26 Speaker 2 Absolutely. You know, accounting firms evaluate every year. They evaluate their clients to determine if they would like to keep them as clients because based on their the firm's ability and then other things. So attestation services, there's a lot of risk, if there are issues and that aren't identified and if you do a poor job. So CPA will always look at their ability to determine if they can if they can do the work. 00;10;13;29 - 00;10;23;26 Speaker 1 Okay. That's interesting. So what are some questions then a consumer could ask a prospective CPA just to ensure they are qualified to perform the work the client needs them to. 00;10;23;28 - 00;10;44;17 Speaker 2 you know, if it's a firm, you would maybe ask about peer reviews because firms are peer reviewed periodically to ensure that they are, performing as intended and following the guidance you would look at. Have they done audits and this type of industry or reports in this type of industry before you'd ask about their continuing education? 00;10;44;17 - 00;11;04;06 Speaker 2 You know, it's kind of like getting to know somebody and asking them questions that are that are important to you for what you're what you're looking for. But definitely the experience, the, the CPA or the firm has and the, the type of clients that they, they've had previously and, the industries that they work in. 00;11;04;09 - 00;11;17;02 Speaker 1 Now, you mentioned peer review, which is an important part about firms and things they have to do occasionally to be renewed. Can you maybe just briefly describe for those of us who aren't super familiar, just, a brief description of that peer review process? 00;11;17;04 - 00;11;40;27 Speaker 2 Sure. And that I worked on when many years ago, when I was in public accounting, when the peer reviewers came in. And what they do, is they will select certain audits and they will perform, quality assurance on those audits. They will note whether guidance was followed, whether there were any issues with those audits, just to ensure that the odds were performed following the guidance and met all the requirements. 00;11;40;29 - 00;11;52;01 Speaker 2 So it's a it's a quality assurance of the work that's done to ensure that the firm is following, all applicable guidance and that that the reports can be relied upon. 00;11;52;04 - 00;12;19;24 Speaker 1 Exactly. Myself, as a consumer, I learned a lot today. So thank you for sharing all that with us. And the CBA, actually, in addition to this podcast now has an entire web page on the CDA website, which is workbox gov that is specific to the different types of services that CPAs with attested authority and CPAs without a test authority are able to perform. 00;12;19;24 - 00;12;31;12 Speaker 1 There's a little table right there and check on one side or check on the other side, depending on if the if they can do it or cannot do it. So you can find that if you go on under the consumers tab of the CBA website. 00;12;31;15 - 00;12;50;29 Speaker 2 I've seen, you know, the website and that information that is provided there. And I think that's very helpful to consumer. I'm just hoping that if they take a look at it now after this podcast, it would make a little more sense to them. So definitely check the website and you can find out about any CPAs that you may be working with or thinking about working with. 00;12;51;01 - 00;12;57;10 Speaker 2 You can look into their abilities and to get the little confidence that they have a test authority that shows up there. 00;12;57;13 - 00;13;00;04 Speaker 1 We appreciate your expertise and your joining us today. 00;13;00;06 - 00;13;01;27 Speaker 2 Thank you very much. I appreciate the opportunity. 00;13;01;28 - 00;13;16;17 Speaker 1 Again. Thank you everyone for listening. We hope you did become a little better informed. And this will help your whether you're choosing a CPA or just maybe a better overall understanding that not all CPAs do taxes. Thank you, Mr. Williams, for reminding us of that. 00;13;16;19 - 00;13;17;10 Speaker 2 You're welcome.