SB 823: An Explainer for California CPA Exam Candidates

Yesterday, California Governor Jerry Brown signed SB 823, an emergency bill sponsored by the California Board of Accountancy (CBA) and supported by the California Society of CPAs, which aims to ease the transition to the 150-hour rule. This means California CPA exam candidates have one last shot at becoming licensed with two years of experience and four years of education OR one year of experience and additional hollow units. 
 
So what does this bill really mean?  As we previously reported, what it doesn’t mean is the 150-hour rule is going away.  SB 823 extends the current licensure requirements -- Pathway One and Pathway Two -- for those who have passed all parts of the Uniform CPA Exam by the end of this year. Since the testing window will be closed in December, candidates have to pass all four parts by November 30, 2013 to benefit from this bill.  In essence, the extension creates a two-year grace period that allows candidates additional time to handle all the other elements of California CPA licensure, such as the ethics exam, application, fingerprints, experience requirement, and those pesky 150 hours for the kids with only one year of experience. If a candidate doesn’t pass the exam this year, (s)he will be subject to the new educational requirements that go into effect on January 1, 2014.
 
In case you are too lazy to click on the links, here is the way the education and experience requirements are going down:

Pathway One

Expires Dec. 31, 2013

Pathway Two

Expires Dec. 31, 2013

Pathway Two Revised

Effective January 1, 2014

  • A bachelor’s degree

  • 24 semester units in accounting

  • 24 semester units in business related subjects

  • A bachelor’s degree

  • 24 semester units in accounting

  • 24 semester units in business related subjects

  • 150 semester units (or 225 quarter units) of education

    • Increase of 30 semester hours which are not defined, aka hollow

  • A bachelor’s degree

  • 24 semester units in accounting

  • 24 semester units in business related subjects

  • 150 semester units (or 225 quarter units) of education

    • Increase of 30 semester hours is defined

  • 20 semester hours in Accounting Study

  • 10 semester hours in Ethics Study

Two years of general accounting experience supervised by a CPA with an active license

One year of general accounting experience supervised by a CPA with an active license

One year of general accounting experience supervised by a CPA with an active license

 
Now before you bag on California for taking so long conform with what the rest of the U.S. was doing, keep in mind they were creating a framework to get with the times and avoid the hollow unit bandwagon.  Because we all know how much those ceramics and online Quickbooks courses help you to balance sheets. And therein lies the greatest area of confusion with this bill -- candidates with one year of experience don’t know which type of courses to take.  Is it the 150 hours with or without hollow units?  And the answer is: it depends.
 
If a candidate passes all four sections of the the exam by November 30, 2013, (s)he can benefit from the grace period and become licensed under the existing Pathway Two which allows for hollow units.  If they don’t pass the exam this year, (s)he will be subject to the new education requirements that go into effect on January 1, 2014. These new requirements mandate study areas of accounting and ethics and disallow that basket-weaving course you have been dying to enroll in.  
 
Where the bill provides tremendous support is for those folks who were just shy of meeting the experience requirement. Since the CBA measures experience based on a calendar year, there were a group of candidates falling short by a matter of days; 364 days of work does not meet the one-year experience requirement even if the candidate worked an average of 55-hour workweeks over the period of 51 weeks.  Seems unjust given zero organizations have a start date of January 1.  (Bravo to the aspiring CPAs that would have been adversely impacted by this legislation and called up the CBA to plead their cases.) 
 
This bill also supports a select group of candidates who work in audit.  In California, you can either be licensed to perform general accounting services or you can be licensed to perform attestation services.  In order to sign reports on attest engagements, you are subject to 500 hours of experience in a variety of audit areas.  It often takes candidates longer than two years to acquire this specific experience based on the engagements they are staffed on, which is something totally out of their control.  Without this bill, these select candidates -who already did what they were told, passed the exam and met the existing educational requirements- were faced with a workaround to avoid the new educational requirements: Get the general license now and then, upon earning the requisite 500 hours, pay a fee and file an application to convert their license.  That wouldn’t have been unfair for that select group and also would have created additional paperwork for both the candidate and the CBA.  
 
One other item that also snuck in: student-candidates enrolled in a five-year, combined master’s (or certificate)/bachelor’s program will be allowed to sit for the exam prior to having their transcripts stamped with a bachelor’s degree so long as they have completed all the necessary requirements for the degree and the school is able to certify the student’s status.  Get ‘er done admissions and records!
 
If any of our readers are still confused on what this bill means, drop me a message in the comments and I can try my best to clarify.  The CBA is also helpful with your inquiries. 

 

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