What should be considered by a CPA who wants to open a new CPA practice?

There are numerous decisions and matters to consider, such as, form of legal entity and what services you may decide to offer.  The following items are intended to summarize major points to consider and may not be all-inclusive of every matter that needs to be addressed.  Some matters or decisions may warrant that you obtain legal advice.  For example, if the decision is to become a professional accounting corporation or an LLC, there are legal formation requirements along with a necessity to register with the Secretary of State. 

Before actually offering or performing services for clients, a licensee should obtain a firm permit if the firm will use the CPA title in any manner -or- if the firm will perform attest services.  Out of state firms, even with no office located here, may need a Louisiana firm permit in cases where attest services are performed in Louisiana.  Licensees should refer to the Firm permit applications are accessible on our Forms & Links webpage.  You should be familiar with the Louisiana Accountancy Act and the Board Rules (see our website’s Rules & Statutes webpage).  The LA Accountancy Act deals with firm permits, attest experience, peer review, unlawful acts, confidentiality, working papers, and client records.  These topics are elaborated upon further in the Board’s Rules.  Your primary attention should be on Chapters 15 and 17 of the Board’s Rules, and sections RS 37:77, and 37:83 through 37:87, of the accountancy act.   You should also become familiar with the Board’s statements of position on Advertising and Audit Documentation Retention that are also posted on our website.  Chapter 15 of the Board Rules covers the specific requirements of CPA firms.

If you offer attest services (compilations, reviews, audits, etc.) and your firm is in Louisiana, you will need to enroll in the LCPA administered Peer Review Program, or the AICPA National Peer Review Program, pursuant to Rule §1503, and complete a peer review periodically. 

Chapter 17 of the Rules are the “Rules of Professional Conduct” and directly cover practice anc conduct issues.  The rules on competency and professional standards specify that licensees must follow professional standards when performing professional services.   In general, if something in the AICPA’s (or other applicable authority’s) rules of conduct is different from the Board’s Rules, the more restrictive rules should be applied.  In cases where the Board’s Rules do not address an issue, you may refer to the AICPA interpretations and rulings on professional conduct, or contact us for guidance. 

Before beginning any service, you should have the competency (Board Rule §1703.B) to undertake the engagement.  Such competencies may have been acquired through past experience working for a CPA, through on-the-job training that is supervised by a competent licensee, through consultation with another competent CPA practitioner, and/or through continuing professional education.  You should refer to the AICPA Quality Control standards in managing your A & A (accounting and auditing) practice.

You must refer to the guidance provided by the AICPA, the GAO, the IRS, the SEC, the PCAOB, the Legislative Auditor, or any standard-setting organization related to the particular engagement.  For example, tax practitioners must follow the requirements of the SSTS and the applicable tax authorities, such as registering with the IRS and following its Circular 230, and complying with Department of Revenue requirements.  For financial reports, the AICPA issues professional standards for compilations and reviews in its Statements on Standards for Accounting and Review Services (SSARS) and for audits in its Statements on Auditing Standards (SAS).   The GAO (U.S. Government Accountability Office) issues standards for government audits (often referred to as the “Yellow Book” standards).  The PCAOB issues audit standards for corporations whose securities are publicly traded and certain other issuers regulated by the SEC.  

With numerous matters with which a practitioner must be cognizant, it is important to complete relevant CPE (continung education) to stay up-to-date and maintain awareness of changes in the standards, and to maintain the competence to perform services in accordance with the standards applicable to the engagement. 

Licensees should notify the Board whenever they change employer.  So, if you will operate as owner/employee of a new firm, you should advise us you are leaving one employer and moving to another.  Contact us if you have any questions.