Are you supporting a CPA candidate working in public practice? What you need to know

In the February issue of the Regulatory Report, we clarified which services can only be performed by a registered Professional Services Provider (PSP), or within a registered Professional Accounting Firm (PAF). The article, “Provision of services – What PAFs and PSPs need to know,” aimed to increase member’s understanding of the rules related to providing these services, ensuring regulatory compliance and public protection. In this follow up, we discuss how these rules relate to CPA candidates. Many members supervise or mentor candidates, making it crucial to understand the regulations pertaining to this group of registrants.

The CPA Act is clear that provision of the following services can only be provided through a PAF:

1. an assurance engagement;
2. a compilation engagement;
3. a specified auditing procedures engagement;
4. accounting services;
5. forensic accounting, financial investigation, or financial litigation support services;
6. advice about or interpretation of taxation matters;
7. preparation of a tax return or other statutory information filing, if the return or filing is prepared in conjunction with any service referred to in points (1) to (6) noted above. 

Understanding of the scope of work is more straightforward for some of these items above than others.  For instance, both the “accounting services” and “advice about or interpretation of taxation matters” are commonly misunderstood.

Accounting services is defined in the CPA Act as:

summarization, analysis, advice or counsel about or interpretation of accounting matters, but does not include (i) bookkeeping, or (ii) any accounting service that is performed incidentally by a provider whose primary occupation is not accounting.

Bookkeeping is defined as managing a bank account without additional journal entries for the period. It is the posting and management of accounts payable and receivable and expenditures and sales transactions, with no production of financial information or financial statements and no accruals are done. Bookkeeping is printing statements from an accounting software system, but not a full and complete set of financial statements. For example, no cash flow statement and no statement of retained earnings is completed.

This shows that the “bookkeeping” that can be done by a registrant outside of a PAF is quite limited.

Only members are eligible to apply to register a PAF. This means that CPA candidates are prohibited from providing or offering to provide services defined under the CPA Act as professional accounting practice or public accounting practice.  As such, the only services a CPA candidate is able to provide on their own are bookkeeping services and/or personal tax return services.  Prior to earning their CPA designation, in order to prepare more work such as financial information or financial statements and/or provide advice (which can be something as simple as asking the client whether or not they have certain types of income or expenses) when preparing personal tax returns, a CPA candidate must be under the supervision of a CPA member who is providing these services through a registered PAF.

Many candidates are also taking on work in the area of fractional controllership which is becoming more common within the profession. As a general rule, CPA members and candidates are permitted to hold one or two contracts in which they provide controller/CFO type services at any one time. As long as you maintain this number of contracts in place at any one time and you don’t offer your services to the public (for example, creating a website or advertisement that offers your services), you would be permitted to provide these services. Should you at any point have three contracts in place or start advertising your services, you would be deemed to be offside with the CPA Act and the CPA Rules of Professional Conduct unless offering these services through a registered PAF.

Moving to taxation, advice about or interpretation of taxation matters requires PAF registration. This means that a CPA Alberta member or candidate can only offer simple, straight forward personal tax returns (with no accounting services, additional financial statements, financial information, or advice provided) to the public without being registered. It is expected that these returns would only include T4s and/or a few T5s.  As soon as any advice is provided (perhaps deductions to claim), this goes beyond the allowable scope of work.

Under Rule 410 of the CPA Rules of Professional Conduct, only members (and not candidates) are eligible to apply to register a PAF.  This means that candidates cannot conduct any aspect of a professional accounting practice or a public accounting practice outside of a registered PAF. In keeping with this Rule and to re-enforce the understanding of this restriction, upon becoming a candidate, individuals are required to provide the following declaration: “I understand that I may be employed by a Chartered Professional Accountant firm. However, I cannot own a firm and I cannot have the authority to sign or issue a report, issue an opinion, or provide advice to the public on behalf of the firm with respect to any regulated services.”

If you are supervising or mentoring a candidate and have questions or concerns about the work they are doing, please access the Candidate in Public Practice FAQ  or the Introduction to CPA Alberta’s Regulatory Requirements, or contact practicalexperience@cpaalberta.ca for advice.