On July 31, 2011 the National Association of State Boards of Accountancy (NASBA) in the United States approved a proposed mutual recognition agreement (MRA) with the Hong Kong Institute of CPAs. The agreement is subject to further approval by the AICPA Council and is expected to be signed at the NASBA annual meeting in October. Because CPA licensing is done by each of the states, the AICPA does not serve the same role as the HKICPA and many other overseas accounting associations. NASBA coordinates the efforts of the state boards to provide consistency in the U.S. for accounting regulation.
MRAs allow CPAs to obtain licensing in another country without having to go through the entire examination process again. Hong Kong currently has MRA’s with 11 overseas bodies, all of which are in the British Commonwealth. Hong Kong also has an agreement with China to exempt Chinese and Hong Kong CPAs from certain examination papers. Hong Kong previously had an MRA with the United States, but it was terminated in 2005 and the negotiations for a new one have been going on since.
Under some of Hong Kong’s MRAs candidates are required to pass a test on Hong Kong laws and taxation, but are exempt from examination on accounting and auditing topics. Acceptance of the U.S. CPA examination as evidence of accounting knowledge for Hong Kong purposes is interesting, since the U.S. CPA examination principally examines U.S. GAAP knowledge, not IFRS.
The world is rapidly converging around IFRS, although the SEC’s recent work plan indicates the process might take 5-7 years in the United States. One of the advantages of internationally accepted accounting standards is increased mobility for accountants. British accountants have long benefited from British Commonwealth rules that have allowed for the easy transfer of credentials, but this could be extended to accountants from any county. The MRA process is slowly putting this in place, yet I think it is time to begin consideration of a global CPA credential. Is it possible to use the same examination in IFRS and international auditing standards to qualify accountants in all countries? The examination would have to be offered in many languages, and it is possible that countries might require different passing standards. Countries might also choose to have their own examinations on local laws and taxes. The system would work similarly to the multistate bar examination for lawyers in the U.S.
There would be significant advantages to accountants in a uniform CPA examination offered globally. Accountants would be able to pursue their careers wherever the best opportunity exists. The cross border practice of accounting could be better regulated. A global CPA credential could improve the quality of accounting worldwide. I would like to see IFAC begin the process of considering how such a system might work.