How much do you really know about the guy who does your taxes?
Vetting a prospective certified public accountant, or CPA, should involve more than just asking your doctor or golfing buddy for a referral.
Whether you’re checking out several CPAs cold turkey or just looking for information on a handful of candidates suggested by friends and family, here are four questions that will help you scope out their background before turning over your financial records.
1. Is your accountant a CPA?
A CPA must have a minimum of a four-year degree, spend a specified amount of time (which varies by state) apprenticing for a practicing CPA and pass a certification exam, says Sheri Bango Cavaney, vice president of the New York-based American Institute of Certified Public Accountants. In most states, CPAs must also complete 120 hours of continuing education every three years, she says.
By doing that, a CPA has “demonstrated expertise in the accounting and finance subjects that are critical,” says Andrea Millar, CPA and senior technical manager for the institute.
In addition, CPAs must adhere to a strict code of professional conduct, and if there is any conflict of interest, they must “disclose that clearly to a client,” Millar says.
The best way to find out about your accountant is to check with your state’s CPA society. You can find yours on the AICPA website.
These state organizations typically have a consumer or public resources section where you can locate a CPA by name or city. Can’t find it? Go to the search bar on the society’s home page and type “find a CPA.” Some states, like Florida, even have a search section with that label. Search by the individual’s name or the firm name.
CPAs are not required to be members of the AICPA or a state CPA society, says AICPA spokesman Joel Allegretti. So if a CPA isn’t listed, you can check with your state board of accountancy which licenses CPAs.
2. Has your CPA faced disciplinary action or had his license revoked?
Finding this information is a two-step process. If your CPA is an AICPA member, you can find out if he’s been disciplined by the institute by checking on the AICPA website. You can retrieve details by putting his name in the site’s search box.
If your CPA has been disciplined, it’s important to note the reasons why, says Allegretti, “There is a whole range of situations where the (institute) would discipline a member,” he says. Those could include not returning client records, disclosing confidential client information and not exercising due care in preparing a tax return, he says.
To find out if a CPA’s license has been revoked, you should check with your state board of accountancy, says Bango Cavaney.
3. How did your CPA firm do in its last peer review?
Firms that perform some specialized tasks, such as auditing, are required to go through a peer review every three years, and some firms post those reports on the AICPA’s website, says Gary Freundlich, technical director of AICPA peer review program. If a firm falls into that category, you can find the report online.
Firms earn one of three grades: pass, pass with deficiencies or fail, says Freundlich. Historically, 94 percent of peer reviewed firms earn the grade “pass,” he says. “The results are very useful information to the consumer,” says Freundlich.
Just as not all types of firms are required to undergo peer review, not all firms that go through the process will post their reviews at the AICPA site. But some firms may post the reports on their own sites. And “there’s nothing to prevent John Q. Public from asking a CPA firm for a copy of its peer review report, and that’s not a bad idea,” Freundlich says.
4. Is your CPA also a personal financial specialist?
A personal financial specialist, or PFS, is a CPA who has taken additional classes and gotten a second certification in personal financial planning. He or she must complete 60 additional hours of financial planning education, pass an exam and log 3,000 hours of business experience in financial planning. They also must complete 80 hours of continuing education every three years.
You might want a CPA-PFS if you want to talk about your overall financial planning strategy or about pieces of that larger blueprint, such as taxes, retirement or estate planning, says Allegretti.
A CPA-PFS will have the CPA credentials in addition to business experience in at least one of five areas of financial planning — estate planning, retirement, tax, investment and risk management — and will have passed a financial planning exam, Millar says.
You can verify that a CPA has earned the Personal Financial Specialist credential at the CPA institute’s website, searching by either city or state.
If your CPA is also a Certified Financial Planner, broker dealer, or Registered Investment Advisor, you’ll have access to additional information about him and his practice.