This is the first of a three-part series related to Louisiana law and regulations pertaining to the accounting profession. This part focuses on the historical licensing and regulation of the profession by the State of Louisiana.

The Louisiana statutes and regulations governing accountants have become much more sophisticated and comprehensive through the years. In the early 1900s the State’s emphasis was on the qualifications and admission to the practice of public accounting. This continues to be a focus of the state¹s efforts; however, like other learned professions, the Louisiana legislature has adopted additional provisions recognizing the inevitable fact of life that: “Professions once seemingly inviolate from litigation are no longer sacrosanct. The age old axiom that physicians bury their mistakes, while attorneys and accountants file theirs away, has little relevance in modern day America.”

The purpose of this article is to provide an analysis of Louisiana statutes, regulations and jurisprudence regarding the accounting profession, as accountants, like others who practice skilled professions, are now full members of the “Krewe of Defendants” in the Louisiana litigation parade. The article does not include an analysis of other state or federal jurisdictions, regulatory bodies or professional standards and requirements.

Historical Prospective of Louisiana Law and Regulations Regarding Accountants

In 1908, the Louisiana legislature passed the first law regulating the practice of public accounting. The legislation established a State Board of Accounting, fixed fees and prohibited the unauthorized use of any letters, abbreviations or words to indicate that an unauthorized person was a certified public accountant. The Board was authorized to revoke the certificate of any person for “unprofessional conduct…or for other Cause…” upon notice and an administrative hearing. Additionally, the law provided that it would be a misdemeanor to fraudulently use the abbreviation “CPA.”

In 1923, the Louisiana Supreme Court upheld the constitutionality of the 1908 act in a case involving a defendant who had been charged with unlawfully holding himself out as having received a certificate from the state board of accountants to practice as an “expert accountant” and having improperly used the designation “CPA.” The Court recognized the practice of public accounting as a profession of skill and science and the importance of having placed proper safeguards to maintain its dignity. In so holding, the Court reasoned that while neither morals, health, nor safety of anyone is jeopardized by the practice of this profession, the power of the state is not confined to professions involving such consequences. It may also act whenever the general welfare requires to protect the public in the skilled trades and professions against ignorance, incompetence and fraud.

The 1908 law was revised in 1924 in order to place the practice on a higher plane of professional dignity and to impose more rigid qualifications on those desiring to be called a certified public accountant. While continuing the State Board of Accountants, the act included a much more comprehensive definition of a “Certified Public Accountant” and their employees and enhanced enforcement provisions.

The 1924 state accounting regulatory provisions came under scrutiny again in 1930 in a case involving a non-Louisiana licensed Texas CPA, who attempted to collect a fee for Louisiana work. The court rejected the claim by the accountant for fees under a contract as being an agreement in violation of statute; however, the court also rejected a claim by the client for the return of money paid for an “erroneous and worthless audit” holding that there was “no culpable malpractice” because the court recognized the profession’s appreciation in the difference in the scope of work, skill and independent verification involved in a “balance sheet audit” and a “detailed audit.” However, the validity of the State’s interest in regulating the accounting profession was recognized.

The various statutory provisions in the 1924 Act were carried forth in the 1950 Louisiana Revised Statutes. There were substantive amendments and re-enactments of the legislation in 1979, 1997 and 1999. The legislation is designated as Louisiana Revised Statutes 37:71, et seq, and known as the “Louisiana Accountancy Act”. One of the results of the 1997 legislation, was assigning the responsibility to the State Board of Certified Public Accountants of Louisiana for the licensing, regulatory and enforcement functions and the enactment of a “Review Panel” procedure for claims against certified public accountants or firms, which is administered by the Society of Louisiana Certified Public Accountants. While the scope of who is within the ambit of the accountancy statutes and accompanying regulations have been considered by Louisiana courts from time to time, it is clear that the purpose of the statutes is to protect the public from expressions of opinion by persons unqualified in the highly technical profession of accounting. This is a legitimate state objective, as the United States Supreme Court has long recognized. States have the power to regulate professionals in such a way as will protect the general public from, “(T)he consequences of ignorance and incapacity as well as deception and fraud.”