State Regulation CPA Services Cannabis

State Regulation CPA Services Cannabis

State Regulation CPA Services Cannabis – State Boards of Accountancy – an unofficial compilation of State Board of Accountancy cannabis industry guidelines. Always check the official page and consult with counsel.

State Regulation CPA Services Cannabis
aBIZinazBOX Cannabis Practice Group

This page provides resources the summarizes the state laws within the US for recreational and medicinal marijuana laws, the current legislative/regulatory environment, and information for CPAs considering providing services to businesses that operate in these industries.

State Regulation CPA Services Cannabis

What CPAs Need to Know

CPAs and CPA firms need to consider several factors before deciding to provide services to marijuana-related businesses:

  • CPAs should first determine how their state board of accountancy defines and applies the “good moral character” requirement, and what their board considers to be an act discreditable.
  • CPAs should consider the legal and insurance risks of providing services to a marijuana-related business.
  • CPAs should also consider conducting background investigations on all key principals in the business to determine if any have prior convictions related to drug issues.
  • CPAs who are AICPA members must consider the AICPA’s bylaws and Code of Professional Conduct. While the AICPA Professional Ethics Executive Committee has not taken a formal position on this issue, AICPA Bylaws sections 7.3.2.1, 7.3.2.3 and 7.3.1.1 REQUIRE the Institute to sanction a member who is disciplined by a state board of accountancy or convicted of a crime punishable by more than a year.

While the law and ethical requirements remain uncertain, it is ultimately up to each individual CPA and his/her firm as to whether they are comfortable providing services to businesses in the marijuana industry.

Services Needed

Businesses operating in the marijuana industry are seeking both assurance and non-assurance attest services, including audits, reviews, and agreed upon procedures engagements.

CPAs wishing to provide services to these businesses must first address the issue of competency. Does the CPA have enough knowledge of the industry to plan an engagement properly? A CPA should fully understand the entity, including the legal and regulatory environment of the industry, in order to assess the risk of material misstatement — a challenge when that environment is ever-changing and unclear. In planning an audit and determining the risks of material misstatements, a CPA should consider the numerous risks associated with businesses in this industry.

The key point for tax professionals working with clients in the marijuana industry is due diligence. Because of the lack of clear guidance, CPAs should be conscientious in reviewing all available information related to standards for tax return reporting, confidentiality of client information, conflicts of interest, due diligence, knowledge of client’s error, contingent fees, and written tax advice.

Mitigating Risk – State Regulation CPA Services Cannabis

CPAs who wish to provide services to clients in the marijuana industry will encounter many gray areas. However, in addition to the numerous considerations discussed thus far, there are a few more steps CPAs can take to mitigate the risks associated with taking on a client in this industry.

  • A CPA should always have an engagement letter with his or her client that explains what services are to be provided, what services will not be provided, and how much those services will cost.
  • The CPA should require each of the principals in the business to sign a representation letter stating that they understand the requirements of state law related to cannabis businesses and that they intend to fully comply with those requirements to the best of their ability at all times.
  • CPAs should also document all work and communication with a client, even if that communication takes place in an informal setting.
  • A CPA should seek out advice from colleagues that have clients in the marijuana industry to determine how they are trying to best mitigate risk.

We have posted a Dropbox Showcase with documents which were we that relates to specific states here.

At the present time, we have varying amounts of information by state. The page will get better with assistance from knowledgeable individuals. We place very high priority on maintaining the integrity of the information contained on this page. As such, we respectfully ask that submissions be limited to coming from attorneys, CPA’s, other Circular 230 Practitioners [IRS Enrolled Agents], and representatives of State Boards of Accountancy or other Cannabis and Tax Regulatory Authorities.

States we currently have information from –  AZ, AR, CO, CT, FL, IA, MD, MA, MI, NM, NV, OR, WA

AttorneyCertified Public AccountantEnrolled AgentRegulatory Agency Representative

State Regulation CPA Services Cannabis

Regulation of Tax Pros

Special Thanks to Shane Eloe, CPA for the insight to suggest we create this page.