Last Thursday, the AICPA held their webcast on recent marijuana developments in the United States,Understanding the Impact of Legalized Marijuana on the CPA Profession. The general consensus from the panel of experts indicated that CPA's interested in pursuing business opportunities in the emerging marketplace should show caution and best judgment during this emerging period of business.
The webcast's panel consisted of Jina Etienne (AICPA director taxation), Ahava Goldman (AICPA senior technical manager), Dave Sukert (exec. vice president, Aon PLC), Lisa Snyder (AICPA director professional ethics division), and Matthew Young (AICPA vice president state regulatory & legislative affairs).
Young explained that the increase in marijuana business potential began in November 2012, when both Colorado and Washington legalized recreational marijuana use, establishing new laws allowing for its production, sale, and taxation. The move from medicinal to recreational marijuana, Young says, sparks an explosion in growth and affects society as a whole.
However, the Federal government released statements in August 2013 saying that while they wouldn't challenge Washington and Colorado's new laws, they reiterated marijuana's Federal illegality, creating a large sense of ambiguity for marijuana businesses and their service providers that continues to this day.
Despite the enormous business opportunities in a growing business sector for CPA service providers, it ultimately becomes "a personal decision in this very murky area," according to Young. A CPA's state board and "their views on [marijuana] are determinative before you should think about anything else," he adds. "For someone approaching this as a service provider, you have to start with your board of accountancy."
Ahava Goodman, speaking on assurance services concerns laid out the specificity needed to do business in the emerging marketplace including, client acceptance (reputation risk considerations, professional liability considerations, clients who provide related services); understanding the entity (the legal and regulatory environment, uncertainties and estimates, cash and financing issues); audit opinion concerns (the ability to obtain sufficient appropriate audit evidence; and agreed-upon procedures (critical to identify the procedures to be performed and consider in advance how the findings would be described).
Dave Sukert also spoke of the inherent risk involved with the new business opportunities, saying that, "In the end, this is a personal business decision that only the CPA and his/her firm can make after weighing the known risks, laws, and evolving environment." Notable risks include dichotomy between federal and state law, more robust client acceptance and due diligence necessary, reputational risk, familiarity with compliance and regulation throughout the supply chain, and since rec. marijuana is largely a cash business, there is a higher likelihood for embezzlement and underreporting of income.
Sukert advised on talking to legal counsel, consulting one's home state board of accountancy where you are seeking to offer services, keeping track of the current state and federal activities in this area, and talking to CPAs already performing these services.
For the AICPA's Issue Brief on marijuana laws and the CPA profession, head to their sitehere.