Is FAAS (Finance As A Service) Just a Way to Bypass Regulatory Oversight?
CPA Canada’s new competency map for public accountants in small, one or 2-partner firms is extremely difficult to comply with. However, the path for accountants in industry appears to be simpler. My own experience is that accountants in industry can bypass difficult hurdles for qualification in public practice, and then work for unregulated finance as a service (FAAS) providers, effectively providing outsourced accounting services without scrutiny. Have other practitioners reported similar issues?
This is a significant and valid frustration that is widely echoed by small practitioners across Canada. You are correct that the regulatory landscape and the new certification model have created what many view as a “two-tier” system—one that places a heavy compliance burden on small public practice firms while allowing industry-trained accountants to operate in the lucrative “Finance as a Service” (FAAS) or “Virtual CFO” space with significantly lower barriers to entry.
Below is an analysis of why this is happening and how other practitioners are responding to these issues.
1. The “Simpler” Path: Industry vs. Small Public Practice
Your observation that the industry path is “simpler” is supported by the mechanics of the certification process, particularly under the Practical Experience Requirements (PER).
- The EVR vs. PPR Disparity: Small firms often rely on the Experience Verification Route (EVR), which has a notoriously heavy administrative burden.1 Candidates and firm partners must map specific tasks to complex competencies, often facing rejection from provincial reviewers who do not see “sufficient depth” in small-client files.
- The “Pre-Approved” Advantage: Large industry employers (and large firms) often have Pre-Approved Program Route (PPR) status. Students in these programs have their competencies “pre-mapped.” They bypass the grueling self-reporting battles that small-firm students face.
- Competency Map 2.0 (CM2.0): The new map shifts focus from technical knowledge to “enabling competencies” (agility, decision-making).2 Small practitioners argue this hurts them disproportionately because they need students who can immediately perform technical tax and accounting tasks. Industry roles, which are often more focused on management accounting and internal reporting, align more naturally with the “strategic” focus of CM2.0, making the industry path feel less disjointed than the public practice path.
2. The FAAS “Loophole”: Bypassing Public Practice Licensing
You identified a critical regulatory arbitrage. The “hurdle” that industry accountants bypass is the Public Accounting License (PAL).
- The Barrier: To be a “traditional” public accountant (signing off on audits or reviews), a CPA must log ~1,250+ assurance hours.3 This is extremely difficult to get outside of a dedicated public practice firm.
- The Bypass: FAAS, Virtual CFO, and outsourced controller services generally do not require a Public Accounting License. They fall under “management accounting” or “consulting.”
- In Ontario: A CPA providing these services must register a firm, but they do not need a PAL.4 This means they are subject to far less scrutiny (e.g., less intense practice inspections) than a firm doing assurance engagements.
- In BC: The rules are stricter (providing “statutory filings” requires a license), but many circumvent this by framing their services as “consulting” or by using the “Other Regulated Services” category, which is easier to obtain than a full Audit/Review license.
- The Result: An industry-trained CPA can leave their job, open a “Virtual CFO” firm, and offer high-margin advisory and bookkeeping services. They compete directly with small public practice firms but without the overhead of assurance standards, extensive liability insurance for audits, or the need to train students on complex assurance topics.
3. Are Other Practitioners Reporting This?
Yes. This is a frequent topic of discussion in practitioner forums, local CPA chapter meetings, and professional networking groups. The common complaints include:
- “Brain Drain”: Small firms feel they act as “training grounds” where they incur the high cost of training students (who need assurance hours), only to see those CPAs leave for industry or FAAS roles where the pay is higher and the hours are better.
- Regulatory Inequity: Practitioners report frustration that they are subject to rigorous practice inspections for compilation and tax work, while “unregulated” bookkeepers (non-CPAs) or “consultant” CPAs operate with little oversight.
- Devaluation of the License: There is a sentiment that the CPA designation is becoming a “management degree” rather than a technical accounting credential. Practitioners worry that clients cannot distinguish between a “Virtual CFO” (who may have never prepared a T2 in public practice) and a Licensed Public Accountant.
4. What Can You Do?
Since you are operating in a small firm environment, the “FAAS threat” is real. Here is how some firms are adapting:
- Shift to Advisory: Many small firms are actively pivoting away from low-margin compliance work (which FAAS providers attack) and into the specialized tax and succession planning work that industry-trained CPAs often lack the technical depth to handle.
- Leverage the “Licensed” Status: Educate clients on the difference. Emphasize that as a Licensed Public Accountant, you carry specific insurance and are subject to regulatory oversight that protects them.5 A “Virtual CFO” may not offer the same level of consumer protection.
- Check “Holding Out” Rules: If you see a CPA providing public accounting services (even just tax/bookkeeping) without a registered firm, they may be in breach of their provincial body’s bylaws. Provincial bodies (like CPA Ontario or CPABC) have “whistleblower” mechanisms for reporting members who are “holding out” as public practitioners without proper registration.
Sources:
Certification Map 2.0: A New Pathway To Becoming a CPA – Canadian Tax Foundation
Post Designation Public Accounting Program – CPA Ontario
Register a Firm | Accounting Firms in Ontario
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