CPA responsibilities under the Ohio Medical Marijuana Program

Written on Jul 18, 2017

By Laura Hay, CPA, CAE

What standards or procedures are expected of an Ohio CPA to “certify” Forms 1B (Liquid Assets) or 1D (Financial Responsibility) of the Ohio Cultivator Application?

Ohio’s House Bill 523, authorizing the use of marijuana for medical purposes, became effective Sept. 8. Chapter 3796 of the Ohio Revised Code establishes the base framework of Ohio’s Medical Marijuana Control Program (the Program,) including charging Ohio’s Department of Commerce with the administration, implementation and enforcement of cultivators, processors and testing laboratories under the Program.

Rules for cultivators were adopted on May 6, 2017. Ohio Administrative Code Sections 3796: 2-1-02 and 3796: 2-1-03 outline the application process for cultivator licenses and include a requirement that a CPA sign off on certain elements of the application. OAC 3796: 2-1-02 (B)(6)(c) states that the applicant’s financial plan, at a minimum, shall include:

Documentation acceptable to the department that the individual or entity filing the application has at least $500,000 in liquid assets for a Level I cultivator provisional license and $50,000 in liquid assets for a Level II cultivator provisional license, which are unencumbered and can be converted within 30 days after a request to liquidate such assets;

(i) Documentation acceptable to the department includes a signed statement from an Ohio Licensed CPA attesting to proof of the required amount of liquid assets under the control of an owner or the entity applying. The statement must be dated within 30 calendar days before the date the application was submitted.

Proposed Rule 3796: 3-1-02 contains a similar requirement for processors, scheduled to be adopted Sept. 8, 2017. Form 1B of the Ohio Cultivator Application, the Liquid Assets Form, asks a CPA to “certify” that the applicant has the specified amount of “liquid assets which are unencumbered and can be converted within 30 days after a request to liquidate such assets.” Should an Ohio CPA sign this statement under professional standards, and if so, what standards and procedures are expected of the CPA?

OSCPA spoke with Charles E. Landes, CPA, Vice President of Professional Standards and Services at the AICPA about the applicability of AICPA professional standards to CPAs signing these forms. Landes outlines an evaluation process for CPAs considering signing elements of the Ohio cultivator and processor applications:

1. Does the engagement fall under any existing AICPA professional standards?

a. Attestation standards: The Ohio law and rules do not specify that this “certification” engagement be conducted under any specific AICPA professional standard. Since the attestation standards are engagement driven, the attestation standards apply only when the CPA is engaged to perform an examination, review or agreed-upon procedures (AUP) engagement. If the CPA is not engaged to perform an examination, review or AUP, then the attestation standards would not apply to the certification engagement.

b. Tax services standards: This is not an engagement subject to AICPA Tax Services Standards.

c. Consulting standards: The CPA should determine whether, in their professional judgment, a consulting service is being provided to which Statements on Standards for Consulting Services would apply. Consulting services under the standards typically include findings, conclusions and recommendations developed for the use and benefit of the client. It is unlikely that simply performing the services to support signing the Liquid Assets Form, for example, would result in the applicability of AICPA consulting services standards.

d. Ethics standards: If the practitioner determines that no other professional standards apply to the service, ethics standards of the AICPA, for AICPA and OSCPA members, and ethics rules of the Accountancy Board of Ohio, for all licensees, would apply. These rules include:

• Objectivity
• Professional competence
• Due care
• Adequately planning and supervising the engagement
• Obtaining sufficient relevant data to support conclusions

The CPA’s documentation should support that these ethical standards were met in performance of the engagement.

2. Does anything in state accountancy law or rule prohibit acceptance of this engagement, or require that it be performed under certain professional standards?

Per discussion with John E. Patterson, Esq., Executive Director of the Accountancy Board of Ohio (ABO), no ABO rules would expressly prohibit the acceptance of these engagements or require the application of any specific professional standards, other than the general standards (ethics) rules referenced in (1)(d) above.

The National Association of State Boards of Accountancy has communicated that performing professional services for marijuana businesses does not in itself constitute an act discreditable to the profession; however, Patterson noted that should a federal agency determine in the future that a service should result in an action by that agency, he cannot at this time assure CPAs that the ABO will not take action in response to a federal judgment or sanction.

3. How does the performance of this engagement fit with the firm’s client acceptance policies and risk profile?

CPAs are strongly encouraged to consult with their professional liability insurance provider and legal counsel about the services they will be adding to the firm’s practice. Is coverage provided for services for which there are no professional standards? CPAs are also strongly encouraged to obtain an engagement letter that defines the terms of the services to be provided.

Laura Hay, CPA, CAE, is executive vice president of The Ohio Society of CPAs and staff liaison to the Accounting & Auditing Committee. She can be reached at or 614.321.2241.

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