View source for Journal:Accounting and the US cannabis industry: Federal financial regulations and the perspectives of certified public accountants and cannabis businesses owners

{{Infobox journal article
|name         = 
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|caption      = 
|title_full   = Accounting and the US cannabis industry: Federal financial regulations and the perspectives<br />of certified public accountants and cannabis businesses owners
|journal      = ''Journal of Cannabis Research''
|authors      = Owens-Ott, G. Suzanne
|affiliations = Colorado Mesa University
|contact      = Email: [https://jcannabisresearch.biomedcentral.com/articles/10.1186/s42238-020-00049-7/email/correspondent/c1/new Send online message]
|editors      = 
|pub_year     = 2020
|vol_iss      = '''2'''
|at           = 41
|doi          = [http://doi.org/10.1186/s42238-020-00049-7 10.1186/s42238-020-00049-7]
|issn         = 2522-5782
|license      = [http://creativecommons.org/licenses/by/4.0/ Creative Commons Attribution 4.0 International]
|website      = [https://jcannabisresearch.biomedcentral.com/articles/10.1186/s42238-020-00049-7 https://jcannabisresearch.biomedcentral.com/articles/10.1186/s42238-020-00049-7]
|download     = [https://jcannabisresearch.biomedcentral.com/track/pdf/10.1186/s42238-020-00049-7.pdf https://jcannabisresearch.biomedcentral.com/track/pdf/10.1186/s42238-020-00049-7.pdf] (PDF)
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==Abstract==
'''Background''': [[Cannabis]]-related businesses (CRBs), in states where cannabis is legal, may be unable to obtain professional financial services such as banking, insurance, and accounting because of federal laws and regulations. This qualitative study investigated the following research questions.

:1. Why are some certified public accountants (CPAs) unwilling to provide services to cannabis-related businesses?
:2. How do CRBs compensate for lack of CPA services?
:3. What does a CPA need to know about the cannabis industry prior to engaging to provide services to CRBs?

'''Methods''': Data for this grounded-theory qualitative study was gathered from twenty-three semi-structured phone and face-to-face interviews. Ten cannabis-related business owners were recruited from a convenience sample after attempting a broad recruiting effort. Thirteen CPAs with active licenses in Colorado or Washington State participated from firms of varying size and willingness to serve the cannabis industry. The individual interviews, which lasted from twenty minutes to more than an hour, focused on the participants’ perceptions of the complexities of accounting and tax compliance for cannabis businesses.

'''Results''': Eight of the thirteen CPAs interviewed would not provide services to the cannabis industry with the primary reason given that cannabis is federally illegal. All ten of the cannabis business owners interviewed indicated they engage a CPA to provide tax services. Seven out of ten CRB participants and ten of the thirteen CPA participants indicated that extensive industry knowledge is needed for an accountant to competently provide services to a CRB.

'''Conclusions''': CRB owners need to carefully consider the industry knowledge and experience of a potential CPA prior to engaging them. This study shows that U.S. CPAs should weigh the risk of federal prosecution and potential loss of the CPA license when deciding whether to serve a CRB client. The study also found that a CPA must commit to acquiring and maintaining substantial specialized knowledge related to tax Code Section 280E, internal controls for a cash-only or cash-intensive business, and the workings of the cannabis industry under the current regulatory conditions.

'''Keywords''': cannabis, marijuana, accounting, business, certified public accountants, financial regulation, Colorado, Washington State

==Background==
There are a growing number of [[cannabis]]-related businesses (CRBs) in the United States, as many states have legalized cannabis for medical and/or recreational use even though it remains illegal at the federal level under the [[Controlled Substances Act]] (CSA). Thirty-three states plus the District of Columbia, Puerto Rico, the U.S. Virgin Islands, and Guam have legalized [[Cannabis (drug)|medical cannabis]], while eleven states plus the District of Columbia and the Northern Mariana Islands have also legalized recreational cannabis usage as of September 2020.<ref name="NCSLState20">{{cite web |url=https://www.ncsl.org/research/health/state-medical-marijuana-laws.aspx |title=State medical Marijuana Laws |author=National Conference on State Legislatures |date=September 2020 |accessdate=22 October 2020}}</ref> Table 1 shows the legalized states by category. Cannabis has been listed as a [[Controlled Substances Act#Schedules of controlled substances|Schedule I]] drug since 1970.<ref name="CampbellPot12">{{cite book |title=Pot, Inc.: Inside Medical Marijuana, America's Most Outlaw Industry |author=Campbell, G. |publisher=Sterling |year=2012 |isbn=9781402779251}}</ref> Regardless of state laws, cannabis is a Schedule I drug according to the federal government, and those found trafficking in cannabis could face criminal prosecution.<ref name="DOJControlled">{{cite web |url=https://www.deadiversion.usdoj.gov/21cfr/21usc/811.htm |title=Title 21 United States Code (USC) Controlled Substances Act |work=Diversion Control Division |publisher=U.S. Department of Justice |accessdate=20 October 2020}}</ref> The Rohrabacher-Blumenauer amendment prohibits the use of federal funds to prosecute a cannabis-related business activity that operates within “States that have legalized the use of medical marijuana,” and was most recently extended to the 2019–2020 fiscal year in the 2020 Consolidated Appropriations Act.<ref name="CongressHR1158">{{cite web |url=https://www.congress.gov/bill/116th-congress/house-bill/1158/text |title=H.R.1158 - Consolidated Appropriations Act, 2020 |work=Congress.gov |publisher=Library of Congress |date=20 December 2019 |accessdate=23 October 2020}}</ref>

{| 
 | STYLE="vertical-align:top;"|
{| class="wikitable" border="1" cellpadding="5" cellspacing="0" width="60%"
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;" colspan="4"|'''Table 1.''' States in which cannabis is legal for medical and/or recreational use. Abbreviations are standard US Postal Service abbreviations.<ref name="NCSLState20" />
 |- 
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|States in which cannabis is legal only for medical use
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|States in which cannabis is legal for medical and recreational use
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|States in which only CBD (low THC) cannabis is allowed
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|States in which cannabis remains illegal
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|AR, AZ, CT, DC, DE, FL, HI, LA, MD, MN, MO, MT, ND, NH, NJ, NM, NY, OH, OK, PA, RI, UT, and WV
  | style="background-color:white; padding-left:10px; padding-right:10px;"|AK, CA, CO, IL, MA, ME, MI, NV, OR, VT, and WA
  | style="background-color:white; padding-left:10px; padding-right:10px;"|AL, GA, IA, IN, KY, MS, NC, SC, TN, TX, VA, WI, and WY
  | style="background-color:white; padding-left:10px; padding-right:10px;"|ID, KS, NE, SD
 |-
|}
|}

Cannabis and [[hemp]] are both varieties of the cannabis plant but with different [[tetrahydrocannabinol]] (THC) content. Hemp products became federally legal with the passage of the [[Agriculture Improvement Act of 2018]].<ref name="CongressHR2">{{cite web |url=https://www.congress.gov/bill/115th-congress/house-bill/2 |title=H.R.2 - Agriculture Improvement Act of 2018 |work=Congress.gov |publisher=Library of Congress |date=20 December 2018 |accessdate=23 October 2020}}</ref> The bill “removed hemp, defined as cannabis (''[[Cannabis sativa]]'' L.) and derivatives of cannabis with extremely low concentrations of the psychoactive compound delta-9-tetrahydrocannabinol (THC) (no more than 0.3 percent THC on a dry weight basis), from the definition of marijuana in the Controlled Substances Act (CSA).”<ref name="USFDAHempProd19">{{cite web |url=https://www.fda.gov/news-events/congressional-testimony/hemp-production-and-2018-farm-bill-07252019 |title=Testimony: Hemp Production and the 2018 Farm Bill |author=Abernethy, A. |publisher=U.S. Food and Drug Administration |date=25 July 2019 |accessdate=05 September 2020}}</ref> Cannabis remains federally illegal and is the topic of this study.

This conflict between federal and state laws is problematic because cannabis-related businesses and ancillary businesses operating in legalized states and complying with all state laws are unable to fully comply with federal laws. Many cannabis businesses in states where cannabis is legal are facing difficulties in obtaining professional financial services because cannabis is still a controlled substance at the federal level.<ref name="TaylorAnAnal16">{{cite journal |title=An analysis of the accounting and financial effects of inconsistent state and federal laws in the recreational cannabis industry |journal=Journal of Legal, Ethical and Regulatory Issues |author=Taylor, K.; Bunker, R.B.; Johnson, L.R. et al. |volume=19 |issue=2 |pages=11–25 |year=2016 |url=https://www.abacademies.org/journals/month-november-year-2016-vol-19-issue-2-journal-jleri-past-issue.html}}</ref> For example, CRBs face difficulty obtaining banking services such as checking, credit cards, electronic transfers, and loans, which results in cash-only or cash-intensive business operation.<ref name="TaylorAnAnal16" /> As such, many certified public accountants (CPAs) may be unwilling to provide their accounting and tax services to CRBs due to increased risks associated with the industry.<ref name="TaylorAnAnal16" /><ref name="AICPAAnIssue19">{{cite web |url=https://www.aicpa.org/advocacy/state/downloadabledocuments/marijuanacpasissuebrief.pdf |format=PDF |title=An issue brief on state marijuana laws and the CPA profession |author=AICPA |publisher=AICPA |date=14 January 2019}}</ref><ref name="GottliebInsurance16">{{cite journal |title=Insurance Issues Raised by the Legalization of Recreational Marijuana |journal=The Brief |author=Gottlieb, L.; Munson, M. |volume=46 |issue=1 |pages=34–39 |year=2016 |url=http://www.bpmlaw.com/wp-content/uploads/2012/04/BRF_v046n01_Fall2016_Gottlieb-Munson-2.pdf |format=PDF}}</ref>

Because cannabis is a Schedule I drug, a cannabis business is subject to Internal Revenue Service (IRS) Code Section 280E, which disallows the deduction of ordinary business expenses in arriving at taxable income.<ref name="HouseUSC280E">{{cite web |url=https://uscode.house.gov/view.xhtml?hl=false&edition=prelim&req=granuleid%3AUSC-prelim-title26-section280E |title=26 USC 280E: Expenditures in connection with the illegal sale of drugs |work=House.gov |date=03 September 1982 |accessdate=09 September 2020}}</ref> As such, Code Section 280E results in significantly higher effective tax rates for cannabis businesses than for other businesses.<ref name="AlsharaihaSmoking17">{{cite journal |title=Smoking Out the Criminals: How Federal Tax Policy Can Reduce Illegal Drug Crime by Supporting the Legal Marijuana Industry |journal=University of Toledo Law Review |author=Alsharaiha, M.N. |volume=48 |issue=2 |pages=319–36 |year=2017 |url=https://www.utoledo.edu/law/studentlife/lawreview/volumes/v48n2.html}}</ref><ref name="Taillon280E18">{{cite journal |title=280E and the Value of Experienced CPAs |journal=2018 Marijuana Business Symposium |author=Taillon, B.; Cornelius, J. |year=2018 |url=https://www.cocpa.org/product/2018-marijuana-business-symposium/}}</ref> The Racketeer Influenced and Corrupt Organizations Act (RICO) of 1970 provides for federal criminal prosecution of individuals involved with criminal activities, including drug trafficking.<ref name="DoJRICO">{{cite web |url=https://www.justice.gov/archives/jm/criminal-resource-manual-956-rico-prosecutions-18-usc-1961-68 |title=956. RICO PROSECUTIONS—18 U.S.C. §§ 1961-68 |work=U.S. Department of Justice Archives |publisher=U.S. Department of Justice |date=21 January 2020 |accessdate=23 October 2020}}</ref> One does not have to be directly involved with the criminal enterprise to be prosecuted under RICO, as it applies to others associated with the criminal enterprise, include those providing professional services such as accountants, lawyers, and bankers.<ref name="DOJCriminalRICOPDF09">{{cite web |url=https://www.justice.gov/sites/default/files/usao/legacy/2014/10/17/rico.pdf |format=PDF |title=Criminal RICO: 18 U.S.C. §§ 1961-1968 - A Manual for Federal Prosecutors, Fifth Revised Edition |author=Marine, F.J.; Crow, D.E.; Dalton, R.C. et al. |publisher=U.S. Department of Justice |date=October 2009 |accessdate=06 September 2020}}</ref><ref name="ReinhartUpIn16">{{cite journal |title=Up in Smoke or Down in Flames? A Florida Lawyer's Legal and Ethical Risks in Advising a Marijuana Industry Client |journal=Florida Bar Journal |author=Reinhart, B.E. |volume=90 |issue=3 |pages=20–28 |year=2016 |url=https://www.floridabar.org/the-florida-bar-journal/up-in-smoke-or-down-in-flames-a-florida-lawyers-legal-and-ethical-risks-in-advising-a-marijuana-industry-client/}}</ref>

Cannabis businesses are also greatly affected by the Bank Secrecy Act (BSA) and anti-money laundering regulations that are designed to help identify and report money laundering activity.<ref name="SandersToWeed15">{{cite journal |title=To weed or not to weed? The Colorado quandary of legitimate cannabis businesses and the financial institutions who are unable to serve them |journal=The Penn State Law Review |author=Sanders, R.C. |issue=Summer |year=2015}}</ref> The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, exists to “safeguard the financial system from illicit use and combat money laundering.”<ref name="FCENAbout">{{cite web |title=What we do |author=Financial Crimes Enforcement Network |publisher=FINCEN |accessdate=05 September 2020}}</ref> In practical terms, FinCEN guidance stated that providing banking services to cannabis businesses was illegal and required banks to self-report this federally illegal activity.<ref name="HouserHigh15">{{cite journal |title=High times: A history of cannabis laws in the United States |journal=International Journal of Business and Public Administration |author=Houser, K.A.; Rosacker, R.E. |volume=12 |issue=2 |year=2015 |url=http://www.iabpad.com/high-times-a-history-of-marijuana-laws-in-the-united-states/}}</ref><ref name="Shu-AcquayeTheUnint16">{{cite journal |title=The Unintended Consequence to Legalizing Marijuana Use: The Banking Conondrum |journal=Cleveland State Law Review |author=Shu-Acquaye, F. |volume=64 |issue=2 |at=315 |year=2016 |url=https://engagedscholarship.csuohio.edu/clevstlrev/vol64/iss2/10}}</ref> Due to the BSA risks and FinCEN reporting requirements, most large banks will not provide accounts for cannabis-related businesses.<ref name="DraytonTheGreat17">{{cite journal |title=The great unknown: Trump’s impact on cannabis banking |journal=Marijuana Venture |author=Dayton, M.R. |volume 4 |issue=3 |pages=142–6 |year=2017 |url=https://www.marijuanaventure.com/product/mv-march-2017/}}</ref> However, there is evidence that some banks and credit unions are serving the industry. According to FinCEN, as of June 2020, 695 financial institutions in the U.S. are reportedly serving the cannabis industry; this is down from a high of 747 institutions in November 2019.<ref name="FINCENMarij20">{{cite web |url=https://www.fincen.gov/sites/default/files/shared/508_295174_MJ%20Banking%20Update%203rd%20QTR%20FY2020_Public_508%20compliant.pdf |format=PDF |title=Marijuana Banking Update |author=Financial Crimes Enforcement Network |date=30 June 2020 |accessdate=05 September 2020}}</ref>

Bills have been proposed that would change the federal landscape for the cannabis industry. For example, H.R. 1588, the Ending Federal Marijuana Prohibition Act of 2019<ref name="CongressHR1588">{{cite web |url=https://www.congress.gov/bill/116th-congress/house-bill/1588 |title=H.R.1588 - Ending Federal Marijuana Prohibition Act of 2019 |work=Congress.gov |publisher=Library of Congress |date=08 April 2019 |accessdate=23 October 2020}}</ref>, was introduced in the House of Representatives in March of 2019 and referred to the House Energy and Commerce and House Judiciary committees. There have been several attempts to pass legislation to ease the banking burden for the industry, including the Secure and Fair Enforcement (SAFE) Banking Act of 2019, which passed in the House of Representatives but has not yet passed the Senate.<ref name="CongressHR1595">{{cite web |url=https://www.congress.gov/bill/116th-congress/house-bill/1595 |title=H.R.1595 - Secure And Fair Enforcement Banking Act of 2019 |work=Congress.gov |publisher=Library of Congress |date=26 September 2019 |accessdate=23 October 2020}}</ref> There have been numerous cannabis-related bills introduced in the 116th Congress in 2019–2020, ranging from the MAPLE Act, which would remove cannabis from the list of crimes that would prevent an immigrant entrance into the U.S., to the MORE Act, which provides for the total decriminalization of cannabis and expungement of cannabis-related convictions. However, as of October 2020, none of these bills have passed both chambers.<ref name="CongressHR2703">{{cite web |url=https://www.congress.gov/bill/116th-congress/house-bill/2703 |title=H.R.2703 - MAPLE Act of 2019 |work=Congress.gov |publisher=Library of Congress |date=26 June 2019 |accessdate=23 October 2020}}</ref><ref name="CongressHR3884">{{cite web |url=https://www.congress.gov/bill/116th-congress/house-bill/3884 |title=H.R.3884 - MORE Act of 2020 |work=Congress.gov |publisher=Library of Congress |date=07 December 2020 |accessdate=23 October 2020}}</ref> Changes in federal legislation could potentially reduce, if not eliminate, the business problem studied herein. For example, if federal prohibition were eliminated, cannabis clients would be no different than any other client in a legal industry from the perspective of a CPA. Passage of a cannabis banking act would allow the industry to utilize regular banking services and eliminate some risk associated with a cash-intensive type of business.

===Accounting and internal control===
There are several unique accounting issues that affect the cannabis industry. Due to the state and local regulatory requirements, CRBs need to maintain effective accounting records. Tax Code Section 280E requires attention to inventory accounting while following the tax requirements.<ref name="MadisonInvent18">{{cite web |url=https://www.thetaxadviser.com/issues/2018/aug/inventory-accounting-cannabis-businesses.html |title=Inventory accounting for cannabis businesses: Sec. 280E and the impact of tax reform |author=Madison, C.J. |work=The Tax Advisor |date=01 August 2018}}</ref> Lack of banking availability requires special attention to internal controls to safeguard cash and maintain good accounting records of cash transactions. State regulations also require thorough accounting records as well as strong internal controls.<ref name="CODeptRevMedical16">{{cite web |url=https://www.sos.state.co.us/CCR/GenerateRulePdf.do?ruleVersionId=6821 |format=PDF |title=Medical Marijuana Rules - 1 CCR 212 - Version ID 6821 |author=Department of Revenue, Marijuana Enforcement Division |publisher=State of Colorado |date=2016 |accessdate=23 October 2020}}</ref><ref name="CODeptRevMedical17">{{cite web |url=https://www.sos.state.co.us/CCR/GenerateRulePdf.do?ruleVersionId=7094 |format=PDF |title=Medical Marijuana Rules - 1 CCR 212 - Version ID 7094 |author=Department of Revenue, Marijuana Enforcement Division |publisher=State of Colorado |date=2017 |accessdate=23 October 2020}}</ref><ref name="WSL314-55">{{cite web |url=https://apps.leg.wa.gov/wac/default.aspx?cite=314-55 |title=Chapter 314-55 WAC, Marijuana Licenses, Application Process, Requirements, and Reporting |work=Washington State Legislature |publisher=State of Washington |date=2020}}</ref>

Internal controls are also important to a cannabis business. These are the activities that an organization takes to provide reasonable assurance that the company can meet its goals.<ref name="FrazerInternal16">{{cite journal |title=Internal Control: Is it a Benefit or Fad to Small Companies? A Literature Dependency Perspective |journal=Journal of Accounting and Finance |author=Frazer, L. |volume=16 |issue=4 |pages=149–61 |year=2016 |url=https://articlegateway.com/index.php/JAF/article/view/1047}}</ref><ref name="KhairulInternal16">{{cite journal |title=Internal controls and fraud – empirical evidence from oil and gas company |journal=Journal of Financial Crime |author=Khairul, M.Z.; Anuar, N.; Ahmad, S.A.P.S. |volume=23 |issue=4 |pages=1154–68 |year=2016 |doi=10.1108/JFC-04-2016-0021}}</ref> Failure to comply with state, local, or tax regulations can result in penalties, fines, and potential revocation of the cannabis license.<ref name="HunzickerSolv18">{{cite journal |title=Solving financial mistakes made by cannabis businesses |journal=Marijuana Venture |author=Hunzicker, A. |volume 5 |issue=8 |pages=148–50 |year=2018 |url=https://www.marijuanaventure.com/product/mv-august-2018/}}</ref> For example, effective internal controls were missing in the Alterman v. Commissioner case in which a medical cannabis company failed to maintain adequate records and failed to understand how to comply with Tax Code Section 280E.<ref name="LeeBigOpp18">{{cite web |url=https://www.accountingtoday.com/news/big-opportunities-in-cannabis-clients-compliance?tag=00000157-6c2f-dfbe-a35f-fcaf52df0000 |title=Big opportunities in cannabis clients, compliance |author=Lee, D. |work=Accounting Today |date=01 August 2018 |accessdate=05 September 2020}}</ref> Due to complexities in accounting and regulation, cannabis businesses should be perpetually ready for a potential audit by regulators or the IRS.<ref name="HunzickerSolv18" /> Certified Public Accountants can provide small businesses, including cannabis businesses, with guidance to develop and implement effective internal controls.<ref name="KappProtect11">{{cite journal |title=Protecting Small Businesses from Fraud |journal=The CPA Journal |author=Kapp, L.A.; Heslop, G. |volume=81 |issue=10 |pages=62–7 |year=2011 |url=https://www.nysscpa.org/news/publications/the-cpa-journal/article-preview?ArticleID=10702}}</ref>

A cash-intensive business requires some unique internal controls to safeguard the asset and to maintain adequate records of cash transactions.<ref name="FrazerInternal16" /> The IRS defines a cash-intensive business as one that receives most of its revenues in cash and/or pays many of its expenses in cash.<ref name="IRSCash10">{{cite web |url=https://www.irs.gov/businesses/small-businesses-self-employed/cash-intensive-businesses-audit-techniques-guide-table-of-contents |title=Cash Intensive Businesses Audit Techniques Guide - Table of Contents |publisher=Internal Revenue Service |date=April 2010 |accessdate=05 September 2020}}</ref> Cash may be stolen by employees and is most susceptible to theft when entering or exiting the business.<ref name="FrazerInternal16" /> To maintain proper accounting records to support potential tax and other regulatory audits, a cash-intensive business should “document the flow of each receipt or revenue from the customer’s hands to the business, to the final end in the business bank account or as payment for a business expense.”<ref name="IRSCash10Chpt1">{{cite web |url=https://www.irs.gov/pub/irs-utl/cashchapter1_210627.pdf |format=PDF |title=Cash Intensive Businesses Audit Techniques - Chapter 1: Introduction and Overview of the Cash Intensive Business |publisher=Internal Revenue Service |date=April 2010 |accessdate=05 September 2020}}</ref>

Physical controls may be one of the most crucial internal controls, and security must be considered for areas “to include property, office buildings, warehouses, utility rooms … and vehicles as well as employees, contractors, and visitors.”<ref name="SatnaliwalaDont18">{{cite journal |title=Don't Overlook Physical Access: Internal auditors need to evaluate how facilities are protected as part of the organization's overall security efforts |journal=Internal Auditor |author=Satnaliwala, M. |volume=75 |issue=5 |pages=22–3 |year=2018 |url=https://go.gale.com/ps/anonymous?id=GALE|A560015397}}</ref> Physical controls over cash and cannabis inventory include keeping them in a safe or vault, video surveillance, and promptly depositing cash into a bank account if the cannabis business has one.<ref name="CODeptRevMedical17" /><ref name="ArensAudit17">{{cite book |title=Auditing and Assurance Services: An Integrated Approach |author=Arens, A.A.; Elder, R.J.; Beasley, M.S. et al. |publisher=Pearson |edition=16th |year=2017 |isbn=9780134065823}}</ref><ref name="SimkinCore14">{{cite book |title=Core Concepts of Accounting Information Systems |author=Simkins, M.G.; Norman, C.A.S.; Rose, J.G. |publisher=Wiley |edition=13th |year=2014 |isbn=9781119033288}}</ref> Physical controls should be tested frequently to ensure continuous safeguarding of assets.<ref name="SatnaliwalaDont18" /> Frequent physical inventory counts are needed, and differences between the actual count and inventory records should be examined right away.<ref name="KappProtect11" /> Colorado, for examples, has regulations that require daily reconciliation of inventory on-hand to the inventory tracking system.<ref name="CODeptRevMedical16" /><ref name="CODeptRevMedical17" />

===CPA requirements and risks===
CPAs must adhere to an extremely high standard of ethical conduct as provided by the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct, as well as any individual state codes of conduct.<ref name="AICPACode14">{{cite web |url=https://pub.aicpa.org/codeofconduct/Ethics.aspx |title=Code of Professional Conduct |author=AICPA |publisher=AICPA |date=15 December 2014 |accessdate=05 September 2020}}</ref> Unlike many business professionals, CPAs obtain a license or permit to practice from the state(s) in which they provide services.<ref name="AICPAAnIssue19" /> A violation of ethics or “lack of good moral character” could potentially result in a loss of the CPA license, and therefore the potential loss of the ability to earn a living.<ref name="AICPAAnIssue19" />

Most state boards of accountancy have provided somewhat unclear official guidance on the provision of services for the cannabis industry.<ref name="AICPAAnIssue19" /> The Washington State Board of Accountancy (BOA) stated in 2014, and again in 2018, that a CPA’s provision of services to a cannabis-related business does not constitute a violation of the BOA’s rules. This statement followed the March 2018 signing of the Engrossed Substitute Senate Bill 5928, which states that the provision of services to a CRB by a CPA does not, by itself, constitute a crime.<ref name="SatterlundCPA18">{{cite web |url=https://acb.wa.gov/cpas-and-cannabis |title=CPAs and Cannabis |author=Satterlund, C. |work=Washington State Board of Accountancy |date=15 March 2018 |accessdate=05 September 2020}}</ref> The Washington BOA further recommended that CPAs consider the risks associated with serving the cannabis industry and that CPAs engage an attorney for counsel.<ref name="SatterlundCPA18" /> As for Colorado, their BOA issued a position statement on December 16, 2015 that indicated the provision of services by a Certified Public Accountant to a cannabis business is not “specifically prohibited by the Accountancy Act.”<ref name="AICPAProviding19">{{cite web |url=https://www.aicpa.org/advocacy/state/downloadabledocuments/marijuana-state-board-positions.pdf |format=PDF |title=Providing services to businesses in the marijuana industry: A sample of current board positions |author=AICPA |publisher=AICPA |date=January 2019 |accessdate=22 October 2020}}</ref> The Colorado Board went on to caution CPAs that their position statement does not constitute an endorsement for CPAs to enter the industry.<ref name="AICPAProviding19" />

In January of 2019, the National Association of State Boards of Accountancy (NASBA), in conjunction with the AICPA, published a document entitled "Providing services to businesses in the marijuana industry: A sample of current board positions."<ref name="AICPAProviding19" /> This paper summarized the board positions for Alaska, Arizona, Arkansas, Colorado, Connecticut, Florida, Iowa, Maryland, Massachusetts, Michigan, New Mexico, Nevada, Oregon, and Washington. This sample includes states in which cannabis is legal only for medical purposes, states in which cannabis is legal for recreational or medical usage, and a state in which cannabis remains prohibited. All state boards in the report, except New Mexico, indicated that the CPA would not face disciplinary action by the board for providing services to a cannabis business, assuming the CPA was in compliance with all state laws.<ref name="AICPAProviding19" /> This was even the case for Iowa, where only low-THC, high-CBD ([[cannabidiol]]) cannabis is allowed; the Iowa BOA indicated that Iowa CPAs serving cannabis businesses in legalized states would not face disciplinary action.<ref name="AICPAProviding19" />

While providing services to cannabis businesses does not by itself necessarily constitute a violation of good moral character, other problems can result from a CPA serving the cannabis industry.<ref name="SternaLiab17">{{cite journal |title=Liability Risks and Other Concerns when Servicing Marijuana Businesses |journal=The CPA Journal |author=Sterna, S.; Wolfe, J. |volume=87 |issue=10 |pages=9–10 |year=2017 |url=https://www.cpajournal.com/2017/10/19/liability-risks-concerns-servicing-marijuana-businesses/}}</ref> In some cases, a CPA may be found to have “aided and abetted” or been involved in a “conspiracy to violate” the federal Controlled Substances Act or racketeering laws.<ref name="SternaLiab17" /> A CPA may also be exposed to criminal investigation and/or prosecution as well as potential fines, penalties, and sanctions if he participates in “dishonest, fraudulent, or criminal acts” associated with the cannabis industry.<ref name="SternaLiab17" />

Cannabis businesses have a higher likelihood of income tax audit than other businesses due to complexities of Tax Code Section 280E.<ref name="OhanesianPrep18">{{cite web |url=https://www.thetaxadviser.com/issues/2018/mar/preparing-work-indirectly-cannabis-industry.html |title=Preparing to work indirectly with the cannabis industry |author=Ohanesian, M.V. |work=The Tax Adviser |date=01 March 2018}}</ref> The large number of cash transactions may result in the absence of a clear paper trail, which increases the risk of tax evasion and makes cannabis businesses targets for federal tax audits.<ref name="SandersToWeed15" /> Some [[RefWork:Known cannabis testing regulations in the United States|state cannabis regulations]]—including those found in New Mexico, Minnesota, and Colorado—may require a financial statement audit of a cannabis business to be completed by a CPA.<ref name="AICPAAnIssue19" /><ref name="CODeptRevMedical17" />

Additionally, CPAs may believe associating with the cannabis industry could damage their reputation in the business community with current or prospective clients. Devers ''et al.'' have shown that reputation of a firm can indeed be seen by outsiders as an indication of the firm’s quality of services.<ref name="DeversAGen08">{{cite journal |title=A General Theory of Organizational Stigma |journal=Organization Science |author=Devers, C.E.; Dewett, T.; Mishina, Y. et al. |volume=20 |issue=1 |pages=154–171 |year=2009 |doi=10.1287/orsc.1080.0367}}</ref> CPA firms may also be viewed as less than legitimate based on their overall association with the somewhat controversial cannabis industry.<ref name="DeversAGen08" /> Core-stigmatized organizations are those for whom outsiders have a “perceived violation of social norms” and may be looked at unfavorably.<ref name="HudsonNotWith09">{{cite journal |title=Not with a Ten-Foot Pole: Core Stigma, Stigma Transfer, and Improbable Persistence of Men's Bathhouses |journal=Organization Science |author=Hudson, B.A.; Okhuysen, G.A. |volume=20 |issue=1 |pages=134–53 |year=2009 |doi=10.1287/orsc.1080.0368}}</ref> Current or prospective clients may avoid associating with a CPA firm who works in the cannabis industry because they worry that negative stigma may transfer to them.<ref name="HampelHow16">{{cite journal |title=How Organizations Move from Stigma to Legitimacy: The Case of Cook’s Travel Agency in Victorian Britain |journal=Academy of Management Journal |author=Hampel, C.E.; Tracey, P. |volume=60 |issue=6 |pages=2175–207 |year=2016 |doi=10.5465/amj.2015.0365}}</ref> However, some CPAs may determine that they are willing to accept such core stigma as part of their business strategy, as may be the case for CPA firms who specialize in cannabis clients.<ref name="HudsonNotWith09" />

Lastly, professional standards require that a CPA only take on engagements for which he or she has the appropriate technical knowledge about the industry to complete the work competently.<ref name="AICPAProviding19" /> The complexities of the cannabis industry make meeting this standard costly and not necessarily worth the risks to many CPAs.<ref name="AICPAAnIssue19" /> In general, CPAs need to evaluate the many risks associated with providing services to the industry and may determine that the risks outweigh the benefits and choose to not take on cannabis clients.<ref name="GaetanoNYSSCPA17">{{cite journal |title=NYSSCPA Marijuana Symposium addresses risks and benefits of the industry |journal=The Trusted Professional |author=Gaetano, C. |volume=20 |issue=1 |page=1 |year=2017 |url=https://www.nysscpa.org/docs/default-source/trusted-professional-archives/tp_jan_feb_17.pdf |format=PDF}}</ref>

===Purpose of this study===
Given the previously discussed, this qualitative study investigated the following research questions:

:1. Why are some certified public accountants (CPAs) unwilling to provide services to cannabis-related businesses?
:2. How do CRBs compensate for lack of CPA services?
:3. What does a CPA need to know about the cannabis industry prior to engaging to provide services to CRBs?

==Methods==
Qualitative research is particularly well-suited for the “early stages of research” as in the case of a young industry such as cannabis.<ref name="BelottoData18">{{cite journal |title=Data Analysis Methods for Qualitative Research: Managing the Challenges of Coding, Interrater Reliability, and Thematic Analysis |journal=The Qualitative Report |author=Belotto, M.J. |volume=23 |issue=11 |pages=2622-2633 |year=2018 |url=https://nsuworks.nova.edu/tqr/vol23/iss11/2}}</ref> The grounded theory approach to qualitative research utilizes “systematical methodological procedures” to identify theories as they “emerge from the data.”<ref name="AstalinQual13">{{cite journal |title=Qualitative Research Designs: A Conceptual Framework |journal=International Journal of Social Sciences & Interdisciplinary Research |author=Astalin, P.K. |volume=2 |issue=1 |pages=118–24 |year=2013 |url=http://www.i-scholar.in/index.php/ijssir/article/view/43645}}</ref> Grounded theory is particularly appropriate for research such as this study, which seeks to generate theory based upon the reported data from participants.<ref name="Savin-BadenQual13">{{cite book |title=Qualitative Research: The Essential Guide to Theory and Practice |author=Savin-Baden, M.; Major, C.H. |publisher=Routledge |year=2013 |isbn=9780415674782}}</ref> Grounded theory requires one to continuously compare and analyze data previously collected to the new data being collected to identify patterns and themes, and produce theories. Interviews of participants are often used as a method of data collection in grounded theory research.<ref name="AstalinQual13" /><ref name="Savin-BadenQual13" /><ref name="CooperBusi13">{{cite book |title=Business Research Methods |author=Cooper, D.R.; Schindler, P.S. |publisher=McGraw-Hill Education |edition=12th |year=2013 |isbn=9780073521503}}</ref>

Semi-structured interviews of cannabis business owners were used to learn about the financial difficulties CRBs face, particularly related to accounting and finding CPA services. Semi-structured interviews of CPAs provided an understanding of the willingness or hesitancy to provide services to CRBs, the potential risks related to the industry, and accounting and tax issues relevant to CRBs. The interview questions for CPAs may be found in the supplementary information as Additional file 1: Appendix A, and the questions for CRB owners as Additional file 2: Appendix B. Institutional review board (IRB) approval was obtained from California Southern University prior to data collection. Signed statements of informed consent from all participants were emailed or hand delivered during face-to-face interviews. Interviews were one-on-one. Nineteen interviews were conducted via telephone and four conducted in-person between February 2019 and May 2019. Interviews lasted from approximately 20 minutes to more than an hour.

===Participants===
A list of 3,076 active CPA firms was downloaded from the Colorado and Washington State Board of Accountancy websites on December 2 and 3, 2018, respectively. The listed firms’ websites were then reviewed to locate contact information for partners and managers, who were then emailed a recruitment letter. This was a highly manual process and not all websites had contact information for their employees posted, resulting in less than half the number of email contacts compared to the number of firms. While 1,249 requests for participation were emailed, only four willing participants responded. A convenience sample was recruited for the remaining CPA participants by posting requests for participation on LinkedIn and Facebook and through conversations and emails with accounting colleagues in both states. Deliberate effort was made to include participants from a variety of sizes of firms as well as from firms who did serve the cannabis industry and firms that did not. No participants withdrew during the interviews; however, one CPA declined the interview and simply provided a statement that his firm does not provide services to the cannabis industry because it remains federally illegal.

Colorado and Washington State both maintain publicly available listings of licensed cannabis businesses. The Colorado Department of Revenue publishes lists of licensed cannabis facilities on their state website. The listings reported approximately 2,200 licensed Colorado retail stores, retail manufacturers, retail cultivators, and medical cultivators for December 2018. These lists contained only company name, city, zip code, and license number. Seventy randomly selected companies from the combined lists were researched on the internet to locate email or phone information. A request for participation was emailed if an email address was listed or if there was a “contact us” option on the website.

The Washington State Liquor and Cannabis Board publishes a report of monthly “Sales Activity by License Number.” For December 2018, 433 cannabis licenses reported sales activity. The 433 license numbers were then cross referenced to the “Washington Listing of Marijuana Applicants” report which provides company name, address, and phone number. Since phone numbers were readily available on this report, phone calls were made to request participation from randomly selected licensees throughout the list.

Forty-five licensed cannabis businesses were called and seventy were emailed to request owner participation, but finding CRB participants proved to be extremely difficult. No emails were answered. Phone calls never got past the employee answering the phone, meaning the employee indicated they would not be interested or would leave a message for the owner to respond. Only two CRB owners responded, but they both declined participation and generally expressed unease in sharing any information related to their business with a stranger. It became apparent that obtaining participation in this manner was not effective.

Next, requests for participation were posted on LinkedIn and Facebook and requested through conversations with colleagues to identify and recruit potential CRB owners in both states. This led to five leads where there was a personal relationship between someone in our professional network and a CRB owner. One of those five, a small Colorado retailer, did not agree to participate as they were uncomfortable sharing their business information. The other four CRB owners agreed to participate and provided additional names of CRB owners in their networks to contact at the conclusion of their interviews. This process of referrals continued until the study reached ten CRB participants. No participants withdrew during the interviews. The unresponsive CRBs varied in terms of location and type of firm, as did those CRBs that participated. Tables 2 and 3 show the descriptive data for the participants.

{| 
 | STYLE="vertical-align:top;"|
{| class="wikitable" border="1" cellpadding="5" cellspacing="0" width="60%"
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;" colspan="5"|'''Table 2.''' Cannabis-related business owners (CRB) participating in interviews.<br />&nbsp;<br /><sup>a</sup>First two digits of participant ID represent the state, next three digits indicate the participant was a CRB owner, and last digit represents the number of the interviewee.
 |- 
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Participant ID<sup>a</sup>
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Type of cannabis business
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Year established
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Legal structure
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Approximate 2018 revenues
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACRB1
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Producer/Processor
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2014
  | style="background-color:white; padding-left:10px; padding-right:10px;"|LLC
  | style="background-color:white; padding-left:10px; padding-right:10px;"|$3.5M
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACRB2
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Producer/Processor
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2015
  | style="background-color:white; padding-left:10px; padding-right:10px;"|LLC
  | style="background-color:white; padding-left:10px; padding-right:10px;"|$600k
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACRB3
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Producer/Processor
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2015
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partnership
  | style="background-color:white; padding-left:10px; padding-right:10px;"|$5k (closing)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACRB4
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Processor
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2013
  | style="background-color:white; padding-left:10px; padding-right:10px;"|LLC
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Declined
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACRB5
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Retailer
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2017
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partnership
  | style="background-color:white; padding-left:10px; padding-right:10px;"|$5.6M
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCRB1
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Retailer
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2014
  | style="background-color:white; padding-left:10px; padding-right:10px;"|LLC
  | style="background-color:white; padding-left:10px; padding-right:10px;"|$2.5M
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCRB2
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Retailer
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2014
  | style="background-color:white; padding-left:10px; padding-right:10px;"|LLC
  | style="background-color:white; padding-left:10px; padding-right:10px;"|$4.0M
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCRB3
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Producer/Processor
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2014
  | style="background-color:white; padding-left:10px; padding-right:10px;"|S-Corp
  | style="background-color:white; padding-left:10px; padding-right:10px;"|$5.0 to 6.0M
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCRB4
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Producer
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2018
  | style="background-color:white; padding-left:10px; padding-right:10px;"|S-Corp
  | style="background-color:white; padding-left:10px; padding-right:10px;"|$0 (start-up)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCRB5
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Retailer
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2009 (medical)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|LLC
  | style="background-color:white; padding-left:10px; padding-right:10px;"|$1.0M
 |-
|}
|}

{| 
 | STYLE="vertical-align:top;"|
{| class="wikitable" border="1" cellpadding="5" cellspacing="0" width="80%"
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;" colspan="5"|'''Table 3.''' Certified Public Accountants (CPAs) participating in interviews.<br />&nbsp;<br /><sup>a</sup>First two digits of participant ID represent the state, second three digits indicate the participant was a Certified Public Accountant, and last digit represents the number of the interviewee.<br /><sup>b</sup>Choices were: single CPA; local CPA firm with multiple CPAs; regional CPA firm; national CPA firm; Big 4 CPA firm; or not in public accounting.<br /><sup>c</sup>COCPA11 was a partner at a Big 4 accounting firm that declined to do a phone interview but responded via email that the firm’s policy is to not serve cannabis businesses because they are illegal at the federal level.
 |- 
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Participant ID<sup>a</sup>
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Partner or manager within firm
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Primary county or US Zip code of practice
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Type of firm<sup>b</sup>	
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Do you or your firm provide services to CRBs?
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACPA1
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|98501
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Local
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Yes
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACPA2
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Various
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Single CPA
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Yes
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACPA3
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|98004
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Local
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Yes
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCPA1
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|81501
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Single CPA
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCPA2
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|80237
  | style="background-color:white; padding-left:10px; padding-right:10px;"|National
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCPA3
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Nationwide
  | style="background-color:white; padding-left:10px; padding-right:10px;"|National
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Yes
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCPA4
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Manager
  | style="background-color:white; padding-left:10px; padding-right:10px;"|81501
  | style="background-color:white; padding-left:10px; padding-right:10px;"|National
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCPA5
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|81501
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Regional
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCPA6
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|80433
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Local
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCPA7
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|80433 and 81501
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Local
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCPA8
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|80901
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Single CPA
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Yes
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCPA9
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Denver
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Regional
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCPA10
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Manager
  | style="background-color:white; padding-left:10px; padding-right:10px;"|81521
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Local
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCPA11
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Partner
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Nationwide
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Big 4
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No
 |-
|}
|}

===Data collection===
Three central research questions were the focus of the study, with sub-questions asked to narrow the focus as the interview was conducted. As interviews took place, responses were analyzed for clarity and understanding. At times, probes were asked to “follow up something already asked” and to seek additional information from the participants.<ref name="MerriamQual09">{{cite book |title=Qualitative Research: A Guide to Design and Implementation |author=Merriam, S.B. |publisher=Jossey-Bass |edition=3rd |year=2009 |isbn=9780470283547}}</ref> Data collection ceased at the point of data saturation, the point at which “the researcher is no longer hearing or seeing new information.”<ref name="Savin-BadenQual13" /><ref name="AstrothFocus18">{{cite journal |title=Focusing on the Fundamentals: Reading Qualitative Research with a Critical Eye |journal=Nephrology Nursing Journal |author=Astroth, K.S. |volume=45 |issue=4 |pages=381–86 |year=2018 |pmid=30303648}}</ref>

===Data analysis===
The study utilized the five steps of the data analysis process from Creswell and Creswell.<ref name="CreswellResearch18">{{cite book |title=Research Design: Qualitative, Quantitative, and Mixed Methods Approaches |author=Creswell, J.W.; Creswell, J.D. |publisher=SAGE Publications, Inc |edition=5th |year=2018 |isbn=9781506386706}}</ref> First, the interview data were organized and prepared for analysis by cataloging interviews by state and type, CPA or CRB owner, and copying or cutting into Excel according to interview question.<ref name="Savin-BadenQual13" /><ref name="CreswellResearch18" /> Data was cleansed to eliminate conversation irrelevant to the research study. Interview data was reviewed to allow understanding of the overall ideas from the participants.<ref name="CreswellResearch18" /> This immersion into the data helped to ensure a solid understanding prior to detailed analysis.<ref name="Savin-BadenQual13" />

Interview transcripts were broken down into similar concepts or codes.<ref name="BelottoData18" /><ref name="CreswellResearch18" />, which were used to identify common themes in the data.<ref name="CreswellResearch18" /> Where repetition was identified in the data, themes became apparent.<ref name="Savin-BadenQual13" /> Comparison, or triangulation, between themes identified in the CRB owner interviews and themes identified in the CPA interviews helped to ensure reliability of the research.<ref name="MerriamQual09" /> Due to the small sample size, a Fisher’s exact test calculated using R statistical software was used to determine statistical significance when comparing responses between accountants that serve the industry and those that do not.

==Results==
Several major themes emerged from the interview data. The primary reason given that CPAs choose to not serve the industry is that cannabis remains illegal at the federal level. All ten of the CRB owners interviewed were able to find a CPA for tax services. The primary theme from CRBs and CPAs who are serving the industry was the need for accountants to have a thorough understanding of the industry and IRS Tax Code Section 280E.

===Research question 1: Why are some CPAs unwilling to service the cannabis industry?===
Eight of the CPA respondents indicated that the primary reason to avoid the industry was because the industry is federally illegal and/or they feared federal criminal prosecution. Four indicated that the special tax requirements and nuances with the tax code were not worth the extra technical training necessary to service what would be a niche industry. In addition, three worried that serving CRBs would jeopardize their CPA license. Table 4 shows the counts and percentages of CPAs responding to the primary reasons they would not serve the cannabis industry.

{| 
 | STYLE="vertical-align:top;"|
{| class="wikitable" border="1" cellpadding="5" cellspacing="0" width="60%"
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;" colspan="2"|'''Table 4.''' Reasons participating CPAs would not serve the cannabis industry. Note that CPAs may have given more than one reason to not serve the industry; therefore, percentages will not total 100%.<br />&nbsp;<br /><sup>a</sup>Includes COCPA11, who declined an interview but indicated his firm does not serve cannabis clients because it is illegal at the federal level.
 |- 
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Reason stated
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Count (%) of CPA participants who do not serve the industry
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Federally illegal; fear of criminal prosecution
  | style="background-color:white; padding-left:10px; padding-right:10px;"|8 (89%)<sup>a</sup>
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Do not want to jeopardize Certified Public Accountant license
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (33%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Complicated tax requirements; not willing to devote the time and resources to special technical training
  | style="background-color:white; padding-left:10px; padding-right:10px;"|4 (44%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Banking/cash and security issues
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (11%)
 |-
|}
|}

===Research question 2: How do CRBs compensate for lack of CPA services?===
All 10 of the CRB owners interviewed indicated that they currently engaged a CPA for their business, though two indicated that they previously had difficulty in finding a CPA who was willing to work with them and were competent. All 10 of the CRBs had CPAs who did their federal income tax filing. Five described their relationship with their CPA as being like an outsourced CFO.

Five CPA participants indicated that they do serve the cannabis industry. Three of those five only serve cannabis clients and no other industries. Seven CRB participants and three CPAs who currently serve the industry made a point to note that regardless of the service to be provided, CPAs must have in-depth knowledge of the industry. Tax compliance was the service indicated as being needed most by CRBs from 15 participants. Table 5 summarizes the responses when asked what professional accounting and tax services are most needed in the industry.

{| 
 | STYLE="vertical-align:top;"|
{| class="wikitable" border="1" cellpadding="5" cellspacing="0" width="60%"
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;" colspan="4"|'''Table 5.''' Professional accounting and tax services perceived as most needed by participating cannabis-related businesses and CPAs. Participants may have identified more than one needed service; therefore, percentages will not total 100%.
 |- 
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;" rowspan="2"|Accounting and tax services most needed by the cannabis industry
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;" colspan="4"|Reported by participant type
 |-
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Cannabis-related business owners count (%)
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|CPAs that serve the industry
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|CPAs that do not serve the industry
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|CPA must know industry in detail regardless of services provided
  | style="background-color:white; padding-left:10px; padding-right:10px;"|7 (70%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (60%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Tax compliance
  | style="background-color:white; padding-left:10px; padding-right:10px;"|5 (50%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|5 (100%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|5 (55%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Accounting and tax advice
  | style="background-color:white; padding-left:10px; padding-right:10px;"|6 (60%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (60%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (22%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Function like a CFO/controller to help management make business decisions
  | style="background-color:white; padding-left:10px; padding-right:10px;"|5 (50%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (33%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Accounting and bookkeeping
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (60%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|7 (77%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Consulting on areas such as business valuations, M&A, and internal controls
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|5 (55%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|GAAP financial statement audits
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (33%)
 |-
|}
|}

===Research question 3: What does a CPA need to know prior to engaging to service the industry?===
Table 6 summarizes the CPAs' responses to what is the greatest risk associated with serving the industry. Risk of federal prosecution and loss of CPA license were the two most frequently indicated responses. CPAs who do not serve the industry identified more risks than those who do serve the industry (''p'' = 0.04).

{| 
 | STYLE="vertical-align:top;"|
{| class="wikitable" border="1" cellpadding="5" cellspacing="0" width="60%"
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;" colspan="4"|'''Table 6.''' Risk in serving the cannabis industry as reported by participating CPAs. Participants may have identified more than one risk factor; therefore, percentages will not total 100%.
 |- 
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;" rowspan="2"|Risk for CPA serving the industry
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;" colspan="4"|Reported by participant type
 |-
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|CPAs that serve the industry
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|CPAs that do not serve the industry
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Total CPAs count (%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Nothing different from any other client; we are helping them stay in compliance with federal tax law
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (40%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (14%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Tax Code Section 280E/Tax issues/Tax audits
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (11%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (14%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Relying on improper records to support income tax return
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (11%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (14%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Client may be doing something outside of regulations
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (7%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Difficult to recruit staff
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (7%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Getting sued/litigation
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (11%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (14%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Reputational risk
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (22%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (14%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Losing CPA license
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|4 (44%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|4 (29%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Federal prosecution
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|4 (44%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|4 (29%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Cash-intensive business/Security of staff/Depositing cash receipts from CRBs
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (22%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (14%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Lack of technical training on industry
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (22%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (14%)
 |-
|}
|}

All participants were asked what banking and cash handling issues were unique to the cannabis industry. Ten participants expressed knowledge that most banks will not serve the industry and that those that do charge high fees. Eight participants acknowledged security issues related to having a cash-intensive business. Seven of ten CRBs indicated they had accounts closed at multiple banks and had to find new ones. Four CRBs in remote areas often had to transport cash long distances to a bank that would give them an account. Four CRBs identified alternative ways to bank, including setting up management accounts to handle the cash through a bank, though these often were closed once the bank discovered the transactions were from a cannabis business. Table 7 shows these responses.

{| 
 | STYLE="vertical-align:top;"|
{| class="wikitable" border="1" cellpadding="5" cellspacing="0" width="60%"
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;" colspan="2"|'''Table 7.''' Banking and cash difficulties for the industry as reported by cannabis-related business owners.<br />&nbsp;<br /><sup>a</sup>First two digits of participant ID represent the state, next three digits indicate whether the participant was a CRB or CPA, and the last digit represents the number of the interviewee.
 |- 
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Participant ID<sup>a</sup>
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|Banking and cash difficulties
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACRB1
  | style="background-color:white; padding-left:10px; padding-right:10px;"|
• Bank is long-distance drive<br />
• Safety/security issues<br />
• Have had accounts closed<br />
• High fees<br />
• No credit cards
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACRB2
  | style="background-color:white; padding-left:10px; padding-right:10px;"|
• Have had 2–3 accounts closed<br />
• Significant reporting requirements/bank audits
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACRB3
  | style="background-color:white; padding-left:10px; padding-right:10px;"|
• Bank is long-distance drive<br />
• High fees<br />
• Difficult to keep cash records<br />
• Closed bank account and went back to all cash
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACRB4
  | style="background-color:white; padding-left:10px; padding-right:10px;"|
• High fees<br />
• Safety/security issues<br />
• Have had 3–4 accounts closed<br />
• Use multiple accounts/management company for bank account
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|WACRB5
  | style="background-color:white; padding-left:10px; padding-right:10px;"|
• Have had 3 accounts closed<br />
• Pay as much in cash as possible<br />
• Save up $20s and drive them to pay IRS in cash<br />
• Use management company for bank account
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCRB1
  | style="background-color:white; padding-left:10px; padding-right:10px;"|
• Have had multiple accounts closed<br />
• Bank is long-distance drive<br />
• Hard to pay taxes without bank account
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCRB2
  | style="background-color:white; padding-left:10px; padding-right:10px;"|
• High fees<br />
• Significant reporting requirements<br />
• Bank is long-distance drive<br />
• Safety/security issues
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCRB3
  | style="background-color:white; padding-left:10px; padding-right:10px;"|
• High fees<br />
• Significant reporting requirements<br />
• Have had multiple accounts closed (even employees’ personal accounts were closed)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCRB4
  | style="background-color:white; padding-left:10px; padding-right:10px;"|
• Have had account closed<br />
• High fees<br />
• Use multiple accounts/management company for bank account
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|COCRB5
  | style="background-color:white; padding-left:10px; padding-right:10px;"|
• High fees<br />
• Pay as much in cash as possible<br />
• Difficult to keep cash records<br />
• Bank “ignores” the type of business/turns a blind eye
 |-
|}
|}

Three CPAs that work with the industry and three CRBs also indicated that there was complicated and time-consuming reporting required for cannabis bank accounts. Table 8 reports the responses by CPAs regarding banking and cash issues compared to the responses given by the CRBs. There is not a statistically significant difference between the banking and cash issues identified by accountants that do serve the industry and those that do not (''p'' = 0.35).

{| 
 | STYLE="vertical-align:top;"|
{| class="wikitable" border="1" cellpadding="5" cellspacing="0" width="60%"
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;" colspan="4"|'''Table 8.''' Banking and cash issues reported by CRBs compared to CPAs. Participants may have identified more than one banking and cash issue; therefore, percentages will not total 100%.
 |- 
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;" rowspan="2"|Banking and cash issues reported
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;" colspan="4"|Reported by participant type
 |-
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|CRB owner count (%)
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|CPAs that serve the industry
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|CPAs that do not serve the industry
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Banking issues vary by state
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (40%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|High fees
  | style="background-color:white; padding-left:10px; padding-right:10px;"|7 (70%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (60%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Significant reporting requirements for bank
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (30%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (60%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Safety/security issues
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (30%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|4 (44%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Some CRBs have bank accounts that are not openly cannabis accounts
  | style="background-color:white; padding-left:10px; padding-right:10px;"|4 (40%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No credit cards
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (10%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (40%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Insider theft/susceptible to fraud
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (11%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No banking available
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|4 (44%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Complicated cash record-keeping
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (22%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Bank is long distance drive
  | style="background-color:white; padding-left:10px; padding-right:10px;"|4 (40%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Accounts get closed by bank
  | style="background-color:white; padding-left:10px; padding-right:10px;"|7 (70%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
 |-
|}
|}

All participants were asked what type of internal controls were needed in the industry to safeguard cash and inventory while ensuring adherence to federal, state, and local regulations. Respondents described physical security controls 18 times. CRB and CPA participants mentioned internal controls for record-keeping requirements needed to support both accounting records and meet state and local regulatory requirements 20 times in the various interviews. There is not a statistically significant difference between internal controls identified by accountants that do serve the industry and those that do not (''p'' = 0.60). Table 9 reports the internal control needs described by interview participants.

{| 
 | STYLE="vertical-align:top;"|
{| class="wikitable" border="1" cellpadding="5" cellspacing="0" width="60%"
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;" colspan="4"|'''Table 9.''' Internal controls needed to safeguard assets and ensure adherence to regulations in the cannabis industry. Participants may have identified more than internal control; therefore, percentages will not total 100%.
 |- 
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;" rowspan="2"|Internal controls needed
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;" colspan="4"|Reported by participant type
 |-
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|CRB owner count (%)
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|CPAs that serve the industry
  ! style="background-color:#e2e2e2; padding-left:10px; padding-right:10px;"|CPAs that do not serve the industry
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;" colspan="4"|Physical security controls
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|&nbsp;&nbsp;&nbsp;Cameras
  | style="background-color:white; padding-left:10px; padding-right:10px;"|5 (50%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (22%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|&nbsp;&nbsp;&nbsp;Saves/Vaults
  | style="background-color:white; padding-left:10px; padding-right:10px;"|5 (50%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|&nbsp;&nbsp;&nbsp;Locks/Fencing/Guards
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (30%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (11%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;" colspan="4"|Support record-keeping requirements
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|&nbsp;&nbsp;&nbsp;Cash logs/records/reconciliation
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (33%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|&nbsp;&nbsp;&nbsp;Frequent inventory counts/reconciliation
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (40%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (33%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|&nbsp;&nbsp;&nbsp;Technology to track inventory and sales
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (30%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (60%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (22%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Segregation of duties with cash/inventory handling
  | style="background-color:white; padding-left:10px; padding-right:10px;"|3 (30%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (40%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|2 (22%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|No one alone with cash
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (20%)
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (22%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Drug test employees
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (11%)
 |-
  | style="background-color:white; padding-left:10px; padding-right:10px;"|Review/oversight of classification of costs for Tax Code section 280E
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|0
  | style="background-color:white; padding-left:10px; padding-right:10px;"|1 (11%)
 |-
|}
|}

==References==
{{Reflist|colwidth=30em}}

==Notes==
This presentation is faithful to the original, with only a few minor changes to presentation. Some grammar and punctuation was cleaned up to improve readability. In some cases important information was missing from the references, and that information was added. The original article lists references in alphabetical order; this version lists them in order of appearance, by design. Two of the original references for AICPA CPA docs had broken URLs; what is presumed to be the same documents—although updated for 2019—were found elsewhere on the AICPA site and used for this version.

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[[Category:CannaQAwiki journal articles (added in 2021)‎]]
[[Category:CannaQAwiki journal articles (all)‎]]
[[Category:CannaQAwiki journal articles on cannabis banking and finances]]
[[Category:CannaQAwiki journal articles on laws and regulations]]