PRINTER'S NO. 973
No. 838 Session of 2007
INTRODUCED BY CORMAN, BROWNE, MELLOW, BOSCOLA, M. WHITE, WOZNIAK, GORDNER, ERICKSON, RAFFERTY, LOGAN, ORIE, FONTANA, MUSTO, O'PAKE, ROBBINS, FOLMER, VANCE, D. WHITE, KASUNIC, COSTA, BRUBAKER, DINNIMAN, WONDERLING AND WAUGH, MAY 4, 2007
REFERRED TO CONSUMER PROTECTION AND PROFESSIONAL LICENSURE, MAY 4, 2007
AN ACT 1 Amending the act of May 26, 1947 (P.L.318, No.140), entitled, as 2 amended, "An act relating to the practice of public 3 accounting; providing for the examination, education and 4 experience requirements for certification of certified public 5 accountants and for the licensing of certified public 6 accountants, public accountants and firms; requiring 7 continuing education and peer review; providing for the 8 organization and ownership of firms and for the procedures 9 and grounds for discipline and reinstatement of licensees; 10 prescribing the powers and duties of the State Board of 11 Accountancy and the Department of State; providing for 12 ownership of working papers and confidentiality; regulating 13 the professional responsibility of licensees; defining 14 unlawful acts and acts not unlawful; providing penalties; and 15 repealing existing laws," further providing for definitions, 16 for State Board of Accountancy, for general powers of the 17 board, for examination and issuance of certificate, for 18 education requirements, for experience requirements; 19 providing for requirements for issuance of certificate; 20 further providing for certificates issued by domestic 21 reciprocity and for certificates issued by foreign 22 reciprocity; providing for practice in this Commonwealth by 23 individuals under substantial equivalency, for practice 24 outside this Commonwealth under substantial equivalency; 25 further providing for licenses to practice, for licensing of 26 firms, for peer review, for grounds for discipline, for 27 reinstatement, for unlawful acts and for acts not unlawful. 28 The General Assembly of the Commonwealth of Pennsylvania 29 hereby enacts as follows:
1 Section 1. Section 2, 2.3(a), 3 and 3.1 of the act of May 2 26, 1947 (P.L.318, No.140), known as the CPA Law, reenacted and 3 amended December 8, 1976 (P.L.1280, No.286) and amended December 4 4, 1996 (P.L.851, No.140), are amended to read: 5 Section 2. Definitions.--The following words and phrases 6 when used in this act shall have the meanings ascribed to them 7 in this section unless the context clearly indicates otherwise: 8 "AICPA." The American Institute of Certified Public 9 Accountants. 10 "Attest activity." [An examination, audit, review, 11 compilation or other agreed-upon procedure with respect to 12 financial information, together with the issuance of a report 13 expressing or disclaiming an opinion or other assurance on the 14 information.] The provision of any of the following financial 15 statement services together with the issuance of a report 16 expressing or disclaiming an opinion or other assurance on the 17 information: 18 (1) an audit or other engagement performed in accordance 19 with Statements on Auditing Standards (SAS); 20 (2) a review or compilation of a financial statement 21 performed in accordance with Statements on Standards for 22 Accounting and Review Services (SSARS); 23 (3) an engagement performed in accordance with Statements on 24 Standards for Attestation Engagements (SSAE); or 25 (4) any other engagement performed in accordance with 26 attestation standards established by an organization granted 27 authority by statute or regulation to establish attestation 28 standards, such as the American Institute of Certified Public 29 Accountants (AICPA) or the Public Company Accounting Oversight 30 Board (PCAOB). 20070S0838B0973 - 2 -
1 "Board." The State Board of Accountancy. 2 "Business unit." A functional group of individuals in a firm 3 or a sole practitioner performing attest activity. 4 "Certificate." A certificate as "certified public 5 accountant" issued under this act or a corresponding certificate 6 as certified public accountant issued after examination under 7 the law of another jurisdiction. 8 "Certified public accountant." An individual to whom a 9 certificate [of certified public accountant] has been issued. 10 [under the laws of this Commonwealth or another state.] 11 "Client." Any person that agrees orally, in writing or in 12 electronic form with a certified public accountant, public 13 accountant or firm to receive a professional service. 14 "Commission." Compensation for recommending or referring a 15 product or service to be supplied by another person. The term 16 does not include a referral fee. 17 "Compilation." A service performed in accordance with 18 Statements on Standards for Accounting and Review Services 19 (SSARS) that presents, in the form of financial statements, 20 information that is the representation of management or the 21 owners without undertaking to express any assurance on the 22 statements. 23 "Department." The Department of State acting through the 24 Commissioner of Professional and Occupational Affairs. 25 "Engagement review." A peer review process which provides 26 the reviewer with a reasonable basis for expressing limited 27 assurance that: 28 (1) the financial statements or information and the related 29 accountant's report on the accounting, review and attestation 30 engagements submitted for review conform with the requirements 20070S0838B0973 - 3 -
1 of professional standards in all material respects; and 2 (2) the reviewed firm's documentation conforms with the 3 requirements of Statements on Standards for Accounting and 4 Review Services (SSARS) and Statements on Standards for 5 Attestation Engagements (SSAE) applicable to those engagements 6 in all material respects. 7 "Equity interest." Any type of ownership interest in a firm. 8 The term includes the right to vote with respect to any issue, 9 whether or not the right to vote is coupled with an interest in 10 the profits or assets of the firm. 11 "Examination." The examination for the certificate of 12 certified public accountant provided for in section 3.1(b) of 13 this act. 14 "Firm." A qualified association that is a licensee. 15 "Holding out" or "hold out." Any representation of the fact 16 that a person, or an individual associated in any way with a 17 person, holds a certificate of certified public accountant, a 18 registration as a public accountant or a license, made in 19 connection with the performance of, or an offer to perform, 20 services for the public. A representation shall be deemed to 21 include any oral or written communication conveying the fact 22 that the person or individual holds a certificate, registration 23 or license, including, without limitation, the use of titles or 24 legends on letterheads, business cards, office doors, 25 advertisements and listings or the displaying of a certificate, 26 registration or license. 27 "Internal auditor." An individual within a governmental or 28 private entity who performs an audit function that requires the 29 individual to be independent of the activities being audited. 30 The independence required of an internal auditor does not need 20070S0838B0973 - 4 -
1 to meet the standard of independence required of a certified 2 public accountant or public accountant. 3 "Licensee." An individual certified by or registered with 4 the board and holding a current license to practice under 5 section 8.2 of this act or a qualified association holding a 6 current license to practice under section 8.8 of this act. The 7 term does not include a person on inactive status under section 8 8.2(a.1) of this act or otherwise not holding a current license. 9 "NASBA." The National Association of State Boards of 10 Accountancy. 11 "PCAOB." The Public Company Accounting Oversight Board. 12 "Peer review." A study, appraisal or review of one or more 13 aspects of the professional work of an individual or firm in the 14 practice of public accounting to determine the degree of 15 compliance by the individual or firm with generally accepted 16 accounting principles and auditing standards and other generally 17 accepted technical standards, conducted by persons who hold 18 current licenses to practice public accounting under the laws of 19 this Commonwealth or another state and who are not affiliated 20 with the individual or firm being reviewed. 21 "Principal place of business." The location of the principal 22 office where a certified public accountant practices public 23 accounting. 24 "Professional services." Services performed by a certified 25 public accountant, public accountant or firm: 26 (1) as part of the practice of public accounting; or 27 (2) that would be part of the practice of public accounting 28 except that the individual performing the services does not hold 29 out as a certified public accountant or public accountant. 30 "Public accountant." An individual who was qualified and 20070S0838B0973 - 5 -
1 accepted for registration in accordance with former section 8.7 2 of this act. 3 "Public accounting." Offering to perform or performing for a 4 client or potential client: 5 (1) Attest activity. 6 (2) Other [professional] services involving the use of 7 accounting skills, including, but not limited to, management 8 advisory or consulting services, business valuations, financial 9 planning, preparation of tax returns or furnishing of advice on 10 tax matters by a person holding out as a certified public 11 accountant, public accountant or firm. 12 "Qualified association." An association as defined in 15 13 Pa.C.S. § 102 (relating to definitions) that is incorporated or 14 organized under the laws of this Commonwealth or any other state 15 or foreign jurisdiction if the organic law under which the 16 association is incorporated or organized does not afford the 17 shareholders, partners, members or other owners of equity 18 interests in the association or the officers, employes or agents 19 of the association greater immunity than is available to the 20 shareholders, officers, employes or agents of a professional 21 corporation under 15 Pa.C.S. § 2925 (relating to professional 22 relationship retained). 23 "Qualified nonlicensee." An individual who does not hold a 24 current license or permit to practice public accounting in this 25 Commonwealth or any other state or foreign jurisdiction. 26 "Referral fee." Compensation paid to a licensee for 27 recommending another licensee to, or referring to another 28 licensee, any person for the performance by the other licensee 29 of public accounting. 30 "Report." Any opinion, statement or other form of written 20070S0838B0973 - 6 -
1 communication that states or implies assurance as to the 2 reliability of any financial information or assessments of the 3 status or performance of any person and that also implies or is 4 accompanied by any statement or implication that the person 5 issuing it has special knowledge or competence in accounting or 6 auditing. Such a statement or implication of special knowledge 7 or competence may arise from use by the issuer of the 8 communication of names or titles indicating that the issuer or 9 any individual employed by or affiliated with it is an 10 accountant or auditor or may arise from the language of the 11 communication itself. The term includes any form of language 12 which disclaims an opinion when the form of language is 13 conventionally understood to imply any positive assurance as to 14 the reliability of the financial information referred to or 15 special competence on the part of the person issuing the 16 language. The term also includes any other form of language that 17 is conventionally understood to imply assurance or special 18 knowledge or competence. 19 "Statements on Auditing Standards (SAS)." The Statements on 20 Auditing Standards or any similar professional standard which 21 supersedes such statements. 22 "Statements on Standards for Attestation Engagements (SSAE)." 23 The Statements on Standards for Attestation Engagements or any 24 similar professional standard which supersedes such statements. 25 "Statements on Standards for Accounting and Review Services 26 (SSARS)." The Statements on Standards for Accounting and Review 27 Services or any similar professional standard which supersedes 28 such statements. 29 "Substantial equivalency." A determination by the State 30 Board of Accountancy that: 20070S0838B0973 - 7 -
1 (1) the education, examination and experience requirements 2 contained in the statutes and regulations of another 3 jurisdiction are comparable to or exceed the education, 4 examination and experience requirements contained in this act; 5 or 6 (2) a certified public accountant's education, examination 7 and experience qualifications are comparable to or exceed the 8 education, examination and experience requirements contained in 9 this act. 10 "System review." A peer review process which provides the 11 reviewer with a reasonable basis for expressing an opinion on 12 whether, during the year under review: 13 (1) the reviewed firm's system of quality control for its 14 accounting and auditing practice has been designed in accordance 15 with quality control standards established by the American 16 Institute of Certified Public Accountants; and 17 (2) is being complied with to provide the firm with 18 reasonable assurance of conforming with professional standards 19 in all material respects. 20 Section 2.3. State Board of Accountancy.--(a) The State 21 Board of Accountancy shall consist of fifteen members, one of 22 whom shall be the Commissioner of Professional and Occupational 23 Affairs in the Department of State or a designee, one of whom 24 shall be the Director of the Bureau of Consumer Protection in 25 the Office of Attorney General or his designee, and the 26 remaining thirteen of whom shall be appointed by the Governor, 27 subject to the consent of the Senate, as follows: 28 (1) [Eight] Nine members shall be certified public 29 accountants, all of whom are licensees and at least six of whom 30 are actively engaged in the practice of public accounting as 20070S0838B0973 - 8 -
1 their principal occupation at the time of their appointment. Two 2 of the members who are certified public accountants shall be 3 appointed from the eastern part of the State, two from the 4 western part, two from the central part, and [two] the remainder 5 from any part of the State. At least two of the members who are 6 certified public accountants shall be actively engaged at the 7 time of their appointment in the practice of public accounting 8 with firms that have five or fewer licensees participating in 9 the firm's practice. 10 (2) Three members shall be persons who are not affiliated in 11 any manner with the profession, who shall represent the public 12 at large. 13 (3) [Two members shall be public accountants who are 14 licensees engaged in the practice of public accounting as their 15 principal occupation at the time of their appointment. The 16 number of public accountant members shall be reduced by one and 17 the number of certified public accountant members increased by 18 one when the number of public accountants who are licensees 19 falls below five hundred for the first time.] One member shall 20 be a public accountant who is a licensee engaged in the practice 21 of public accounting as his or her principal occupation at the 22 time of appointment. The [remaining] public accountant member 23 shall be eliminated and the number of certified public 24 accountant members increased by one when the number of public 25 accountants who are licensees falls below fifty for the first 26 time. [A decrease in the number of members of the board who are 27 required to be public accountants] The elimination of the public 28 accountant member as provided in this clause shall not have the 29 effect of shortening the term of [an incumbent] the incumbent 30 public accountant member of the board. 20070S0838B0973 - 9 -
1 * * * 2 Section 3. General Powers of the Board.--(a) The Board 3 shall have the power: 4 (1) To provide for, regulate and approve the issuance of a 5 certificate of certified public accountant to any person (a) who 6 meets the requirements for the issuance of a certificate in 7 [section 3.1(e) of] this act; or (b) who meets the requirements 8 for the issuance of a certificate by reciprocity in section 5 or 9 5.1 of this act. 10 (3) To contract with a professional testing organization for 11 the preparation and administration of the examination, in 12 accordance with section 812.1(a) of the act of April 9, 1929 13 (P.L.177, No.175), known as "The Administrative Code of 1929," 14 and to establish prior to the administration of each examination 15 an appropriate minimum passing score, in keeping with the 16 purposes of this act. 17 (4) To keep a record showing the names and the places of 18 business of persons to whom a certificate of certified public 19 accountant has been issued under this act or prior laws and all 20 other persons registered or holding licenses under this act or 21 prior laws. The department shall furnish copies of such record 22 to the public upon request and may establish a reasonable fee 23 for such copies which shall not exceed the cost of reproduction. 24 (5) To: 25 (i) revoke, suspend, limit or otherwise restrict the 26 certificate or license of any certified public accountant or the 27 registration or license of any public accountant or the license 28 of any firm under this act[, to]; 29 (ii) censure or publicly reprimand the holder of any 30 certificate, registration or license[, to]; 20070S0838B0973 - 10 -
1 (iii) require completion of general or a specific number of 2 continuing professional education courses[, to]; 3 (iv) require more frequent peer review or other remedial 4 action [and to]; 5 (v) revoke, suspend or limit the right of a person to 6 practice under section 5.2 or 5.4 of this act; 7 (vi) censure or publicly reprimand a person practicing under 8 section 5.2 or 5.4; and 9 (vii) impose civil penalties as provided in section 16 for 10 violation of this act. 11 (6) To collect fees as provided for in this act and to 12 submit annually to the department an estimate of the financial 13 requirements of the board for its administrative, investigative, 14 legal and miscellaneous expenses. 15 (7) To arrange for assistance in the performance of its 16 duties, to administer and enforce the laws of this Commonwealth 17 relating to certification, registration, licensing and practice 18 by certified public accountants, public accountants and firms 19 and to instruct and require its agents to seek an injunction, or 20 bring a prosecution for a violation of this act. 21 (8) To keep minutes and records of all its transactions and 22 proceedings. To the extent required by the act of June 21, 1957 23 (P.L.390, No.212), referred to as the Right-to-Know Law, the 24 department shall furnish copies of such minutes and records to 25 the public upon request and may establish a reasonable fee for 26 such copies which shall not exceed the cost of reproduction. 27 (9) To become a member of [the National Association of State 28 Boards of Accountancy] NASBA, or a similar organization, and pay 29 such dues as said association shall establish and to send 30 members of the board and staff as delegates to the meetings of 20070S0838B0973 - 11 -
1 that association and defray their expenses. 2 (10) To adopt, promulgate and enforce rules and regulations 3 consistent with the provisions of this act establishing 4 requirements of continuing education and peer review to be met 5 by certified public accountants, public accountants and firms as 6 a condition for renewal of biennial licenses to engage in the 7 practice of public accounting in this Commonwealth. Such rules 8 and regulations shall include, but not be limited to, analysis 9 of continuing education records by a consultant whose analysis 10 shall cover licensee forms and records of continuing education 11 sponsors. The analysis shall be designed to determine compliance 12 with all continuing education regulations of the board, 13 including attendance of licensees, qualifications of sponsors 14 and qualifications of courses for credit. 15 (11) To promulgate and amend rules of professional conduct, 16 uniformly applicable to certified public accountants and public 17 accountants, appropriate to establish and maintain a high 18 standard of integrity, objectivity and dignity by certified 19 public accountants, public accountants and firms. 20 (12) To adopt, promulgate and enforce such administrative 21 rules and regulations not inconsistent with this act, or other 22 acts, as are necessary and proper to carry into effect the 23 provisions of this act. 24 (15) To submit annually to the House and Senate 25 Appropriations Committees, not later than fifteen days after the 26 Governor has submitted his budget to the General Assembly, a 27 copy of the budget request for the upcoming year that the board 28 previously submitted to the department. 29 (16) To engage consultants as may be deemed necessary to 30 carry out and enforce the provisions of this act. 20070S0838B0973 - 12 -
1 (b) The board shall not require a photograph as part of an 2 application for a certificate of certified public accountant. 3 Section 3.1. [Examination and Issuance of Certificate.--(a) 4 An individual shall be permitted to take the examination for the 5 certificate of certified public accountant if the individual: 6 (1) At the time the individual first sits for the 7 examination: 8 (i) is a resident of this Commonwealth; 9 (ii) is enrolled in or has graduated from a college or 10 university in this Commonwealth; or 11 (iii) is employed in this Commonwealth under the supervision 12 of a licensee. 13 (2) Has attained the age of eighteen years. 14 (3) Is of good moral character. 15 (4) Meets the education requirements of section 4 of this 16 act.] Examination.-- 17 (b) The examination shall [be held at least twice in each 18 calendar year and simultaneously in at least two counties of 19 this Commonwealth and shall be a written examination in business 20 law and professional responsibilities, auditing, accounting and 21 reporting, and financial accounting and reporting.] test the 22 applicant's knowledge and skills required for performance as a 23 certified public accountant. The examination shall include the 24 subject areas of accounting and auditing and such related 25 knowledge and skills as the board may require. The time and 26 location for holding the examination shall be determined by the 27 board and may be changed from time to time. The examination may 28 be administered in either written or computerized form. The 29 board may use all parts of the Uniform Certified Public 30 Accountants' examination and [Advisory Grading Service of the 20070S0838B0973 - 13 -
1 American Institute of Certified Public Accountants] designated 2 grading service of the AICPA to assist in performing its duties 3 hereunder. 4 (c) Subject to such regulations as the board may adopt 5 governing reexaminations, a candidate shall be entitled to 6 retake the examination. 7 (d) An individual who has previously taken an examination 8 for a certificate of certified public accountant under the 9 provisions of a prior law of this Commonwealth shall continue to 10 be permitted to take the examination and receive a certificate 11 subject to such prior provisions and applicable regulations. 12 [(e) A certificate of certified public accountant shall be 13 issued by the board upon application by an individual who has 14 passed the examination and meets the experience requirements 15 provided for in section 4.1 of this act.] 16 Section 2. Section 4 of the act, amended December 4, 1996 17 (P.L.851, No.140) and May 9, 1997 (P.L.145, No.9), is repealed: 18 [Section 4. Education Requirements.--(a) Before an 19 individual is permitted to take the examination, the board shall 20 be satisfied that, except as provided in subsection (b), he has: 21 (1) graduated with a baccalaureate degree from a college or 22 university approved at the time of graduation by the Department 23 of Education and also completed at least a total of twenty-four 24 semester credits, which credits shall be in accounting and 25 auditing, business law, finance or tax subjects of a content 26 satisfactory to the board, not necessarily as a part of his 27 undergraduate work; 28 (2) graduated with a Master's Degree or other post-graduate 29 degree from a college or university approved at the time of 30 graduation by the Department of Education and completed at least 20070S0838B0973 - 14 -
1 a total of twenty-four semester credits, which credits shall be 2 in accounting and auditing, business law, finance or tax 3 subjects of a content satisfactory to the board, not necessarily 4 as part of his undergraduate or graduate work; 5 (3) within two years of the effective date of this clause, 6 graduated with a baccalaureate degree, Master's Degree or other 7 post-graduate degree from a college or university approved at 8 the time of graduation by the Department of Education with 9 subjects of a content satisfactory to the board which meet or 10 exceed the education requirement for licensure as of January 1, 11 1996; or 12 (4) graduated with a baccalaureate or higher degree from a 13 college or university approved at the time of graduation by the 14 Department of Education and completed a total of one hundred 15 fifty semester credits of post-secondary education, including at 16 least a total of twenty-four semester credits of accounting and 17 auditing, business law, finance or tax subjects of a content 18 satisfactory to the board, and an additional twelve semester 19 credits in accounting, auditing and tax subjects of a content 20 satisfactory to the board, not necessarily as part of his 21 undergraduate or graduate work. 22 (g) The board shall permit an applicant taking the 23 examination for the first time within one year after the 24 effective date of this subsection to take the examination during 25 the final term, semester or quarter of the school year in which 26 he will graduate, if it is reasonably expected that he will 27 fulfill the educational requirements of subsection (a) and 28 receive the required degree within ninety days after the date of 29 the examination.] 30 Section 3. Section 4.1 of the act, added December 4, 1996 20070S0838B0973 - 15 -
1 (P.L.851, No.140), is repealed: 2 [Section 4.1. Experience Requirements.--(a) An individual 3 shall be issued the certificate of certified public accountant 4 under section 3.1(e) of this act after the individual has 5 complied with the following experience requirements: 6 (1) An individual taking the examination on the basis of 7 having satisfied the education requirements in section 4(a)(1) 8 of this act shall have completed at least two years of 9 experience. 10 (2) An individual taking the examination on the basis of 11 having satisfied the education required in section 4(a)(2) of 12 this act shall need only one year of qualifying experience. 13 (3) Beginning on January 1, 2000, an individual taking the 14 examination on the basis of having satisfied the education 15 required in section 4(a)(4) of this act shall need only one year 16 of qualifying experience. 17 (b) The experience required under subsection (a) must: 18 (1) Be in public accounting or as an internal auditor or an 19 auditor with a unit of Federal, State or local government. 20 (2) Be of a caliber satisfactory to the board. 21 (3) Satisfy the requirements of subsection (d). 22 (4) Have been supervised by an individual who is currently 23 licensed to practice public accounting as a certified public 24 accountant or public accountant in this Commonwealth or another 25 state. 26 (c) Individuals taking the examination for the first time 27 after January 1, 2000, must complete the experience required by 28 this section within one hundred twenty months preceding the date 29 of application for a certificate of certified public accountant 30 under section 3.1(e) of this act. Individuals taking the 20070S0838B0973 - 16 -
1 examination before January 1, 2000, need not attain the 2 experience required by this section within any particular period 3 of time. 4 (d) The experience required under subsection (a)(1) must 5 include not less than eight hundred hours of attest activity, 6 and the experience required under subsection (a)(2) or (4) must 7 include not less than four hundred hours of attest activity.] 8 Section 4. The act is amended by adding a section to read: 9 Section 4.2. Requirements for Issuance of Certificate.--(a) 10 The board shall issue a certificate upon application by an 11 individual who has passed the examination and meets the 12 education and experience requirements in this section. 13 (b) Before an individual may take the examination, the board 14 shall be satisfied that the individual: 15 (1) has attained eighteen years of age; 16 (2) is of good moral character; and 17 (3) has graduated with: 18 (i) a baccalaureate or higher degree from a college or 19 university approved at the time of graduation by the Department 20 of Education and completed a total of one hundred fifty semester 21 credits of post-secondary education, including at least a total 22 of twenty-four semester credits of accounting and auditing, 23 business law, finance or tax subjects of a content satisfactory 24 to the board, and an additional twelve semester credits in 25 accounting, auditing and tax subjects of a content satisfactory 26 to the board, not necessarily as part of the individual's 27 undergraduate or graduate work; 28 (ii) a baccalaureate degree from a college or university 29 approved at the time of graduation by the Department of 30 Education and also completed at least a total of twenty-four 20070S0838B0973 - 17 -
1 semester credits, which credits shall be in accounting and 2 auditing, business law, finance or tax subjects of a content 3 satisfactory to the board, not necessarily as a part of his 4 undergraduate work; or 5 (iii) a Master's Degree or other post-graduate degree from a 6 college or university approved at the time of graduation by the 7 Department of Education and completed at least a total of 8 twenty-four semester credits, which credits shall be in 9 accounting and auditing, business law, finance or tax subjects 10 of a content satisfactory to the board, not necessarily as part 11 of his undergraduate or graduate work. 12 (c) Before an individual who takes the examination under 13 subsection (b)(3)(ii) or (iii) may be issued a certificate, the 14 individual must also satisfy the education requirement in 15 subsection (b)(3)(i). 16 (d) Before an individual may be issued a certificate, the 17 board shall be satisfied that the individual has completed at 18 least one year of experience that was: 19 (1) completed within sixty months preceding the date of 20 application for a certificate; 21 (2) in one of the following: 22 (i) public accounting; 23 (ii) as an internal auditor, if the internal audit function 24 reports to an independent board or similar body responsible for 25 oversight of the financial reporting process; or 26 (iii) as an auditor with a unit of Federal, State or local 27 government; 28 (3) of a caliber satisfactory to the board and included not 29 less than four hundred hours of attest activity; and 30 (4) supervised by an individual with a current license to 20070S0838B0973 - 18 -
1 practice public accounting as a certified public accountant or 2 public accountant in this Commonwealth or another state. 3 (e) The following requirements may be complied with instead 4 of the otherwise applicable provisions of subsections (b), (c) 5 and (d): 6 (1) An individual who takes the examination before December 7 31, 2011, but does not pass at least one part taken before that 8 date, may not be issued a certificate until the individual: 9 (i) has satisfied the education requirement in subsection 10 (c), if applicable; and 11 (ii) has completed at least one year of experience described 12 in subsection (d)(2), (3) and (4) within one hundred twenty 13 months preceding the date of application for a certificate. 14 (2) An individual who passes at least one part of the 15 examination taken before December 31, 2011, pursuant to 16 subsection (b)(3)(ii), may be issued a certificate before or 17 after December 31, 2011, without satisfying the education 18 requirement in subsection (c), but not until the individual has 19 completed at least two years of experience that satisfies the 20 requirements in subsection (d)(3) and (4), except that the 21 experience must include at least eight hundred hours of attest 22 activity. The experience may be completed within one hundred- 23 twenty months preceding the date of application for a 24 certificate. 25 (3) An individual who passes at least one part of the 26 examination taken before December 31, 2011, pursuant to 27 subsection (b)(3)(iii), may be issued a certificate before or 28 after December 31, 2011, without satisfying the education 29 requirement in subsection (c) and may complete the one year of 30 experience required by subsection (d) within one hundred twenty 20070S0838B0973 - 19 -
1 months preceding the date of application for a certificate. 2 Section 5. Sections 5 and 5.1 of the act, amended or added 3 December 4, 1996 (P.L.851, No.140), are amended to read: 4 Section 5. Certificates Issued by Domestic Reciprocity.--(a) 5 Without requiring the examination otherwise required under 6 section [3.1(e)] 4.2 of this act, the board may, in its 7 discretion, issue a certificate of certified public accountant 8 to a holder of a certificate of certified public accountant then 9 in full force and effect issued by any other state following 10 passage of [a written] an examination if the applicant shall 11 submit evidence satisfactory to the board that he: 12 (1) possesses the general qualifications specified in 13 section [3.1(a)] 4.2(b)(1) and (2) of this act, has passed the 14 [written] examination required to practice as a certified public 15 accountant under the laws of the other state, meets the 16 continuing education requirements specified in section 8.2(b) of 17 this act and has the experience required under section [4.1] 18 4.2(d) of this act to receive the certificate in this 19 Commonwealth; or 20 (2) has passed the [written] examination required to 21 practice as a certified public accountant under the laws of the 22 other state and has held a certificate and license to practice 23 public accounting for the immediately preceding five years in 24 another state. 25 (b) An applicant for a certificate under this section shall 26 list in the application all states and foreign jurisdictions in 27 which the applicant has applied for or holds a designation or 28 certificate to practice public accounting. 29 (c) Each holder of a certificate issued under this section 30 shall notify the board in writing within thirty days after its 20070S0838B0973 - 20 -
1 occurrence of any issuance, denial, revocation or suspension of
2 his designation, certificate or license to practice public
3 accounting or the commencement of a disciplinary or enforcement
4 action against him or his firm by any state or foreign
5 jurisdiction.
6 Section 5.1. Certificates Issued by Foreign Reciprocity.--
7 (a) Without requiring the examination otherwise required under
8 section [3.1(e)] 4.2 of this act, the board may in its
9 discretion issue a certificate of certified public accountant to
10 a holder of a foreign designation, granted and then in full
11 force in a foreign country or other jurisdiction that is not a
12 state, entitling the holder thereof to engage in the practice of
13 public accounting if all of the following conditions are
14 satisfied:
15 (1) Pursuant to a duly enacted free trade agreement, the
16 foreign jurisdiction that granted the designation makes similar
17 provision to allow an individual who holds a valid certificate
18 of certified public accountant issued by this Commonwealth to
19 obtain such foreign jurisdiction's comparable designation.
20 (2) The foreign designation:
21 (i) Was duly issued by a duly constituted authority within
22 the foreign jurisdiction that regulates the practice of public
23 accounting, and the foreign designation has not expired or been
24 revoked or suspended.
25 (ii) Entitles the holder to issue reports.
26 (iii) Was issued upon the basis of educational, examination
27 and experience requirements established by the foreign authority
28 or by law.
29 (3) The applicant:
30 (i) Received the designation based on educational and
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1 examination standards substantially equivalent to those in 2 effect in this Commonwealth at the time the foreign designation 3 was granted. 4 (ii) Completed an experience requirement substantially 5 equivalent to the requirements set forth in section [4.1] 4.2(d) 6 of this act in the jurisdiction that granted the foreign 7 designation or has completed five years of experience in the 8 practice of public accounting in this Commonwealth or meets such 9 other requirements as may be prescribed by the board by rule 10 within the ten years immediately preceding the application. 11 (iii) Passed a uniform qualifying examination in national 12 standards. 13 (b) An applicant for a certificate under this section shall 14 list in the application all states and foreign jurisdictions in 15 which the applicant has applied for or holds a designation or 16 certificate to practice public accounting. 17 (c) Each holder of a certificate issued under this section 18 shall notify the board in writing within thirty days after its 19 occurrence of any issuance, denial, revocation or suspension of 20 his designation, certificate or license to practice public 21 accounting or the commencement of a disciplinary or enforcement 22 action against him or his firm by any state or foreign 23 jurisdiction. 24 Section 6. The act is amended by adding sections to read: 25 Section 5.2. Practice in this Commonwealth by Individuals 26 under Substantial Equivalency.--(a) The board shall grant the 27 right to persons to practice public accounting under substantial 28 equivalency as provided in this section and section 5.4 of this 29 act and shall adopt regulations relating to substantial 30 equivalency and establishing procedures for determining whether: 20070S0838B0973 - 22 -
1 (1) a state provides substantial equivalency; and 2 (2) substantial equivalency exists with respect to an 3 individual. 4 (b) The following apply to practice in this Commonwealth 5 under substantial equivalency: 6 (1) Notwithstanding any other provision of this act, an 7 individual whose principal place of business in not in this 8 Commonwealth and who has a valid certificate and license to 9 practice public accounting from a state that provides 10 substantial equivalency shall be presumed to have qualifications 11 substantially equivalent to the Commonwealth's requirements and 12 shall have all the privileges and obligations of a licensee of 13 the Commonwealth without the need to obtain a certificate or 14 license under this act. 15 (2) Notwithstanding any other provision of this act, an 16 individual whose principal place of business is not in this 17 Commonwealth and who has a valid certificate and license to 18 practice public accounting from a state that does not provide 19 substantial equivalency shall be presumed to have qualifications 20 substantially equivalent to the Commonwealth's requirements and 21 shall have all the privileges and obligations of a licensee of 22 the Commonwealth without the need to obtain a certificate or 23 license if there is substantial equivalency as to the 24 individual. In determining whether substantial equivalency 25 exists as to an individual, the board shall make its 26 determination without regard to the order in which the 27 individual satisfied the experience, education and examination 28 requirements. 29 (3) The exercise by an individual of the right to practice 30 in this Commonwealth under this section constitutes: 20070S0838B0973 - 23 -
1 (i) sufficient contact with this Commonwealth for the 2 exercise of personal jurisdiction by the board and the courts of 3 this Commonwealth over the individual in any action or 4 proceeding arising out of acts or omissions by the individual; 5 (ii) consent by the individual to the personal and subject 6 matter jurisdiction and disciplinary authority of the board; 7 (iii) an agreement by the individual to comply with the 8 provisions of this act and regulations promulgated by the board; 9 and 10 (iv) consent by the individual to the appointment of the 11 board of accountancy or other regulatory authority of the state 12 in which the principal place of business of the individual is 13 located as the agent upon which process may be served in any 14 action or proceeding by the board against the individual. 15 (4) An individual who exercises the right to practice under 16 this section shall be subject to disciplinary action in this 17 Commonwealth for any act or omission that would subject the 18 holder of a Pennsylvania certificate or license to disciplinary 19 action. 20 (5) An individual who passed the Uniform CPA Examination and 21 holds a valid license to practice public accounting issued by 22 any other state on or before December 31, 2011, shall be exempt 23 from the education requirements in section 4.2(b)(3)(i) and (c) 24 of this act for purposes of this section. 25 (6) If the board imposes discipline on an individual 26 exercising the right to practice under this section, the board 27 shall as soon as practicable notify the board of accountancy or 28 other regulatory authority in each state where the board has 29 learned during the disciplinary process that the individual has 30 been granted a certificate or license to practice public 20070S0838B0973 - 24 -
1 accounting of the imposition of the discipline. If the order 2 imposing discipline is appealed or stayed, the board shall send 3 a subsequent notice to each regulatory authority advising of the 4 filing of the appeal or entry of the stay. As an alternative to 5 sending the notices to each regulatory authority, the board may 6 send the notices instead to a multistate enforcement information 7 network maintained at the time by AICPA or NASBA. The board may 8 furnish investigative information and the hearing record 9 relating to the disciplinary proceeding to such other regulatory 10 authorities upon request. 11 (7) An individual exercising the right to practice under 12 this section may identify the fact that the individual practices 13 with a partnership, corporation or other association and may use 14 its name even if the partnership, corporation or other 15 association is not a licensee. 16 Section 5.3. Practice outside this Commonwealth under 17 Substantial Equivalency.--(a) A licensee who practices public 18 accounting in another jurisdiction under substantial equivalency 19 shall be subject to disciplinary action in this Commonwealth for 20 an act or omission in the other jurisdiction if the act or 21 omission: 22 (1) subjects the licensee to discipline in the other 23 jurisdiction; or 24 (2) would subject the licensee to discipline in this 25 Commonwealth. 26 (b) The board shall investigate any complaint made by the 27 board of accountancy or other regulatory authority of another 28 state against a licensee. 29 Section 5.4. Practice by Firms and Unlicensed Entities under 30 Substantial Equivalency.--(a) A firm may practice public 20070S0838B0973 - 25 -
1 accounting in this Commonwealth through an individual who is not 2 a licensee if the individual has the right to practice in this 3 Commonwealth under section 5.2 of this act. The exercise by a 4 firm of the right to practice through such individuals under 5 this subsection constitutes an agreement by the firm: 6 (1) to be subject to the jurisdiction and disciplinary 7 authority of the board with respect to acts or omissions of the 8 individuals through whom it practices under this subsection; 9 (2) to accept service of process from the board on behalf of 10 the individuals through whom it practices under this subsection; 11 and 12 (3) to cooperate in any investigation by the board involving 13 an individual through which the firm has practiced under this 14 subsection even if the individual is no longer an owner of or 15 employed by the firm. 16 (b) A qualified unlicensed entity may practice public 17 accounting in this Commonwealth through an individual who: 18 (1) has the right to practice in this Commonwealth under 19 section 5.2 of this act; or 20 (2) is a licensee. 21 (c) The exercise by a qualified unlicensed entity of the 22 right to practice in this Commonwealth under subsection (b) 23 constitutes: 24 (1) sufficient contact with this Commonwealth for the 25 exercise of personal jurisdiction by the board and the courts of 26 this Commonwealth over the qualified unlicensed entity in any 27 action or proceeding arising out of acts or omissions by an 28 individual associated with the qualified unlicensed entity in 29 any capacity; 30 (2) consent by the qualified unlicensed entity to the 20070S0838B0973 - 26 -
1 personal and subject matter jurisdiction and disciplinary 2 authority of the board; 3 (3) an agreement by the qualified unlicensed entity to 4 comply with the provisions of this act and regulations 5 promulgated by the board; and 6 (4) consent by the qualified unlicensed entity to the 7 appointment of the board of accountancy or other regulatory 8 authority of the state in which the principal place of business 9 of the qualified unlicensed entity is located as the agent upon 10 which process may be served in any action or proceeding by the 11 board against the qualified unlicensed entity. 12 (d) As used in this section "qualified unlicensed entity" 13 means a partnership, corporation or other association that: 14 (1) is not a licensee; 15 (2) does not have an office in this Commonwealth; and 16 (3) may lawfully practice public accounting in another 17 state. 18 Section 7. Sections 8.2, 8.8, 8.9(a), (b), (d) and (g) and 19 9.1(a) of the act, amended or added December 4, 1996 (P.L.851, 20 No.140), are amended to read: 21 Section 8.2. Licenses to Practice.--(a) Biennial licenses 22 to engage in the practice of public accounting in this 23 Commonwealth shall be issued by the Department of State upon 24 payment of the biennial licensing fee to (i) holders of the 25 certificate of certified public accountant issued by this 26 Commonwealth and public accountants registered in this 27 Commonwealth who [shall have furnished evidence satisfactory to 28 the board of compliance] have certified to the board that they 29 have complied with the requirements of subsection (b) of this 30 section and (ii) qualified associations licensed under section 20070S0838B0973 - 27 -
1 8.8 of this act. Licenses to practice shall expire on the last 2 day of [April of even-numbered] December of odd-numbered years 3 or on such other biennial expiration dates as the department may 4 fix. The renewal application of a certified public accountant or 5 public accountant does not need to list the continuing education 6 courses taken by the applicant except as provided by the rules 7 and regulations of the board. 8 (a.1) A certified public accountant or public accountant who 9 is not engaged in the practice of public accounting may request 10 the board, in writing, to place his name on the inactive roll 11 and thus protect his right to obtain a license at such time as 12 he may become engaged in the practice of public accounting. 13 (b) Each certified public accountant and public accountant 14 filing an application for a license or a renewal thereof to 15 engage in the practice of public accounting in this Commonwealth 16 must, during the reporting period immediately preceding the 17 current biennial period, complete eighty hours of continuing 18 education, in programs approved by the board. The reporting 19 period for licensees shall be January 1 of even-numbered years 20 to December 31 of odd-numbered years. No carry-over of credits 21 shall be permitted from one biennial license period to another. 22 The continuing education requirement shall not apply to firms 23 but shall apply to all natural persons who apply for a license 24 or a renewal thereof under this section. 25 (c) Failure by a licensed certified public accountant or 26 public accountant applying for renewal of his biennial license 27 to furnish [evidence] a certification of completion of the 28 required number of hours of acceptable continuing education 29 shall constitute grounds for denial or refusal to renew such 30 license, unless the board, in its discretion, shall determine 20070S0838B0973 - 28 -
1 [such failure to have been] that the failure to complete the 2 required continuing education was due to reasonable cause, in 3 which case the board shall grant an extension. 4 (d) In issuing rules, regulations and individual orders with 5 respect to requirements of continuing education, the board may 6 rely upon guidelines and pronouncements of recognized 7 educational and professional organizations; may prescribe for 8 content, duration and organization of courses; shall take into 9 account the accessibility of such continuing education as it may 10 require, and any impediments to interstate practice of public 11 accounting which may result from differences in such 12 requirements in other states; and may provide for relaxation or 13 suspension of such requirements in instances of individual 14 hardship such as for reasons of health, military service or 15 other good cause. 16 (e) A certified public accountant or public accountant who 17 is also certified, registered or licensed to practice public 18 accounting in any other state or foreign jurisdiction shall 19 report this information to the board on the biennial renewal 20 application. Any disciplinary action taken in any other state or 21 foreign jurisdiction shall be reported to the board on the 22 biennial renewal application or within thirty days of 23 disposition, whichever is sooner. Multiple certification, 24 registration or licensure shall be noted by the board on the 25 record of the certified public accountant or public accountant, 26 and the other state or foreign jurisdiction shall be notified by 27 the board within thirty days after any disciplinary action is 28 taken against the certified public accountant or public 29 accountant in this Commonwealth. 30 (f) An initial or renewal license shall not be issued after 20070S0838B0973 - 29 -
1 April 30, 2000, to a certified public accountant or public 2 accountant practicing as a sole practitioner unless he complies 3 with the requirements of section 8.9 of this act. 4 Section 8.8. Licensing of Firms.--(a) [An association] A 5 person other than an individual shall not practice public 6 accounting in this Commonwealth unless it is a qualified 7 association, has been granted a license to practice and 8 satisfies the requirements of this section at all times while it 9 is a licensee. A new firm shall apply for its initial license 10 within thirty days after its formation; thereafter, the firm's 11 license shall be subject to renewal in accordance with section 12 8.2 of this act. 13 (b) The initial and all renewal license applications by a 14 firm shall: 15 (1) List the name, home address and license number of each 16 certified public accountant or public accountant who owns an 17 equity interest directly or indirectly in the firm and who is a 18 licensee. 19 (2) List the name and home address of each qualified 20 nonlicensee who owns an equity interest in the firm if the 21 principal residence or the office out of which the individual 22 principally practices is located in this Commonwealth. 23 (3) Include a statement that the firm is in compliance with 24 subsections (d) and (e). 25 (c) An initial or renewal license shall not be issued to a 26 firm after April 30, 2000, unless the firm complies with the 27 requirements of section 8.9 of this act. 28 (d) A firm shall satisfy all of the following requirements: 29 (1) At least one general partner if the firm is a 30 partnership, one record and beneficial owner of common shares if 20070S0838B0973 - 30 -
1 the firm is a corporation or one owner of a similar equity 2 interest if the firm is any other form of qualified association 3 shall be a certified public accountant or public accountant who 4 is a licensee. 5 (2) Except as provided in subsections (e) and (f), each 6 shareholder, partner, member or other owner of an equity 7 interest in the firm must be the holder of a current license to 8 practice public accounting as a certified public accountant or 9 public accountant under the laws of this Commonwealth or another 10 jurisdiction. This clause shall not: 11 (i) apply in the case of a person who withdraws from a firm 12 for such period as may be reasonable under the circumstances to 13 permit the firm to comply with this requirement; or 14 (ii) prohibit payments by a firm to a former equity owner or 15 his estate in connection with his withdrawal from the firm. 16 (3) Each individual in charge of an office that performs any 17 attest activity or business unit of the firm in this 18 Commonwealth shall be a certified public accountant or public 19 accountant who is a licensee. 20 (4) The principal executive officer of the firm shall be a 21 certified public accountant or public accountant who holds a 22 current license to practice public accounting in this 23 Commonwealth or another state. 24 (5) An individual who does not hold a current license to 25 practice public accounting as a certified public accountant or 26 public accountant in this Commonwealth or another state or 27 foreign jurisdiction shall not assume ultimate responsibility 28 for any attest activity. 29 (e) Notwithstanding any other provision of law, a qualified 30 nonlicensee may own an equity interest in a firm if all of the 20070S0838B0973 - 31 -
1 following conditions are met: 2 (1) All of the qualified nonlicensees owning equity 3 interests in the firm shall not: 4 (i) own in the aggregate equity interests in the firm 5 entitling them to cast more than [one-third] forty-nine percent 6 of the votes on any issue or to receive more than [one-third] 7 forty-nine percent of any dividend or other distribution of 8 profits or assets of the firm; or 9 (ii) constitute more than [one-third] forty-nine percent in 10 number of the owners of equity interests in the firm. 11 (2) The qualified nonlicensee shall not hold himself out as 12 a certified public accountant or public accountant. 13 (3) The qualified nonlicensee shall be permitted to 14 designate or refer to himself as a principal, owner, officer, 15 member or shareholder of the firm. The qualified nonlicensee may 16 also use such other titles as may be authorized by the 17 regulations of the board. 18 (4) The qualified nonlicensee shall not: 19 (i) have pleaded guilty to, entered a plea of nolo 20 contendere to or been found guilty or been convicted of a felony 21 under the laws of this Commonwealth or any other jurisdiction; 22 or 23 (ii) be in violation of any regulation of the board 24 regarding the character or conduct of a qualified nonlicensee 25 who is the owner of an equity interest in a firm. 26 (5) The participation of the qualified nonlicensee in the 27 business of the firm must be the principal occupation of the 28 individual and shall be in the nature of providing services to 29 the firm or clients of the firm and not solely as an investor or 30 in another commercial or passive capacity. 20070S0838B0973 - 32 -
1 (6) The qualified nonlicensee has graduated with a 2 baccalaureate or higher degree from a college or university 3 approved at the time of graduation by the Department of 4 Education. 5 (7) The qualified nonlicensee shall comply with all 6 applicable provisions of this act and the regulations of the 7 board. 8 (f) An equity interest in a firm may be owned indirectly but 9 only if all of the ultimate, indirect beneficial owners of the 10 equity interest are licensees. 11 (g) In accordance with the procedure referred to in section 12 9 of this act, the board may revoke the license to practice of a 13 firm if at any time it is in violation of any of the provisions 14 of this section. 15 Section 8.9. Peer Review.--(a) As a condition for granting 16 a firm a renewal license, or an initial license in the case of a 17 firm that has previously been engaged in practice in another 18 jurisdiction, the board shall require that the firm undergo a 19 peer review in accordance with this section unless the firm 20 meets one of the exemptions in subsection (g). [The firm shall 21 submit to the board with its license application a letter from] 22 The initial or renewal license application of a firm that does 23 not meet one of those exemptions shall include a certification 24 that the firm is in compliance with this section and shall state 25 the name of the organization administering the firm's most 26 recent peer review [stating the date on which the peer review 27 was completed.], the date of acceptance of that peer review and 28 the period covered by that peer review. The board shall not 29 require submittal of the letter of acceptance, peer review 30 report, letter of comment, letter of response or working papers 20070S0838B0973 - 33 -
1 related to the peer review process[.], but the board may require 2 the organization administering the firm's most recent peer 3 review to confirm the date of acceptance and the period covered 4 by that peer review. As used in this section, the term "firm" 5 includes, but is not limited to, a sole practitioner. 6 (b) A firm with less than three licensees shall not be 7 required to undergo a peer review more frequently than once 8 every five years and a firm with three or more licensees shall 9 not be required to undergo a peer review more frequently than 10 once every three years, except that: 11 (1) The board may order a firm that has been disciplined 12 under section 9.1 of this act or that has been ordered to take 13 remedial action under subsection (e) to undergo a peer review 14 more frequently. 15 (2) A new firm that is not subject to subsection (j) shall 16 undergo its first peer review within eighteen months after it is 17 granted its initial license. 18 (2.2) A firm that was not previously required to undergo a 19 peer review must notify the board within thirty days after 20 accepting an engagement to perform an attest activity other than 21 a compilation and shall undergo a peer review within eighteen 22 months after commencing the engagement. 23 (3) The regulations of the board may lengthen any of the 24 periods between required peer reviews prescribed in this 25 subsection in such manner, under such circumstances or with 26 respect to such firms as the board in its discretion may 27 consider appropriate. 28 * * * 29 (d) (1) The peer review of a firm that performs one or more 30 audits of historical financial statements or examinations of 20070S0838B0973 - 34 -
1 prospective financial information shall [include an onsite] be a 2 system review, including a study and evaluation of a 3 representative selection of audit, examination, review and 4 compilation reports, the financial information upon which those 5 reports were based and the associated working papers. The 6 [onsite] system review shall include additional procedures 7 relating to the firm's system of quality control sufficient to 8 provide the reviewer with a reasonable basis upon which to issue 9 a peer review report. 10 (2) The peer review of a firm that performs no audit or 11 examination engagements but does perform one or more review 12 engagements shall be required only to be an [offsite] engagement 13 review, including a study and evaluation of a representative 14 selection of reports issued by the firm and the financial 15 information upon which those reports were based; but, if such a 16 firm elects to have [an onsite] a system review, that review 17 shall also be acceptable. The [offsite] engagement review shall 18 [not be required to] include a study of the associated working 19 papers [but shall include] and procedures and inquiries 20 sufficient to provide the reviewer with a reasonable basis upon 21 which to issue a peer review report. 22 (3) A firm that does not perform any audits or reviews, 23 regardless of whether or not the firm performs compilations, 24 shall be exempt from the requirement to undergo a peer review to 25 the extent provided in subsection (g)(2). 26 * * * 27 (g) A firm shall be exempt from the requirement to undergo a 28 peer review if all of the following apply: 29 (1) Within three years before the date of application for 30 initial or renewal licensure, the firm has undergone a peer 20070S0838B0973 - 35 -
1 review conducted in another state or foreign jurisdiction which 2 meets the requirements of subsection (c)(1) and (2). The firm 3 shall submit to the board a letter from the organization 4 administering the firm's most recent peer review stating the 5 date on which the peer review was completed. 6 (2) The firm satisfies all of the following conditions: 7 (i) During the preceding two years, the firm has not 8 accepted or performed any audit or review engagement. 9 (ii) Within the next two years, the firm does not intend to 10 accept or perform any audit or review engagement. 11 [(iii) The firm agrees to notify the board within thirty 12 days of accepting an audit or review engagement and to undergo a 13 peer review within eighteen months of commencing such 14 activities.] 15 (3) For reasons of personal health, military service or 16 other good cause, the board determines that the firm is entitled 17 to an exemption for a period of time not to exceed twelve 18 months. 19 * * * 20 Section 9.1. Grounds for Discipline.--(a) In accordance 21 with the procedure provided in section 9 of this act, the board 22 may revoke, suspend, limit or otherwise restrict the certificate 23 of a certified public accountant or the registration of a public 24 accountant, may revoke, suspend, limit or otherwise restrict any 25 license issued under this act, may censure or publicly reprimand 26 the holder of any certificate, registration or license, may 27 require completion of general or a specific number of continuing 28 professional education courses or may require more frequent peer 29 review or other remedial action, or may revoke, suspend or limit 30 the right of an individual to practice under section 5.2 of this 20070S0838B0973 - 36 -
1 act or censure or publicly reprimand an individual practicing 2 under section 5.2 of this act for any one or any combination of 3 the following causes: 4 (1) Fraud or deceit in obtaining: 5 (i) a certificate of certified public accountant [or in 6 obtaining]; 7 (ii) registration under this act [or in obtaining]; 8 (iii) a license to practice under this act[.]; or 9 (iv) a determination that substantial equivalency exists 10 with respect to an individual. 11 (2) Dishonesty, fraud or gross negligence in the [practice 12 of public accounting.] provision of professional services. 13 (3) Violation of any of the provisions of section 12 of this 14 act. 15 (4) Violation of a rule of professional conduct promulgated 16 by the board under the authority granted by this act. 17 (5) Pleading guilty to, entering a plea of nolo contendere 18 to or being found guilty of a felony under any Federal or State 19 law or the laws of any foreign jurisdiction. 20 (6) Pleading guilty to, entering a plea of nolo contendere 21 to or being found guilty of any crime, an element of which is 22 dishonesty or fraud under any Federal or State law or the laws 23 of any foreign jurisdiction. 24 (6.1) Pleading guilty to, entering a plea of nolo contendere 25 to or being found guilty of violating any Federal or State 26 revenue law or the revenue laws of any foreign jurisdiction. 27 (7) Cancellation, revocation, suspension or refusal to renew 28 [his authority to practice] authority to provide professional 29 services as a certified public accountant or public accountant 30 by any other state or foreign jurisdiction for any cause other 20070S0838B0973 - 37 -
1 than failure to pay a registration or other fee in such other 2 state or foreign jurisdiction. 3 (8) Suspension or revocation of the right to [practice] 4 provide professional services before any Federal or State 5 governmental agency. 6 (10) Failure of certified public accountant or public 7 accountant filing an application for a license or renewal 8 thereof to furnish evidence of completion of the requirements 9 for continuing education under section 8.2 of this act or to 10 meet any conditions with respect to continuing education that 11 the board may have ordered in respect to such certified public 12 accountant or public accountant under that section. 13 (12) Failure of a firm or sole proprietorship to satisfy the 14 peer review requirements in section 8.9 of this act. 15 (13) Failure of a firm to satisfy any of the organizational 16 requirements in section 8.8(d) of this act. 17 (14) Conduct that brings the profession of public accounting 18 into disrepute or that lowers public esteem for the profession. 19 (15) Violation of an order of the board. 20 (16) Engaging in unprofessional conduct. Discipline may be 21 imposed under this clause whether or not actual injury or loss 22 to a client is established. 23 (17) An act or omission by a licensee in another 24 jurisdiction under substantial equivalency that subjects the 25 licensee to discipline in the other jurisdiction. 26 * * * 27 Section 8. Section 9.2 of the act, amended December 4, 1996 28 (P.L.851, No.140) and May 9, 1997 (P.L.145, No.9), is amended to 29 read: 30 Section 9.2. Reinstatement.--(a) Except as provided in 20070S0838B0973 - 38 -
1 subsection (b), upon application in writing and after hearing 2 pursuant to notice, the board may reinstate or modify the 3 suspension of any license to practice which has been suspended. 4 Reinstatement shall not be granted under this subsection: 5 (1) To an individual unless he demonstrates that he has 6 completed the biennial continuing education requirements that he 7 would have been required to complete during the immediately 8 preceding reporting period if his license had not been 9 suspended. 10 (2) Unless the person seeking reinstatement pays the current 11 biennial licensing fee plus a reinstatement fee. 12 (b) An individual whose license has been suspended for more 13 than five years shall not be eligible to apply for reinstatement 14 of the license, but instead must take the examination and apply 15 for a certificate of certified public accountant in accordance 16 with section [3.1] 4.2 of this act. 17 (c) Unless ordered to do so by a court, the board shall not 18 reinstate the certificate of a person to practice as a certified 19 public accountant or the registration of a person to practice as 20 a public accountant which has been revoked. A person whose 21 certification or registration has been revoked may take the 22 examination and apply for a certificate in accordance with 23 section [3.1] 4.2 of this act not earlier than five years after 24 his certificate or registration was revoked if he desires to 25 resume the practice of public accounting. 26 (d) A person whose license to practice has expired for 27 failure to make biennial registration or who has been on the 28 inactive roll under section 8.2(a.1) of this act may have the 29 license reinstated upon compliance with the following: 30 (1) In the case of an individual, presentation to the board 20070S0838B0973 - 39 -
1 of satisfactory evidence of having completed eighty hours of 2 continuing education in programs approved by the board under 3 section 8.2(d) of this act within two years preceding the date 4 of the application for reinstatement. 5 (2) Payment of the current biennial licensing fee plus a 6 reinstatement fee. 7 (e) Upon application in writing and after hearing pursuant to 8 notice, the board may reinstate or modify the suspension of an 9 individual's right to practice under section 5.2 of this act 10 which has been revoked or suspended. 11 Section 9. Sections 12, 13 and 16(c) of the act, amended 12 December 4, 1996 (P.L.851, No.140), are amended to read: 13 Section 12. Unlawful Acts.--(a) [It] Except as provided in 14 sections 5.2 and 5.4 of this act, it is unlawful for any person 15 to hold himself out as or otherwise use the title or designation 16 "certified public accountant," or the abbreviation "CPA," or any 17 other title, designation, words, letters or abbreviation tending 18 to indicate that the person is a certified public accountant or 19 engaged in the practice of public accounting unless the person 20 has received or has been notified in writing by the board that 21 he has qualified to receive a certificate of certified public 22 accountant issued by this Commonwealth, which is not revoked or 23 suspended. 24 (b) It is unlawful for any person to hold himself out or 25 otherwise use the title "certified public accountant," "public 26 accountant" or any abbreviation thereof, or the letters "CPA" or 27 "PA" by virtue of any certificate, registration or license 28 illegally or fraudulently obtained by the person, or issued 29 unlawfully or through any fraudulent representation or deceit, 30 or misstatement of material fact or fraudulent concealment of a 20070S0838B0973 - 40 -
1 material fact made or induced or aided or abetted by the person. 2 (c) [It] Except as provided in sections 5.2 and 5.4 of this 3 act, it is unlawful for any partnership, corporation or other 4 association to hold itself out as or otherwise use the title or 5 designation "certified public accountant" or "public accountant" 6 or the abbreviation "CPA" or "PA," or any other title, 7 designation, words, letters or abbreviation tending to indicate 8 that the partnership, corporation or other association is 9 composed of or includes certified public accountants or public 10 accountants unless the partnership, corporation or other 11 association holds a current license under section 8.8 of this 12 act. 13 (f) Except as provided in this subsection, in sections 5.2 14 and 5.4 of this act or in subsections (a) and (c), it is 15 unlawful for any person to use a title that includes the word 16 "certified" as a part thereof, or any other title or designation 17 likely to be confused with "certified public accountant," or any 18 title or designation implying or connoting accreditation by any 19 jurisdiction for the practice of any type of bookkeeping, 20 accounting, auditing, tax or other professional practice related 21 thereto, or to use any abbreviation of such title or 22 designation. It is not a violation of this subsection for an 23 individual: 24 (1) except as provided in clause (2), to use a title or 25 designation that includes the word "accredited" or "certified" 26 or an abbreviation of such a title or designation if the title 27 or designation has been conferred by a private organization 28 after evaluation of the individual's credentials or 29 qualifications and if when the title or designation is used on 30 the individual's stationery it is accompanied by a statement 20070S0838B0973 - 41 -
1 that it has been conferred by an organization not affiliated 2 with the Federal or any State government; or 3 (2) to use the designation "certified financial planner" or 4 an abbreviation of that designation if the designation has been 5 conferred by a private organization after evaluation of the 6 individual's credentials or qualifications. 7 (j) It is unlawful for any person to hold himself out as or 8 otherwise use the title or designation "public accountant" or 9 the abbreviation "PA" or any other title, designation, words, 10 letters or abbreviation tending to indicate that the person is a 11 public accountant, unless such person is registered as a public 12 accountant and is a licensee, or unless such person has 13 received, or has been notified in writing by the board that he 14 has qualified to receive a certificate as certified public 15 accountant issued by this Commonwealth. 16 (l) It is unlawful for any person, partnership or 17 corporation to hold himself or itself out as or otherwise use 18 the title or designation "certified accountant," "chartered 19 accountant," "enrolled accountant," "licensed accountant," 20 "registered accountant," "licensed public accountant," 21 "registered public accountant" or "accredited accountant" or any 22 other title or designation likely to be confused with "certified 23 public accountant" or "public accountant," or any abbreviation 24 of any of those prohibited titles or designations or similar 25 abbreviations likely to be confused with "CPA," except that a 26 person who is a licensee may hold himself out to the public as 27 an "accountant," "auditor" or "accountant and auditor." It is 28 not a violation of this clause for an individual designated by 29 the Internal Revenue Service as an enrolled agent to use that 30 title or the abbreviation "EA." 20070S0838B0973 - 42 -
1 (l.1) It is unlawful for any person to sell or offer to sell 2 or fraudulently obtain, furnish or procure any certificate, 3 registration [or license], license or determination of 4 substantial equivalency under the provisions of this act or 5 cause or aid or abet another person to do so. 6 (l.2) [It] Except as provided in sections 5.2 and 5.4 of 7 this act, it is unlawful for any person that is not a licensee 8 to sign, affix a firm name to or otherwise issue any: 9 (1) report; or 10 (2) opinion, certificate or other communication respecting 11 compliance with conditions established by law or contract, 12 including, but not limited to, statutes, ordinances, 13 regulations, grants, loans and appropriations, together with any 14 wording, accompanying or contained in such opinion [or 15 certificate], certificate or other communication that indicates 16 that the person is composed of or employs: 17 (i) accountants or auditors; or 18 (ii) persons having expert knowledge in accounting or 19 auditing. 20 (l.3) It is unlawful for a licensee to use a professional or 21 firm name that the licensee is prohibited from using by other 22 applicable provision of law or that is misleading as to the 23 persons who are partners, officers, members, directors, 24 employees or shareholders of the firm or as to any other matter, 25 except that the names of one or more former partners, 26 shareholders or members may be included in the name of a firm or 27 its successor. 28 (m) [It] Except as provided in sections 5.2 and 5.4 of this 29 act, it is unlawful for any [person] individual who is not a 30 licensee to sign or affix his name or any trade or assumed name 20070S0838B0973 - 43 -
1 used by him in his profession or business to or otherwise issue 2 any: 3 (1) report; or 4 (2) opinion, certificate or other communication respecting 5 compliance with conditions established by law or contract, 6 including, but not limited to, statutes, ordinances, 7 regulations, grants, loans and appropriations, together with any 8 wording accompanying or contained in such [report] opinion, 9 certificate or other communication, which indicates: 10 (i) that he is an accountant or auditor; or 11 (ii) that he has expert knowledge in accounting or auditing. 12 The provisions of this subsection shall not prohibit any 13 officer, employe, partner, or principal of any organization from 14 affixing his signature to any [report or other] communication in 15 reference to the affairs of the organization with any wording 16 designating the position, title, or office which he holds in the 17 organization, nor shall the provisions of this subsection 18 prohibit any act of a public official or public employe in the 19 performance of his duties as such. 20 (n) [It] Except as provided in sections 5.2 and 5.4 of this 21 act, it is unlawful for any person not a licensee to hold 22 himself or itself out to the public as an "auditor" or as an 23 "accountant and auditor". employe, partner, or principal of any 24 organization from describing himself by the position, title or 25 office he holds in the organization, nor shall this subsection 26 prohibit any action of a public official or public employe in 27 the performance of his duties as such. 28 (o) It is unlawful for any person to hold himself or itself 29 out as a member of any society, association or organization of 30 certified public accountants or public accountants, unless such 20070S0838B0973 - 44 -
1 person holds a valid certificate of certified public accountant 2 issued by this Commonwealth or by some state or is registered as 3 a public accountant in this Commonwealth or, in the case of a 4 firm, is licensed under section 8.8 of this act. 5 (p) Commissions and referral fees shall comply with the 6 following: 7 (1) A [licensee in public practice] person practicing public 8 accounting in this Commonwealth shall not for a commission 9 recommend or refer to a client any product or service, or for a 10 commission recommend or refer any product or service to be 11 supplied by a client, or receive a commission when the [licensee 12 or the licensee's] person or the person's firm also performs for 13 that client any of the following: 14 (i) An audit or review of a financial statement. 15 (ii) A compilation of a financial statement when the 16 [licensee] person expects, or reasonably might expect, that a 17 third party will use the financial statement and the 18 [licensee's] person's compilation report does not disclose a 19 lack of independence. 20 (iii) An examination of prospective financial information. 21 This prohibition applies during the period in which the 22 [licensee] person is engaged to perform any of the services 23 listed in this clause and the period covered by any historical 24 financial statements involved in such listed services. 25 (2) A [licensee in public practice] person practicing public 26 accounting in this Commonwealth who is not prohibited by this 27 act from performing services for or receiving a commission and 28 who is paid or expects to be paid commission shall disclose that 29 fact to any person to whom the [licensee] person recommends or 30 refers a product or service to which the commission relates. 20070S0838B0973 - 45 -
1 (3) Any [licensee] person who accepts a referral fee or who 2 pays a referral fee shall disclose such acceptance or payment to 3 the client. 4 (4) The board shall promulgate regulations specifying the 5 terms of the disclosures required by clause (2) or (3), the 6 manner in which the disclosures shall be made and such other 7 matters regarding the disclosures as the board shall deem 8 appropriate. The regulations shall require, at a minimum, that a 9 disclosure shall comply with all of the following: 10 (i) Be in writing and be clear and conspicuous. 11 (ii) State the amount of the commission or referral fee or 12 the basis on which it will be computed. 13 (iii) Be made at or prior to the time: 14 (A) the recommendation or referral of the product or service 15 is made in the case of a commission; or 16 (B) the client retains the [licensee] person to whom the 17 client has been referred in the case of a referral fee. 18 (5) This subsection does not apply to: 19 (i) Payments for the purchase of all or part of an 20 accounting practice. 21 (ii) Retirement or similar payments to persons formerly 22 engaged in the practice of public accounting. 23 (iii) Payments to the heirs or estates of persons formerly 24 engaged in the practice of public accounting. 25 (iv) Incentive or bonus payments to a [licensee] person by a 26 firm employing the [licensee] person. 27 (q) [It] Except as provided in sections 5.2 and 5.4 of this 28 act, it is unlawful for any person not a licensee to engage in 29 the practice of public accounting in this Commonwealth. 30 (r) Except as provided in sections 5.2 and 5.4 of this act, 20070S0838B0973 - 46 -
1 it is unlawful for any person not a licensee to prepare 2 financial information that is accompanied by a letter or other 3 text that does not comply with section 13(c) of this act. 4 Section 13. Acts Not Unlawful.--(a) Nothing contained in 5 this act shall prohibit any person not a certified public 6 accountant or a public accountant from serving as an employe of 7 or an assistant to a certified public accountant, a public 8 accountant or firm, but an employe or assistant shall not issue 9 any report or accounting or financial statement over his name or 10 signature. 11 (b) Nothing contained in this act shall prohibit a certified 12 public accountant, or association composed of certified public 13 accountants, of another state who is concurrently engaged in 14 public practice in such state from temporarily practicing in 15 this Commonwealth on professional business if the practice is 16 conducted in conformity with the regulations and rules governing 17 temporary practice promulgated by the board. 18 (c) Nothing contained in this act shall prohibit a person 19 while not holding himself out as a certified public accountant, 20 public accountant or licensee from offering and rendering 21 bookkeeping and similar technical services or other services 22 involving the use of accounting skills, including the 23 preparation of tax returns and the preparation of financial 24 information without issuing a report or other communication that 25 expresses an opinion or assurance on the statements. A letter or 26 other text that accompanies financial information prepared under 27 this subsection shall not constitute a report or other 28 communication that expresses an opinion or assurance only if it 29 contains and is limited to the following wording: 30 The accompanying financial information of (company) as of 20070S0838B0973 - 47 -
1 (date and year), and for the year then ended have been 2 prepared by (me/us). 3 This financial information is the representation of the 4 management (owners) of (company). 5 A person who prepares financial information as permitted by this 6 subsection may use the title or designation "accountant" or 7 "accountants" and may refer to the services being provided as 8 "accounting" only if the person includes in any letter or other 9 text accompanying the financial information the following 10 statement: 11 I am not a certified public accountant or public 12 accountant. 13 We are not certified public accountants or public 14 accountants. 15 Section 16. Penalties.--* * * 16 (c) In addition to any other civil remedy, criminal penalty 17 or discipline provided for in this act, the board may levy a 18 civil penalty of up to one thousand dollars ($1,000) on any 19 person for a violation of any provision of this act. The board 20 shall levy a civil penalty only after affording the accused 21 party the opportunity for a hearing, as provided in Title 2 of 22 the Pennsylvania Consolidated Statutes (relating to 23 administrative law and procedure). The maximum civil penalty 24 that may be levied by the board shall not be more than two 25 hundred thousand dollars ($200,000) for any related series of 26 violations. The board may not levy a civil penalty with respect 27 to a violation for which the person has been fined or assessed a 28 civil penalty in another jurisdiction. 29 * * * 30 Section 10. This act shall take effect in 60 days. D27L63VDL/20070S0838B0973 - 48 -