Regular Session 2015-2016 Senate Bill 1018 P.N. 1936

PRIOR PRINTER'S NO. 1284

PRINTER'S NO. 1936

THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

No.

1018

Session of

2015

INTRODUCED BY BROWNE AND ALLOWAY, SEPTEMBER 29, 2015

SENATOR TOMLINSON, CONSUMER PROTECTION AND PROFESSIONAL

LICENSURE, AS AMENDED, JUNE 15, 2016

AN ACT

Amending the act of May 26, 1947 (P.L.318, No.140), entitled, as

amended, "An act relating to the practice of public

accounting; providing for the examination, education and

experience requirements for certification of certified public

accountants and for the licensing of certified public

accountants, public accountants and firms; requiring

continuing education and peer review; providing for the

organization and ownership of firms and for the procedures

and grounds for discipline and reinstatement of licensees;

prescribing the powers and duties of the State Board of

Accountancy and the Department of State; providing for

ownership of working papers and confidentiality; regulating

the professional responsibility of licensees; defining

unlawful acts and acts not unlawful; providing penalties; and

repealing existing laws," further providing for definitions,

for requirements for issuance of certificate, for

certificates issued by domestic reciprocity, for licenses to

practice and, for licensing of firms; and providing for

expungement of disciplinary records AND FOR PEER REVIEW.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The definitions of "attest activity" and "report"

in section 2 of the act of May 26, 1947 (P.L.318, No.140), known

as the CPA Law, reenacted and amended December 8, 1976

(P.L.1280, No.286) and amended July 9, 2008 (P.L.954, No.73),

are amended and the section is amended by adding definitions A

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DEFINITION to read:

Section 2. Definitions.--The following words and phrases

when used in this act shall have the meanings ascribed to them

in this section unless the context clearly indicates otherwise:

* * *

"Attest activity." The provision of any of the following

[financial statement] services together with the issuance of a

report expressing or disclaiming an opinion or other assurance

on the information:

(1) an audit or other engagement performed in accordance

with Statements on Auditing Standards (SAS);

(2) a review or compilation of a financial statement

performed in accordance with Statements on Standards for

Accounting and Review Services (SSARS);

(3) an engagement performed in accordance with Statements on

Standards for Attestation Engagements (SSAE);

(4) an audit or other engagement performed in accordance

with government auditing standards issued by the Comptroller

General of the United States; or

(5) any other engagement performed in accordance with

attestation standards established by an organization granted

authority by statute or regulation to establish attestation

standards, such as the American Institute of Certified Public

Accountants (AICPA) or the Public Company Accounting Oversight

Board (PCAOB).

* * *

"Expunge" or "expungement." Removal of a disciplinary

record, accomplished by any of the following:

(1) Permanently sealing the affected record from public

access.

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(2) Deeming the proceedings to which the affected record

refers as not having occurred.

(3) Except with respect to a subsequent application for

expungement, affording the affected party the right to represent

that no record exists regarding the subject matter.

* * *

"Forensic accounting services." The application of

specialized knowledge and investigative skills possessed by a

licensee, qualified nonlicensee or qualified association to

collect, analyze and evaluate evidential matter and to interpret

and communicate findings in a courtroom, boardroom or other

legal or administrative venue.

* * *

"Report." Any opinion, statement or other form of written

communication that states or implies assurance as to the

reliability of any [financial information] attested information,

compiled financial statements or assessments of the status or

performance of any person and that also implies or is

accompanied by any statement or implication that the person

issuing it has special knowledge or competence in accounting or

auditing. Such a statement or implication of special knowledge

or competence may arise from use by the issuer of the

communication of names or titles indicating that the issuer or

any individual employed by or affiliated with it is an

accountant or auditor or may arise from the language of the

communication itself. The term includes any form of language

which disclaims an opinion when the form of language is

conventionally understood to imply any positive assurance as to

the reliability of the [financial information] attested

information or compiled financial statements referred to or

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special competence on the part of the person issuing the

language. The term also includes any other form of language that

is conventionally understood to imply assurance or special

knowledge or competence.

* * *

Section 2. Section 4.2 of the act, amended June 19, 2013

(P.L.46, No.15), is amended to read:

Section 4.2. Requirements for Issuance of Certificate.--(a)

The board shall issue a certificate upon application by an

individual who has passed the examination and meets the

education and experience requirements in this section.

(b) Before an individual may take the examination, the board

shall be satisfied that the individual:

(1) has attained eighteen years of age;

(2) is of good moral character; and

(3) has graduated with:

(i) a baccalaureate or higher degree from a college or

university accredited by a nationally recognized accrediting

agency recognized by the United States Department of Education,

or a college or university approved by the board, and completed

a total of one hundred fifty semester credits of post-secondary

education, including at least a total of twenty-four semester

credits of accounting and auditing, business law, finance or tax

subjects of a content satisfactory to the board and an

additional twelve semester credits in [accounting, auditing and]

accounting and auditing subjects or tax subjects of a content

satisfactory to the board, not necessarily as part of the

individual's undergraduate or graduate work;

(ii) a baccalaureate degree from a college or university

accredited by a nationally recognized accrediting agency

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recognized by the United States Department of Education, or a

college or university approved by the board, and completed at

least a total of twenty-four semester credits, which credits

shall be in accounting and auditing, business law, finance or

tax subjects of a content satisfactory to the board, not

necessarily as a part of his undergraduate work; or

(iii) a Master's Degree or other post-graduate degree from a

college or university accredited by a nationally recognized

accrediting agency recognized by the United States Department of

Education, or a college or university approved by the board, and

completed at least a total of twenty-four semester credits,

which credits shall be in accounting and auditing, business law,

finance or tax subjects of a content satisfactory to the board,

not necessarily as part of his undergraduate or graduate work.

subsection (b)(3)(ii) or (iii) may be issued a certificate, the

individual must also satisfy the education requirement in

subsection (b)(3)(i).

(d) Before an individual may be issued a certificate, the

board shall be satisfied that the individual has completed at

least one year of experience that:

(1) was completed within sixty months preceding the date of

application for a certificate;

(2) included providing any type of service or advice

involving the use of accounting, attest, compilation, management

advisory, financial advisory, tax or consulting skills, which

were gained through employment in government, industry, academia

or public practice;

(3) was of a caliber satisfactory to the board; and

(4) was verified by an individual with a current license to

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practice public accounting as a certified public accountant or

public accountant in this Commonwealth or another state.

(e) The following requirements may be complied with instead

of the otherwise applicable provisions of subsections (b), (c)

and (d):

(1) An individual who took the examination before December

31, 2011, but did not pass at least one part taken before that

date, may not be issued a certificate until the individual:

(i) has satisfied the education requirement in subsection

(c), if applicable; and

(ii) has completed at least one year of experience described

in subsection (d)(2), (3) and (4) within one hundred twenty

months preceding the date of application for a certificate.

(2) An individual who passed at least one part of the

examination taken before December 31, 2011, pursuant to

subsection (b)(3)(ii), may be issued a certificate before or

after December 31, 2011, without satisfying the education

requirement in subsection (c), but not until the individual has

completed at least two years of experience that satisfies the

requirements in subsection (d)(2), (3) and (4). The experience

may be completed within one hundred-twenty months preceding the

date of application for a certificate.

(3) An individual who passed at least one part of the

examination taken before December 31, 2011, pursuant to

subsection (b)(3)(iii), may be issued a certificate before or

after December 31, 2011, without satisfying the education

requirement in subsection (c) and may complete the one year of

experience required by subsection (d) within one hundred twenty

months preceding the date of application for a certificate.

Section 3. Sections 5, 8.2 and 8.8, 8.8 AND 8.9(G) of the

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act, amended July 9, 2008 (P.L.954, No.73), are amended to read:

Section 5. Certificates Issued by Domestic Reciprocity.--(a)

Without requiring the examination otherwise required under

section 4.2 of this act, the board may, in its discretion, issue

a certificate of certified public accountant to a holder of a

certificate of certified public accountant then in full force

and effect issued by any other state following passage of an

examination if the applicant shall submit evidence satisfactory

to the board that he:

(1) possesses the general qualifications specified in

section 4.2(b)(1) and (2) of this act, has passed the

examination required to practice as a certified public

accountant under the laws of the other state, meets the

continuing education requirements specified in section 8.2(b) of

this act and has the experience required under section [4.2(d)]

4.2(d)(2), (3) and (4) of this act [to receive the certificate

in this Commonwealth]; or

(2) has passed the examination required to practice as a

certified public accountant under the laws of the other state

and has held a certificate and license to practice public

accounting for the immediately preceding five years in another

state.

(b) An applicant for a certificate under this section shall

list in the application all states and foreign jurisdictions in

which the applicant has applied for or holds a designation or

certificate to practice public accounting.

shall notify the board in writing within thirty days after its

occurrence of any issuance, denial, revocation or suspension of

his designation, certificate or license to practice public

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accounting or the commencement of a disciplinary or enforcement

action against him or his firm by any state or foreign

jurisdiction.

Section 8.2. Licenses to Practice.--(a) Biennial licenses

to engage in the practice of public accounting in this

Commonwealth shall be issued by the Department of State upon

payment of the biennial licensing fee to (i) holders of the

certificate of certified public accountant issued by this

Commonwealth and public accountants registered in this

Commonwealth who have certified to the board that they have

complied with the requirements of subsection (b) of this section

and (ii) qualified associations licensed under section 8.8 of

this act. Licenses to practice shall expire on the last day of

December of odd-numbered years or on such other biennial

expiration dates as the department may fix. The renewal

application of a certified public accountant or public

accountant does not need to list the continuing education

courses taken by the applicant except as provided by the rules

and regulations of the board.

(a.1) A certified public accountant or public accountant who

is not engaged in the practice of public accounting may request

the board, in writing, to place his name on the inactive roll

and thus protect his right to obtain a license at such time as

he may become engaged in the practice of public accounting.

(a.2) Notwithstanding the act of August 21, 1953 (P.L.1273,

No.361), known as "The Private Detective Act of 1953," a

licensee, qualified nonlicensee or qualified association

providing forensic accounting services shall be licensed and

regulated solely under this act.

(b) Each certified public accountant and public accountant

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filing an application for a license or a renewal thereof to

engage in the practice of public accounting in this Commonwealth

must, during the reporting period immediately preceding the

current biennial period, complete eighty hours of continuing

education, in programs approved by the board. The reporting

period for licensees shall be January 1 of even-numbered years

to December 31 of odd-numbered years. No carry-over of credits

shall be permitted from one biennial license period to another.

The continuing education requirement shall not apply to firms

but shall apply to all natural persons who apply for a license

or a renewal thereof under this section.

public accountant applying for renewal of his biennial license

to furnish a certification of completion of the required number

of hours of acceptable continuing education shall constitute

grounds for denial or refusal to renew such license, unless the

board, in its discretion, shall determine that the failure to

complete the required continuing education was due to reasonable

cause, in which case the board shall grant an extension.

(d) In issuing rules, regulations and individual orders with

respect to requirements of continuing education, the board may

rely upon guidelines and pronouncements of recognized

educational and professional organizations; may prescribe for

content, duration and organization of courses; shall take into

account the accessibility of such continuing education as it may

require, and any impediments to interstate practice of public

accounting which may result from differences in such

requirements in other states; and may provide for relaxation or

suspension of such requirements in instances of individual

hardship such as for reasons of health, military service or

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other good cause.

(e) A certified public accountant or public accountant who

is also certified, registered or licensed to practice public

accounting in any other state or foreign jurisdiction shall

report this information to the board on the biennial renewal

application. Any disciplinary action taken in any other state or

foreign jurisdiction shall be reported to the board on the

biennial renewal application or within thirty days of

disposition, whichever is sooner. Multiple certification,

registration or licensure shall be noted by the board on the

record of the certified public accountant or public accountant,

and the other state or foreign jurisdiction shall be notified by

the board within thirty days after any disciplinary action is

taken against the certified public accountant or public

accountant in this Commonwealth.

(f) An initial or renewal license shall not be issued after

April 30, 2000, to a certified public accountant or public

accountant practicing as a sole practitioner unless he complies

with the requirements of section 8.9 of this act.

Section 8.8. Licensing of Firms.--(a) The following shall

apply:

(1) A person other than an individual shall not practice

public accounting in this Commonwealth unless it:

(i) is a qualified association, has been granted a license

to practice and satisfies the requirements of this section at

all times while it is a licensee[.]; or

(ii) meets the requirements of section 5.4 of this act.

(2) A new firm shall apply for its initial license within

thirty days after its formation; thereafter, the firm's license

shall be subject to renewal in accordance with section 8.2 of

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this act.

(3) A new firm must designate a licensee of this

Commonwealth, or for a firm which practices pursuant to section

5.4 of this act, a licensee of another state who meets the

requirements under section 5.2 of this act, who is responsible

for the proper registration of the firm and who identifies that

individual to the board.

(b) The initial and all renewal license applications by a

firm shall[:

[(1) List the name, home address and license number of each

certified public accountant or public accountant who owns an

equity interest directly or indirectly in the firm and who is a

licensee.

(2) List the name and home address of each qualified

nonlicensee who owns an equity interest in the firm if the

principal residence or the office out of which the individual

principally practices is located in this Commonwealth.]

(3) Include] INCLUDE a statement that the firm is in

compliance with subsections (d) and (e).

firm after April 30, 2000, unless the firm complies with the

requirements of section 8.9 of this act.

(d) A firm shall satisfy all of the following requirements:

(1) At least one general partner if the firm is a

partnership, one record and beneficial owner of common shares if

the firm is a corporation or one owner of a similar equity

interest if the firm is any other form of qualified association

shall be a certified public accountant or public accountant who

is a licensee.

(2) Except as provided in subsections (e) and (f), each

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shareholder, partner, member or other owner of an equity

interest in the firm must be the holder of a current license to

practice public accounting as a certified public accountant or

public accountant under the laws of this Commonwealth or another

jurisdiction. This clause shall not:

(i) apply in the case of a person who withdraws from a firm

for such period as may be reasonable under the circumstances to

permit the firm to comply with this requirement; or

(ii) prohibit payments by a firm to a former equity owner or

his estate in connection with his withdrawal from the firm.

(3) [Each individual in charge of an office that performs

any attest] Attest activity [or business unit of the firm]

rendered in this Commonwealth shall be under the charge of a

certified public accountant or public accountant who is a

licensee in this Commonwealth or another state.

[(4) The principal executive officer of the firm shall be a

certified public accountant or public accountant who holds a

current license to practice public accounting in this

Commonwealth or another state.]

(5) An individual who does not hold a current license to

practice public accounting as a certified public accountant or

public accountant in this Commonwealth or another state or

foreign jurisdiction shall not assume ultimate responsibility

for any attest activity.

(e) Notwithstanding any other provision of law, a qualified

nonlicensee may own an equity interest in a firm if all of the

following conditions are met:

(1) All of the qualified nonlicensees owning equity

interests in the firm shall not:

(i) own in the aggregate equity interests in the firm

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entitling them to cast more than forty-nine percent of the votes

on any issue or to receive more than forty-nine percent of any

dividend or other distribution of profits or assets of the firm;

(ii) constitute more than forty-nine percent in number of

the owners of equity interests in the firm.

(2) The qualified nonlicensee shall not hold himself out as

a certified public accountant or public accountant.

(3) The qualified nonlicensee shall be permitted to

designate or refer to himself as a principal, owner, officer,

member or shareholder of the firm. The qualified nonlicensee may

also use such other titles as may be authorized by the

regulations of the board.

(4) The qualified nonlicensee shall not:

(i) have pleaded guilty to, entered a plea of nolo

contendere to or been found guilty or been convicted of a felony

under the laws of this Commonwealth or any other jurisdiction;

(ii) be in violation of any regulation of the board

regarding the character or conduct of a qualified nonlicensee

who is the owner of an equity interest in a firm.

(5) The participation of the qualified nonlicensee in the

business of the firm must be the principal occupation of the

individual and shall be in the nature of providing services to

the firm or clients of the firm and not solely as an investor or

in another commercial or passive capacity.

(6) The qualified nonlicensee has graduated with a

baccalaureate or higher degree from a college or university

approved at the time of graduation by the Department of

Education.

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(7) The qualified nonlicensee shall comply with all

applicable provisions of this act and the regulations of the

board.

(f) An equity interest in a firm may be owned indirectly but

only if all of the ultimate, indirect beneficial owners of the

equity interest are licensees.

(g) In accordance with the procedure referred to in section

9 of this act, the board may revoke the license to practice of a

firm if at any time it is in violation of any of the provisions

of this section.

Section 4. The act is amended by adding a section to read:

Section 9.4. Expungement of Disciplinary Records.--(a) The

board may expunge the disciplinary record of a licensee as

follows:

(1) The licensee must make a written application to the

board for expungement no earlier than four years from the final

disposition of the disciplinary record.

(2) The disciplinary record must be the only disciplinary

record that the licensee has with the board under the board's

jurisdiction.

(3) The licensee may not be the subject of an active

investigation related to the accounting profession.

(4) The licensee may not be in a current disciplinary status

and any fines or fees assessed must be paid in full.

(5) The licensee may not have had a disciplinary record

previously expunged by the board.

(6) The imposition of discipline must have been for a

violation involving any of the following:

(i) Failure to complete continuing education requirements or

practicing for six months or less on a lapsed license. At least

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four years must have elapsed since the final disposition of the

disciplinary record at the time of application for expungement.

(ii) A violation, except a violation which resulted in

license suspension or revocation, in which at least ten years

have elapsed since the final disposition of the disciplinary

record at the time of application for expungement.

(7) The licensee must pay each cost associated with the

expungement as established by the board by regulation.

(b) Nothing in this section shall prohibit the board from

using a previous discipline for a regulatory purpose or from

releasing records of a previous discipline upon request from law

enforcement or other governmental body as permitted by law.

SECTION 8.9. PEER REVIEW.--* * *

(G) A FIRM SHALL BE EXEMPT FROM THE REQUIREMENT TO UNDERGO A

PEER REVIEW IF [ALL] ANY OF THE FOLLOWING [APPLY] APPLIES:

(1) WITHIN THREE YEARS BEFORE THE DATE OF APPLICATION FOR

INITIAL OR RENEWAL LICENSURE, THE FIRM HAS UNDERGONE A PEER

REVIEW CONDUCTED IN ANOTHER STATE OR FOREIGN JURISDICTION WHICH

MEETS THE REQUIREMENTS OF SUBSECTION (C)(1) AND (2). THE FIRM

SHALL SUBMIT TO THE BOARD A LETTER FROM THE ORGANIZATION

ADMINISTERING THE FIRM'S MOST RECENT PEER REVIEW STATING THE

DATE ON WHICH THE PEER REVIEW WAS COMPLETED.

(2) THE FIRM SATISFIES [ALL] BOTH OF THE FOLLOWING

CONDITIONS:

(I) DURING THE PRECEDING TWO YEARS, THE FIRM HAS NOT

ACCEPTED OR PERFORMED ANY AUDIT OR REVIEW ENGAGEMENT.

(II) WITHIN THE NEXT TWO YEARS, THE FIRM DOES NOT INTEND TO

ACCEPT OR PERFORM ANY AUDIT OR REVIEW ENGAGEMENT.

(3) FOR REASONS OF PERSONAL HEALTH, MILITARY SERVICE OR

OTHER GOOD CAUSE, THE BOARD DETERMINES THAT THE FIRM IS ENTITLED

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TO AN EXEMPTION FOR A PERIOD OF TIME NOT TO EXCEED TWELVE

MONTHS.

* * *

Section 5 4. This act shall take effect in 60 days.

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