PRINTER'S NO. 3298
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
2288
Session of
2020
INTRODUCED BY PEIFER, GREINER, MILLARD, RYAN, WHEELAND, SANCHEZ,
PICKETT, DUNBAR, DeLUCA, STAATS, SCHLEGEL CULVER, CIRESI,
MOUL, GLEIM AND ROEBUCK, FEBRUARY 18, 2020
REFERRED TO COMMITTEE ON FINANCE, FEBRUARY 18, 2020
AN ACT
Amending the act of May 26, 1947 (P.L.318, No.140), entitled "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 general powers of the board, for requirements for
issuance of certificate, for peer review and for unlawful
acts.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Sections 3(a)(11), 4.2(b)(3) and (d)(4), 8.9 and
12(f)(2) of the act of May 26, 1947 (P.L.318, No.140), known as
the CPA Law, are amended to read:
Section 3. General Powers of the Board.--(a) The Board
shall have the power:
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(11) To promulgate and amend rules [of professional
conduct], including adoption of AICPA's Code of Professional
Conduct, uniformly applicable to certified public accountants
and public accountants, appropriate to establish and maintain a
high standard of integrity, objectivity and dignity by certified
public accountants, public accountants and firms.
* * *
Section 4.2. Requirements for Issuance of Certificate.--* *
*
(b) Before an individual may take the examination, the board
shall be satisfied that the individual:
* * *
(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, economics,
finance or tax subjects of a content satisfactory to the board
and an additional twelve semester credits in 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
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
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shall be in accounting and auditing, business law, economics,
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,
economics, finance or tax subjects of a content satisfactory to
the board, not necessarily as part of his undergraduate or
graduate work.
* * *
(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:
* * *
(4) was verified by an individual with a current license to
practice public accounting as a certified public accountant or
public accountant in this Commonwealth or another state or a
substantially equivalent licensed individual from a foreign
country.
* * *
Section 8.9. Peer Review.--(a) As a condition for granting
a firm a renewal license, or an initial license in the case of a
firm that has previously been engaged in practice in another
jurisdiction, the board shall require that the firm undergo a
peer review in accordance with this section unless the firm
meets one of the exemptions in subsection (g). The initial or
renewal license application of a firm that does not meet one of
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those exemptions shall include a certification that the firm is
in compliance with this section and shall state the name of the
organization administering the firm's most recent peer review,
the date of acceptance of that peer review and the period
covered by that peer review. The board shall not require
submittal of the letter of acceptance, peer review report,
letter of comment, letter of response or working papers related
to the peer review process[, but the board may require the
organization administering the firm's most recent peer review to
confirm the date of acceptance and the period covered by that
peer review. As used in this section, the term "firm" includes,
but is not limited to, a sole practitioner.]. The board shall
verify the date of acceptance through the Facilitated State
Board Access.
(b) A firm [with less than three licensees] shall not be
required to undergo a peer review more frequently than once
every [five years and a firm with three or more licensees shall
not be required to undergo a peer review more frequently than
once every] three years, except that:
(1) The board may order a firm that has been disciplined
under section 9.1 of this act or that has been ordered to take
remedial action under subsection (e) to undergo a peer review
more frequently.
(2) A new firm that is not subject to subsection (j) shall
undergo its first peer review within eighteen months after it is
granted its initial license.
(2.2) A firm that was not previously required to undergo a
peer review must notify the board within thirty days after
accepting an engagement to perform an attest activity other than
a compilation and shall undergo a peer review within eighteen
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months after commencing the engagement.
(3) The regulations of the board may lengthen any of the
periods between required peer reviews prescribed in this
subsection in such manner, under such circumstances or with
respect to such firms as the board in its discretion may
consider appropriate.
(4) Firms with fewer than three licensees that were
previously not required to undergo a peer review more frequently
than once every five years shall be permitted to maintain that
five-year peer review cycle until their next peer review is
completed.
(c) The board shall adopt regulations establishing
guidelines for peer reviews which shall:
(1) Require that a peer review be conducted pursuant to a
program and standards approved by the board. The board shall
approve only peer review programs that the board finds comply
with established standards for performing and reporting on peer
reviews.
(2) Require that a peer review be conducted by a reviewer
that is independent of the firm reviewed, qualified pursuant to
board rules and approved by the organization administering the
peer review program.
(3) Other than in the peer review process, prohibit the use
or public disclosure of information obtained by the reviewer,
any organization administering an approved peer review program
or the board during or in connection with the peer review
process. The requirement that information not be publicly
disclosed shall not apply to a hearing before the board that the
firm requests be public under subsection (e) or to the
information described in subsection (h)(3).
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(d) (1) The peer review of a firm that performs one or more
audits of historical financial statements or examinations [of
prospective financial information] in accordance with the
Statements on Standards for Attestation Engagements (SSAE) shall
be a system review, including a study and evaluation of a
representative selection of [audit, examination, review and
compilation] attestation engagement reports, the financial
information upon which those reports were based and the
associated working papers. The system review shall include
additional procedures relating to the firm's system of quality
control sufficient to provide the reviewer with a reasonable
basis upon which to issue a peer review report.
(2) The peer review of a firm that performs no audit or
examination engagements in accordance with the Statements on
Standards for Attestation Engagements (SSAE) but does perform
one or more review engagements in accordance with the Statements
on Standards for Attestation Engagements (SSAE) other than
examinations shall be required only to be an engagement review,
including a study and evaluation of a representative selection
of reports issued by the firm and the financial information upon
which those reports were based; but, if such a firm elects to
have a system review, that review shall also be acceptable. The
engagement review shall include a study of the associated
working papers and procedures and inquiries sufficient to
provide the reviewer with a reasonable basis upon which to issue
a peer review report.
[(3) A firm that does not perform any audits or reviews,
regardless of whether or not the firm performs compilations,
shall be exempt from the requirement to undergo a peer review to
the extent provided in subsection (g)(2).]
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(e) If a firm does not comply with any remedial actions
determined appropriate by the administering organization, the
administering organization shall refer the matter to the board
to determine if further action under this subsection is
warranted. The board may at its discretion or shall upon
submission of a written application by the firm hold a hearing
to determine whether the firm complies with the appropriate
professional standards and practices. The hearing shall be
confidential and shall not be open to the public unless
requested by the firm. If [the board after conducting a hearing
determines that the firm complies with the appropriate
professional standards and practices, it shall issue an order
requiring the reviewer and the administering organization to
take any necessary action to record and implement the board's
determination and to restore the status of compliance of the
firm. However, if] the board after conducting the hearing
determines that the firm does not comply with the appropriate
professional standards and practices, it may issue an order that
requires both of the following:
(1) Remedial action, which may include any or all of the
following:
(i) Requiring employes of the firm to complete general or
specific continuing professional education courses.
(ii) Requiring the firm to undergo a peer review more
frequently than every three years.
(iii) Any other remedial action specified by the board.
(2) An affidavit from the firm submitted within the time
specified by the board indicating completion of the required
remedial actions.
(f) The firm reviewed shall pay for any peer review
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performed.
(g) A firm shall be exempt from the requirement to undergo a
peer review if any of the following 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.] The board shall
verify the date of acceptance through the Facilitated State
Board Access.
(2) The firm satisfies [both of] the following conditions:
(i) During the preceding two years, the firm has not
accepted or performed any [audit or review engagement]
attestation engagements other than a compilation.
(ii) [Within the next two years, the firm does not intend to
accept or perform any audit or review engagement.] (Reserved).
(3) For reasons of personal health, military service or
other good cause, the board determines that the firm is entitled
to an exemption for a period of time not to exceed twelve
months.
(h) In any civil action, arbitration or administrative
proceeding, regardless of whether a licensee is a party thereto,
all of the following shall apply:
(1) The proceedings, records (including, without limitation,
letters of acceptance, peer review reports, letters of comment
and letters of response) and working papers related to the peer
review process of any reviewer, administering organization or
board member are privileged and not subject to discovery,
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subpoena or other means of legal process and may not be
introduced into evidence.
(2) No employe, member or agent of an administering
organization, reviewer or board member shall be permitted or
required to testify as to any matters produced, presented,
disclosed or discussed during or in connection with the peer
review process or be required to testify to any finding,
recommendation, evaluation, opinion or other actions of any
person in connection with the peer review process.
(3) No privilege exists under this subsection:
(i) For information presented or considered in the peer
review process that was otherwise available to the public.
(ii) For material not prepared in connection with a peer
review merely because they subsequently are presented or
considered as part of the peer review process.
(iii) In connection with an administrative proceeding or
related civil action brought for the purpose of enforcing this
section.
(i) If a peer review report indicates that a firm complies
with the appropriate professional standards and practices set
forth in the regulations of the board, the administering
organization shall destroy all working papers and documents,
other than report-related documents, related to the peer review
within [ninety] one hundred-twenty days after issuance to the
firm of the letter of acceptance by the administering
organization. If a peer review letter of acceptance indicates
that corrective action by a firm is required, the administering
organization may retain documents and reports related to the
peer review until completion of the next peer review or other
agreed-to corrective actions.
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(j) In the event the practices of two or more firms are
merged or otherwise combined, the surviving firm shall retain
the peer review year of the largest firm, as determined by the
number of accounting and auditing hours of each of the
practices. In the event that the practice of a firm is divided
or a portion of its practice is sold or otherwise transferred,
any firm acquiring some or all of the practice that does not
already have its own review year shall retain the review year of
the former firm. In the event that the first peer review of a
firm that would otherwise be required by this subsection would
be less than twelve months after its previous review, a review
year shall be assigned by the administering organization so that
the firm's next peer review occurs after not less than twelve
months of operation, but not later than eighteen months of
operation.
(k) (1) None of the following persons shall be held to have
violated any criminal law or to be civilly liable by reason of
the performance by him or it of any duty, function or activity
under this section so long as the person has not engaged in
recklessness or willful misconduct:
(i) reviewers;
(ii) the administering organization or any of its members,
employees or agents or any person furnishing professional
counsel or services to the administering organization; or
(iii) board members.
(2) Subsection (h) shall not apply to the defense of a claim
alleging conduct not protected under clause (1).
[(l) This section shall apply as follows:
(1) Except as provided in clause (2), this section shall
take effect on February 3, 1997. This clause includes without
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limitation effectiveness for the purposes of permitting the
board to promulgate the regulations under subsection (c) and of
applying subsections (h) and (k).
(2) This section shall not become applicable to firms and no
firm shall be required to undergo a peer review under this
section until May 1, 2000, except that this section shall not
become applicable until May 1, 2004, to a firm that has not
accepted or performed any audit engagements during the period
May 1, 1998, through April 30, 2004.]
(m) The fees charged by an administering organization under
this section shall not vary depending on whether or not a firm
or some or all of its owners or employees are members of the
administering organization.
Section 12. Unlawful Acts.--* * *
(f) Except as provided in this subsection, in sections 5.2
and 5.4 of this act or in subsections (a) and (c), it is
unlawful for any person to use a title that includes the word
"certified" as a part thereof, or any other title or designation
likely to be confused with "certified public accountant," or any
title or designation implying or connoting accreditation by any
jurisdiction for the practice of any type of bookkeeping,
accounting, auditing, tax or other professional practice related
thereto, or to use any abbreviation of such title or
designation. It is not a violation of this subsection for an
individual:
* * *
(2) to use the designation "certified financial planner" or
"chartered global management accountant" or an abbreviation of
[that] the designation if the designation has been conferred by
a private organization after evaluation of the individual's
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credentials or qualifications.
* * *
Section 2. This act shall take effect in 60 days.
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