HOUSE AMENDED PRIOR PRINTER'S NOS. 973, 1582 PRINTER'S NO. 2247
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, WAUGH AND PICCOLA, MAY 4, 2007
AS REPORTED FROM COMMITTEE ON PROFESSIONAL LICENSURE, HOUSE OF REPRESENTATIVES, AS AMENDED, JUNE 25, 2008
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 OWNERSHIP OF WORKING PAPERS, for unlawful <-- 28 acts and for acts not unlawful. 29 The General Assembly of the Commonwealth of Pennsylvania
1 hereby enacts as follows: 2 Section 1. Section 2, 2.3(a), 3 and 3.1 of the act of May 3 26, 1947 (P.L.318, No.140), known as the CPA Law, reenacted and 4 amended December 8, 1976 (P.L.1280, No.286) and amended December 5 4, 1996 (P.L.851, No.140), are amended to read: 6 Section 2. Definitions.--The following words and phrases 7 when used in this act shall have the meanings ascribed to them 8 in this section unless the context clearly indicates otherwise: 9 "AICPA." The American Institute of Certified Public 10 Accountants. 11 "Attest activity." [An examination, audit, review, 12 compilation or other agreed-upon procedure with respect to 13 financial information, together with the issuance of a report 14 expressing or disclaiming an opinion or other assurance on the 15 information.] The provision of any of the following financial 16 statement services together with the issuance of a report 17 expressing or disclaiming an opinion or other assurance on the 18 information: 19 (1) an audit or other engagement performed in accordance 20 with Statements on Auditing Standards (SAS); 21 (2) a review or compilation of a financial statement 22 performed in accordance with Statements on Standards for 23 Accounting and Review Services (SSARS); 24 (3) an engagement performed in accordance with Statements on 25 Standards for Attestation Engagements (SSAE); or <-- 26 (4) AN AUDIT OR OTHER ENGAGEMENT PERFORMED IN ACCORDANCE <-- 27 WITH GOVERNMENT AUDITING STANDARDS ISSUED BY THE COMPTROLLER 28 GENERAL OF THE UNITED STATES; OR 29 (4) (5) any other engagement performed in accordance with <-- 30 attestation standards established by an organization granted 20070S0838B2247 - 2 -
1 authority by statute or regulation to establish attestation 2 standards, such as the American Institute of Certified Public 3 Accountants (AICPA) or the Public Company Accounting Oversight 4 Board (PCAOB). 5 "Board." The State Board of Accountancy. 6 "Business unit." A functional group of individuals in a firm 7 or a sole practitioner performing attest activity. 8 "Certificate." A certificate as "certified public 9 accountant" issued under this act or a corresponding right to 10 practice as certified public accountant issued after examination 11 under the law of another jurisdiction. 12 "Certified public accountant." An individual to whom a 13 certificate [of certified public accountant] has been issued. 14 [under the laws of this Commonwealth or another state.] 15 "Client." Any person that agrees orally, in writing or in 16 electronic form with a certified public accountant, public 17 accountant or firm to receive a professional service. 18 "Commission." Compensation for recommending or referring a 19 product or service to be supplied by another person. The term 20 does not include a referral fee. 21 "Compilation." A service performed in accordance with 22 Statements on Standards for Accounting and Review Services 23 (SSARS) that presents, in the form of financial statements, 24 information that is the representation of management or the 25 owners without undertaking to express any assurance on the 26 statements. 27 "Department." The Department of State acting through the 28 Commissioner of Professional and Occupational Affairs. 29 "Engagement review." A peer review process which provides 30 the reviewer with a reasonable basis for expressing limited 20070S0838B2247 - 3 -
1 assurance that: 2 (1) the financial statements or information and the related 3 accountant's report on the accounting, review and attestation 4 engagements submitted for review conform with the requirements 5 of professional standards in all material respects; and 6 (2) the reviewed firm's documentation conforms with the 7 requirements of Statements on Standards for Accounting and 8 Review Services (SSARS) and Statements on Standards for 9 Attestation Engagements (SSAE) applicable to those engagements 10 in all material respects. 11 "Equity interest." Any type of ownership interest in a firm. 12 The term includes the right to vote with respect to any issue, 13 whether or not the right to vote is coupled with an interest in 14 the profits or assets of the firm. 15 "Examination." The examination for the certificate of 16 certified public accountant provided for in section 3.1(b) of 17 this act. 18 "Firm." A qualified association that is a licensee. 19 "Holding out" or "hold out." Any representation of the fact 20 that a person, or an individual associated in any way with a 21 person, holds a certificate of certified public accountant, a 22 registration as a public accountant or a license, made in 23 connection with the performance of, or an offer to perform, 24 services for the public. A representation shall be deemed to 25 include any oral or written communication conveying the fact 26 that the person or individual holds a certificate, registration 27 or license, including, without limitation, the use of titles or 28 legends on letterheads, business cards, office doors, 29 advertisements and listings or the displaying of a certificate, 30 registration or license. 20070S0838B2247 - 4 -
1 "Internal auditor." An individual within a governmental or 2 private entity who performs an audit function that requires the 3 individual to be independent of the activities being audited. 4 The independence required of an internal auditor does not need 5 to meet the standard of independence required of a certified 6 public accountant or public accountant. 7 "Licensee." An individual certified by or registered with 8 the board and holding a current license to practice under 9 section 8.2 of this act or a qualified association holding a 10 current license to practice under section 8.8 of this act. The 11 term does not include a person on inactive status under section 12 8.2(a.1) of this act or otherwise not holding a current license. 13 "NASBA." The National Association of State Boards of 14 Accountancy. 15 "PCAOB." The Public Company Accounting Oversight Board. 16 "Peer review." A study, appraisal or review of one or more 17 aspects of the professional work of an individual or firm in the 18 practice of public accounting to determine the degree of 19 compliance by the individual or firm with generally accepted 20 accounting principles and auditing standards and other generally 21 accepted technical standards, conducted by persons who hold 22 current licenses to practice public accounting under the laws of 23 this Commonwealth or another state and who are not affiliated 24 with the individual or firm being reviewed. 25 "Principal place of business." The location of the principal 26 office where a certified public accountant practices public 27 accounting. 28 "Professional services." Services performed by a certified 29 public accountant, public accountant or firm: 30 (1) as part of the practice of public accounting; or 20070S0838B2247 - 5 -
1 (2) that would be part of the practice of public accounting 2 except that the individual performing the services does not hold 3 out as a certified public accountant or public accountant. 4 "Public accountant." An individual who was qualified and 5 accepted for registration in accordance with former section 8.7 6 of this act. 7 "Public accounting." Offering to perform or performing for a 8 client or potential client: 9 (1) Attest activity. 10 (2) Other [professional] services involving the use of 11 accounting skills, including, but not limited to, management 12 advisory or consulting services, business valuations, financial 13 planning, preparation of tax returns or furnishing of advice on 14 tax matters by a person holding out as a certified public 15 accountant, public accountant or firm. 16 "Qualified association." An association as defined in 15 17 Pa.C.S. § 102 (relating to definitions) that is incorporated or 18 organized under the laws of this Commonwealth or any other state 19 or foreign jurisdiction if the organic law under which the 20 association is incorporated or organized does not afford the 21 shareholders, partners, members or other owners of equity 22 interests in the association or the officers, employes or agents 23 of the association greater immunity than is available to the 24 shareholders, officers, employes or agents of a professional 25 corporation under 15 Pa.C.S. § 2925 (relating to professional 26 relationship retained). 27 "Qualified nonlicensee." An individual who does not hold a 28 current license or permit to practice public accounting in this 29 Commonwealth or any other state or foreign jurisdiction. 30 "Referral fee." Compensation paid to a licensee for 20070S0838B2247 - 6 -
1 recommending another licensee to, or referring to another 2 licensee, any person for the performance by the other licensee 3 of public accounting. 4 "Report." Any opinion, statement or other form of written 5 communication that states or implies assurance as to the 6 reliability of any financial information or assessments of the 7 status or performance of any person and that also implies or is 8 accompanied by any statement or implication that the person 9 issuing it has special knowledge or competence in accounting or 10 auditing. Such a statement or implication of special knowledge 11 or competence may arise from use by the issuer of the 12 communication of names or titles indicating that the issuer or 13 any individual employed by or affiliated with it is an 14 accountant or auditor or may arise from the language of the 15 communication itself. The term includes any form of language 16 which disclaims an opinion when the form of language is 17 conventionally understood to imply any positive assurance as to 18 the reliability of the financial information referred to or 19 special competence on the part of the person issuing the 20 language. The term also includes any other form of language that 21 is conventionally understood to imply assurance or special 22 knowledge or competence. 23 "Statements on Auditing Standards (SAS)." The Statements on 24 Auditing Standards or any similar professional standard which 25 supersedes such statements. 26 "Statements on Standards for Attestation Engagements (SSAE)." 27 The Statements on Standards for Attestation Engagements or any 28 similar professional standard which supersedes such statements. 29 "Statements on Standards for Accounting and Review Services 30 (SSARS)." The Statements on Standards for Accounting and Review 20070S0838B2247 - 7 -
1 Services or any similar professional standard which supersedes 2 such statements. 3 "Substantial equivalency." The fact that: 4 (1) the education, examination and experience requirements 5 contained in the statutes and regulations of another 6 jurisdiction are comparable to or exceed the education, 7 examination and experience requirements contained in this act; 8 or 9 (2) a certified public accountant's education, examination 10 and experience qualifications are comparable to or exceed the 11 education, examination and experience requirements contained in 12 this act. 13 "System review." A peer review process which provides the 14 reviewer with a reasonable basis for expressing an opinion on 15 whether, during the year under review: 16 (1) the reviewed firm's system of quality control for its 17 accounting and auditing practice has been designed in accordance 18 with quality control standards established by the American 19 Institute of Certified Public Accountants; and 20 (2) is being complied with to provide the firm with 21 reasonable assurance of conforming with professional standards 22 in all material respects. 23 Section 2.3. State Board of Accountancy.--(a) The State 24 Board of Accountancy shall consist of fifteen members, one of 25 whom shall be the Commissioner of Professional and Occupational 26 Affairs in the Department of State or a designee, one of whom 27 shall be the Director of the Bureau of Consumer Protection in 28 the Office of Attorney General or his designee, and the 29 remaining thirteen of whom shall be appointed by the Governor, 30 subject to the consent of the Senate, as follows: 20070S0838B2247 - 8 -
1 (1) [Eight] Nine members shall be certified public 2 accountants, all of whom are licensees and at least six of whom 3 are actively engaged in the practice of public accounting as 4 their principal occupation at the time of their appointment. Two 5 of the members who are certified public accountants shall be 6 appointed from the eastern part of the State, two from the 7 western part, two from the central part, and [two] the remainder 8 from any part of the State. At least two of the members who are 9 certified public accountants shall be actively engaged at the 10 time of their appointment in the practice of public accounting 11 with firms that have five or fewer licensees participating in 12 the firm's practice. 13 (2) Three members shall be persons who are not affiliated in 14 any manner with the profession, who shall represent the public 15 at large. 16 (3) [Two members shall be public accountants who are 17 licensees engaged in the practice of public accounting as their 18 principal occupation at the time of their appointment. The 19 number of public accountant members shall be reduced by one and 20 the number of certified public accountant members increased by 21 one when the number of public accountants who are licensees 22 falls below five hundred for the first time.] One member shall 23 be a public accountant who is a licensee engaged in the practice 24 of public accounting as his or her principal occupation at the 25 time of appointment. The [remaining] public accountant member 26 shall be eliminated and the number of certified public 27 accountant members increased by one when the number of public 28 accountants who are licensees falls below fifty for the first 29 time. [A decrease in the number of members of the board who are 30 required to be public accountants] The elimination of the public 20070S0838B2247 - 9 -
1 accountant member as provided in this clause shall not have the 2 effect of shortening the term of [an incumbent] the incumbent 3 public accountant member of the board. 4 * * * 5 Section 3. General Powers of the Board.--(a) The Board 6 shall have the power: 7 (1) To provide for, regulate and approve the issuance of a 8 certificate of certified public accountant to any person (a) who 9 meets the requirements for the issuance of a certificate in 10 [section 3.1(e) of] this act; or (b) who meets the requirements 11 for the issuance of a certificate by reciprocity in section 5 or 12 5.1 of this act. 13 (3) To contract with a professional testing organization for 14 the preparation and administration of the examination, in 15 accordance with section 812.1(a) of the act of April 9, 1929 16 (P.L.177, No.175), known as "The Administrative Code of 1929," 17 and to establish prior to the administration of each examination 18 an appropriate minimum passing score, in keeping with the 19 purposes of this act. 20 (4) To keep a record showing the names and the places of 21 business of persons to whom a certificate of certified public 22 accountant has been issued under this act or prior laws and all 23 other persons registered or holding licenses under this act or 24 prior laws. The department shall furnish copies of such record 25 to the public upon request and may establish a reasonable fee 26 for such copies which shall not exceed the cost of reproduction. 27 (5) To: 28 (i) revoke, suspend, limit or otherwise restrict the 29 certificate or license of any certified public accountant or the 30 registration or license of any public accountant or the license 20070S0838B2247 - 10 -
1 of any firm under this act[, to]; 2 (ii) censure or publicly reprimand the holder of any 3 certificate, registration or license[, to]; 4 (iii) require completion of general or a specific number of 5 continuing professional education courses[, to]; 6 (iv) require more frequent peer review or other remedial 7 action [and to]; 8 (v) revoke, suspend or limit the right of a person to 9 practice under section 5.2 or 5.4 of this act; 10 (vi) censure or publicly reprimand a person practicing under 11 section 5.2 or 5.4; and 12 (vii) impose civil penalties as provided in section 16 for 13 violation of this act. 14 (6) To collect fees as provided for in this act and to 15 submit annually to the department an estimate of the financial 16 requirements of the board for its administrative, investigative, 17 legal and miscellaneous expenses. 18 (7) To arrange for assistance in the performance of its 19 duties, to administer and enforce the laws of this Commonwealth 20 relating to certification, registration, licensing and practice 21 by certified public accountants, public accountants and firms 22 and to instruct and require its agents to seek an injunction, or 23 bring a prosecution for a violation of this act. 24 (8) To keep minutes and records of all its transactions and 25 proceedings. To the extent required by the act of June 21, 1957 26 (P.L.390, No.212), referred to as the Right-to-Know Law, the 27 department shall furnish copies of such minutes and records to 28 the public upon request and may establish a reasonable fee for 29 such copies which shall not exceed the cost of reproduction. 30 (9) To become a member of [the National Association of State 20070S0838B2247 - 11 -
1 Boards of Accountancy] NASBA, or a similar organization, and pay
2 such dues as said association shall establish and to send
3 members of the board and staff as delegates to the meetings of
4 that association and defray their expenses.
5 (10) To adopt, promulgate and enforce rules and regulations
6 consistent with the provisions of this act establishing
7 requirements of continuing education and peer review to be met
8 by certified public accountants, public accountants and firms as
9 a condition for renewal of biennial licenses to engage in the
10 practice of public accounting in this Commonwealth. Such rules
11 and regulations shall include, but not be limited to, analysis
12 of continuing education records by a consultant whose analysis
13 shall cover licensee forms and records of continuing education
14 sponsors. The analysis shall be designed to determine compliance
15 with all continuing education regulations of the board,
16 including attendance of licensees, qualifications of sponsors
17 and qualifications of courses for credit.
18 (11) To promulgate and amend rules of professional conduct,
19 uniformly applicable to certified public accountants and public
20 accountants, appropriate to establish and maintain a high
21 standard of integrity, objectivity and dignity by certified
22 public accountants, public accountants and firms.
23 (12) To adopt, promulgate and enforce such administrative
24 rules and regulations not inconsistent with this act, or other
25 acts, as are necessary and proper to carry into effect the
26 provisions of this act.
27 (15) To submit annually to the House and Senate
28 Appropriations Committees, not later than fifteen days after the
29 Governor has submitted his budget to the General Assembly, a
30 copy of the budget request for the upcoming year that the board
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1 previously submitted to the department. 2 (16) To engage consultants as may be deemed necessary to 3 carry out and enforce the provisions of this act. 4 (b) The board shall not require a photograph as part of an 5 application for a certificate of certified public accountant. 6 Section 3.1. [Examination and Issuance of Certificate.--(a) 7 An individual shall be permitted to take the examination for the 8 certificate of certified public accountant if the individual: 9 (1) At the time the individual first sits for the 10 examination: 11 (i) is a resident of this Commonwealth; 12 (ii) is enrolled in or has graduated from a college or 13 university in this Commonwealth; or 14 (iii) is employed in this Commonwealth under the supervision 15 of a licensee. 16 (2) Has attained the age of eighteen years. 17 (3) Is of good moral character. 18 (4) Meets the education requirements of section 4 of this 19 act.] Examination.-- 20 (b) The examination shall [be held at least twice in each 21 calendar year and simultaneously in at least two counties of 22 this Commonwealth and shall be a written examination in business 23 law and professional responsibilities, auditing, accounting and 24 reporting, and financial accounting and reporting.] test the 25 applicant's knowledge and skills required for performance as a 26 certified public accountant. The examination shall include the 27 subject areas of accounting and auditing and such related 28 knowledge and skills as the board may require. The time and 29 location for holding the examination shall be determined by the 30 board and may be changed from time to time. The examination may 20070S0838B2247 - 13 -
1 be administered in either written or computerized form. The 2 board may use all parts of the Uniform Certified Public 3 Accountants' examination and [Advisory Grading Service of the 4 American Institute of Certified Public Accountants] designated 5 grading service of the AICPA to assist in performing its duties 6 hereunder. 7 (c) Subject to such regulations as the board may adopt 8 governing reexaminations, a candidate shall be entitled to 9 retake the examination. 10 (d) An individual who has previously taken an examination 11 for a certificate of certified public accountant under the 12 provisions of a prior law of this Commonwealth shall continue to 13 be permitted to take the examination and receive a certificate 14 subject to such prior provisions and applicable regulations. 15 [(e) A certificate of certified public accountant shall be 16 issued by the board upon application by an individual who has 17 passed the examination and meets the experience requirements 18 provided for in section 4.1 of this act.] 19 Section 2. Section 4 of the act, amended December 4, 1996 20 (P.L.851, No.140) and May 9, 1997 (P.L.145, No.9), is repealed: 21 [Section 4. Education Requirements.--(a) Before an 22 individual is permitted to take the examination, the board shall 23 be satisfied that, except as provided in subsection (b), he has: 24 (1) graduated with a baccalaureate degree from a college or 25 university approved at the time of graduation by the Department 26 of Education and also completed at least a total of twenty-four 27 semester credits, which credits shall be in accounting and 28 auditing, business law, finance or tax subjects of a content 29 satisfactory to the board, not necessarily as a part of his 30 undergraduate work; 20070S0838B2247 - 14 -
1 (2) graduated with a Master's Degree or other post-graduate 2 degree from a college or university approved at the time of 3 graduation by the Department of Education and completed at least 4 a total of twenty-four semester credits, which credits shall be 5 in accounting and auditing, business law, finance or tax 6 subjects of a content satisfactory to the board, not necessarily 7 as part of his undergraduate or graduate work; 8 (3) within two years of the effective date of this clause, 9 graduated with a baccalaureate degree, Master's Degree or other 10 post-graduate degree from a college or university approved at 11 the time of graduation by the Department of Education with 12 subjects of a content satisfactory to the board which meet or 13 exceed the education requirement for licensure as of January 1, 14 1996; or 15 (4) graduated with a baccalaureate or higher degree from a 16 college or university approved at the time of graduation by the 17 Department of Education and completed a total of one hundred 18 fifty semester credits of post-secondary education, including at 19 least a total of twenty-four semester credits of accounting and 20 auditing, business law, finance or tax subjects of a content 21 satisfactory to the board, and an additional twelve semester 22 credits in accounting, auditing and tax subjects of a content 23 satisfactory to the board, not necessarily as part of his 24 undergraduate or graduate work. 25 (g) The board shall permit an applicant taking the 26 examination for the first time within one year after the 27 effective date of this subsection to take the examination during 28 the final term, semester or quarter of the school year in which 29 he will graduate, if it is reasonably expected that he will 30 fulfill the educational requirements of subsection (a) and 20070S0838B2247 - 15 -
1 receive the required degree within ninety days after the date of 2 the examination.] 3 Section 3. Section 4.1 of the act, added December 4, 1996 4 (P.L.851, No.140), is repealed: 5 [Section 4.1. Experience Requirements.--(a) An individual 6 shall be issued the certificate of certified public accountant 7 under section 3.1(e) of this act after the individual has 8 complied with the following experience requirements: 9 (1) An individual taking the examination on the basis of 10 having satisfied the education requirements in section 4(a)(1) 11 of this act shall have completed at least two years of 12 experience. 13 (2) An individual taking the examination on the basis of 14 having satisfied the education required in section 4(a)(2) of 15 this act shall need only one year of qualifying experience. 16 (3) Beginning on January 1, 2000, an individual taking the 17 examination on the basis of having satisfied the education 18 required in section 4(a)(4) of this act shall need only one year 19 of qualifying experience. 20 (b) The experience required under subsection (a) must: 21 (1) Be in public accounting or as an internal auditor or an 22 auditor with a unit of Federal, State or local government. 23 (2) Be of a caliber satisfactory to the board. 24 (3) Satisfy the requirements of subsection (d). 25 (4) Have been supervised by an individual who is currently 26 licensed to practice public accounting as a certified public 27 accountant or public accountant in this Commonwealth or another 28 state. 29 (c) Individuals taking the examination for the first time 30 after January 1, 2000, must complete the experience required by 20070S0838B2247 - 16 -
1 this section within one hundred twenty months preceding the date 2 of application for a certificate of certified public accountant 3 under section 3.1(e) of this act. Individuals taking the 4 examination before January 1, 2000, need not attain the 5 experience required by this section within any particular period 6 of time. 7 (d) The experience required under subsection (a)(1) must 8 include not less than eight hundred hours of attest activity, 9 and the experience required under subsection (a)(2) or (4) must 10 include not less than four hundred hours of attest activity.] 11 Section 4. The act is amended by adding a section to read: 12 Section 4.2. Requirements for Issuance of Certificate.--(a) 13 The board shall issue a certificate upon application by an 14 individual who has passed the examination and meets the 15 education and experience requirements in this section. 16 (b) Before an individual may take the examination, the board 17 shall be satisfied that the individual: 18 (1) has attained eighteen years of age; 19 (2) is of good moral character; and 20 (3) has graduated with: 21 (i) a baccalaureate or higher degree from a college or 22 university approved at the time of graduation by the Department <-- 23 of Education ACCREDITED BY A NATIONALLY RECOGNIZED ACCREDITING <-- 24 AGENCY RECOGNIZED BY THE UNITED STATES DEPARTMENT OF EDUCATION, 25 OR A COLLEGE OR UNIVERSITY APPROVED BY THE BOARD, and completed 26 a total of one hundred fifty semester credits of post-secondary 27 education, including at least a total of twenty-four semester 28 credits of accounting and auditing, business law, finance or tax 29 subjects of a content satisfactory to the board, and an 30 additional twelve semester credits in accounting, auditing and 20070S0838B2247 - 17 -
1 tax subjects of a content satisfactory to the board, not 2 necessarily as part of the individual's undergraduate or 3 graduate work; 4 (ii) a baccalaureate degree from a college or university 5 approved at the time of graduation by the Department of <-- 6 Education ACCREDITED BY A NATIONALLY RECOGNIZED ACCREDITING <-- 7 AGENCY RECOGNIZED BY THE UNITED STATES DEPARTMENT OF EDUCATION, 8 OR A COLLEGE OR UNIVERSITY APPROVED BY THE BOARD, and also <-- 9 completed at least a total of twenty-four semester credits, 10 which credits shall be in accounting and auditing, business law, 11 finance or tax subjects of a content satisfactory to the board, 12 not necessarily as a part of his undergraduate work; or 13 (iii) a Master's Degree or other post-graduate degree from a 14 college or university approved at the time of graduation by the <-- 15 Department of Education ACCREDITED BY A NATIONALLY RECOGNIZED <-- 16 ACCREDITING AGENCY RECOGNIZED BY THE UNITED STATES DEPARTMENT OF 17 EDUCATION, OR A COLLEGE OR UNIVERSITY APPROVED BY THE BOARD, and 18 completed at least a total of twenty-four semester credits, 19 which credits shall be in accounting and auditing, business law, 20 finance or tax subjects of a content satisfactory to the board, 21 not necessarily as part of his undergraduate or graduate work. 22 (c) Before an individual who takes the examination under 23 subsection (b)(3)(ii) or (iii) may be issued a certificate, the 24 individual must also satisfy the education requirement in 25 subsection (b)(3)(i). 26 (d) Before an individual may be issued a certificate, the 27 board shall be satisfied that the individual has completed at 28 least one year of experience that was: <-- 29 (1) WAS completed within sixty months preceding the date of <-- 30 application for a certificate; 20070S0838B2247 - 18 -
1 (2) in one INCLUDED NOT LESS THAN FOUR HUNDRED HOURS OF <-- 2 ATTEST ACTIVITY IN ANY of the following: 3 (i) public accounting; 4 (ii) as an internal auditor, if the internal audit function 5 reports to an independent board or similar body responsible for 6 oversight of the financial reporting process; or 7 (iii) as an auditor with a unit of Federal, State or local 8 government; 9 (3) WAS of a caliber satisfactory to the board and included <-- 10 not less than four hundred hours of attest activity; and 11 (4) WAS supervised by an individual with a current license <-- 12 to practice public accounting as a certified public accountant 13 or public accountant in this Commonwealth or another state. 14 (e) The following requirements may be complied with instead 15 of the otherwise applicable provisions of subsections (b), (c) 16 and (d): 17 (1) An individual who takes the examination before December 18 31, 2011, but does not pass at least one part taken before that 19 date, may not be issued a certificate until the individual: 20 (i) has satisfied the education requirement in subsection 21 (c), if applicable; and 22 (ii) has completed at least one year of experience described 23 in subsection (d)(2), (3) and (4) within one hundred twenty 24 months preceding the date of application for a certificate. 25 (2) An individual who passes at least one part of the 26 examination taken before December 31, 2011, pursuant to 27 subsection (b)(3)(ii), may be issued a certificate before or 28 after December 31, 2011, without satisfying the education 29 requirement in subsection (c), but not until the individual has 30 completed at least two years of experience that satisfies the 20070S0838B2247 - 19 -
1 requirements in subsection (d)(3) and (4), except that the 2 experience must include at least eight hundred hours of attest 3 activity. The experience may be completed within one hundred- 4 twenty months preceding the date of application for a 5 certificate. 6 (3) An individual who passes at least one part of the 7 examination taken before December 31, 2011, pursuant to 8 subsection (b)(3)(iii), may be issued a certificate before or 9 after December 31, 2011, without satisfying the education 10 requirement in subsection (c) and may complete the one year of 11 experience required by subsection (d) within one hundred twenty 12 months preceding the date of application for a certificate. 13 Section 5. Sections 5 and 5.1 of the act, amended or added 14 December 4, 1996 (P.L.851, No.140), are amended to read: 15 Section 5. Certificates Issued by Domestic Reciprocity.--(a) 16 Without requiring the examination otherwise required under 17 section [3.1(e)] 4.2 of this act, the board may, in its 18 discretion, issue a certificate of certified public accountant 19 to a holder of a certificate of certified public accountant then 20 in full force and effect issued by any other state following 21 passage of [a written] an examination if the applicant shall 22 submit evidence satisfactory to the board that he: 23 (1) possesses the general qualifications specified in 24 section [3.1(a)] 4.2(b)(1) and (2) of this act, has passed the 25 [written] examination required to practice as a certified public 26 accountant under the laws of the other state, meets the 27 continuing education requirements specified in section 8.2(b) of 28 this act and has the experience required under section [4.1] 29 4.2(d) of this act to receive the certificate in this 30 Commonwealth; or 20070S0838B2247 - 20 -
1 (2) has passed the [written] examination required to
2 practice as a certified public accountant under the laws of the
3 other state and has held a certificate and license to practice
4 public accounting for the immediately preceding five years in
5 another state.
6 (b) An applicant for a certificate under this section shall
7 list in the application all states and foreign jurisdictions in
8 which the applicant has applied for or holds a designation or
9 certificate to practice public accounting.
10 (c) Each holder of a certificate issued under this section
11 shall notify the board in writing within thirty days after its
12 occurrence of any issuance, denial, revocation or suspension of
13 his designation, certificate or license to practice public
14 accounting or the commencement of a disciplinary or enforcement
15 action against him or his firm by any state or foreign
16 jurisdiction.
17 Section 5.1. Certificates Issued by Foreign Reciprocity.--
18 (a) Without requiring the examination otherwise required under
19 section [3.1(e)] 4.2 of this act, the board may in its
20 discretion issue a certificate of certified public accountant to
21 a holder of a foreign designation, granted and then in full
22 force in a foreign country or other jurisdiction that is not a
23 state, entitling the holder thereof to engage in the practice of
24 public accounting if all of the following conditions are
25 satisfied:
26 (1) Pursuant to a duly enacted free trade agreement, the
27 foreign jurisdiction that granted the designation makes similar
28 provision to allow an individual who holds a valid certificate
29 of certified public accountant issued by this Commonwealth to
30 obtain such foreign jurisdiction's comparable designation.
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1 (2) The foreign designation:
2 (i) Was duly issued by a duly constituted authority within
3 the foreign jurisdiction that regulates the practice of public
4 accounting, and the foreign designation has not expired or been
5 revoked or suspended.
6 (ii) Entitles the holder to issue reports.
7 (iii) Was issued upon the basis of educational, examination
8 and experience requirements established by the foreign authority
9 or by law.
10 (3) The applicant:
11 (i) Received the designation based on educational and
12 examination standards substantially equivalent to those in
13 effect in this Commonwealth at the time the foreign designation
14 was granted.
15 (ii) Completed an experience requirement substantially
16 equivalent to the requirements set forth in section [4.1] 4.2(d)
17 of this act in the jurisdiction that granted the foreign
18 designation or has completed five years of experience in the
19 practice of public accounting in this Commonwealth or meets such
20 other requirements as may be prescribed by the board by rule
21 within the ten years immediately preceding the application.
22 (iii) Passed a uniform qualifying examination in national
23 standards.
24 (b) An applicant for a certificate under this section shall
25 list in the application all states and foreign jurisdictions in
26 which the applicant has applied for or holds a designation or
27 certificate to practice public accounting.
28 (c) Each holder of a certificate issued under this section
29 shall notify the board in writing within thirty days after its
30 occurrence of any issuance, denial, revocation or suspension of
20070S0838B2247 - 22 -
1 his designation, certificate or license to practice public 2 accounting or the commencement of a disciplinary or enforcement 3 action against him or his firm by any state or foreign 4 jurisdiction. 5 Section 6. The act is amended by adding sections to read: 6 Section 5.2. Practice in this Commonwealth by Individuals 7 under Substantial Equivalency.--(a) A person may practice 8 public accounting in this Commonwealth under substantial 9 equivalency as provided in this section and section 5.4 IF THE <-- 10 STATE THE PERSON IS LICENSED IN HAS ALSO ADOPTED INTO LAW A 11 PROVISION ALLOWING FOR PRACTICE UNDER SUBSTANTIAL EQUIVALENCY 12 THAT INCLUDES NO NOTICE AND NO FEE AS PROVIDED FOR IN SUBSECTION 13 (B)(9). Any determination as to whether substantial equivalency 14 exists with respect to a state or individual for purposes of 15 this act shall be consistent with any determination as to 16 substantial equivalency with respect to that state or individual 17 made by the National Association of State Boards of Accountancy 18 National Qualification Appraisal Service. 19 (b) The following apply to practice in this Commonwealth 20 under substantial equivalency: 21 (1) Notwithstanding any other provision of this act, an 22 individual whose principal place of business is not in this 23 Commonwealth and who has a valid certificate or right to 24 practice public accounting from a state that is substantially 25 equivalent shall be presumed to have qualifications 26 substantially equivalent to the Commonwealth's requirements and 27 shall have all the privileges and obligations of a licensee of 28 the Commonwealth without the need to obtain a certificate or 29 license under this act. 30 (2) Notwithstanding any other provision of this act, an 20070S0838B2247 - 23 -
1 individual whose principal place of business is not in this 2 Commonwealth and who has a valid certificate or right to 3 practice public accounting from a state that is not 4 substantially equivalent shall be presumed to have 5 qualifications substantially equivalent to the Commonwealth's 6 requirements and shall have all the privileges and obligations 7 of a licensee of the Commonwealth without the need to obtain a 8 certificate or license if there is substantial equivalency as to 9 the individual. In determining whether substantial equivalency 10 exists as to an individual, the order in which the individual 11 satisfied the experience, education and examination requirements 12 shall be disregarded. 13 (3) The exercise by an individual of the right to practice 14 in this Commonwealth under this section constitutes: 15 (i) sufficient contact with this Commonwealth for the 16 exercise of personal jurisdiction by the board and the courts of 17 this Commonwealth over the individual in any action or 18 proceeding arising out of acts or omissions by the individual; 19 (ii) consent by the individual to the personal and subject 20 matter jurisdiction and disciplinary authority of the board; 21 (iii) an agreement by the individual to comply with the 22 provisions of this act and regulations promulgated by the board; 23 and 24 (iv) consent by the individual to the appointment of the 25 board of accountancy or other regulatory authority of the state 26 in which the principal place of business of the individual is 27 located as the agent upon which process may be served in any 28 action or proceeding by the board against the individual. 29 (4) An individual who exercises the right to practice under 30 this section shall be subject to disciplinary action in this 20070S0838B2247 - 24 -
1 Commonwealth for any act or omission that would subject the 2 holder of a Pennsylvania certificate or license to disciplinary 3 action. 4 (5) An individual who passed the Uniform CPA Examination and 5 holds a valid license to practice public accounting issued by 6 any other state on or before December 31, 2011, shall MAY be <-- 7 exempt from the education requirements in section 4.2(b)(3)(i) 8 and (c) of this act for purposes of this section. 9 (6) If the board imposes discipline on an individual 10 exercising the right to practice under this section, the board 11 shall as soon as practicable notify the board of accountancy or 12 other regulatory authority in each state where the board has 13 learned during the disciplinary process that the individual has 14 been granted a certificate or license to practice public 15 accounting of the imposition of the discipline. If the order 16 imposing discipline is appealed or stayed, the board shall send 17 a subsequent notice to each regulatory authority advising of the 18 filing of the appeal or entry of the stay. As an alternative to 19 sending the notices to each regulatory authority, the board may 20 send the notices instead to a multistate enforcement information 21 network maintained at the time by AICPA or NASBA. The board may 22 furnish investigative information and the hearing record 23 relating to the disciplinary proceeding to such other regulatory 24 authorities upon request. 25 (7) An individual exercising the right to practice under 26 this section may identify the fact that the individual practices 27 with a partnership, corporation or other association and may use 28 its name even if the partnership, corporation or other 29 association is not a licensee. 30 (8) An individual practicing under this section or a firm or 20070S0838B2247 - 25 -
1 qualified unlicensed entity practicing under section 5.4 may 2 provide professional services in this Commonwealth in the same 3 manner as a licensee, including without limitation, in person or 4 by mail, telephone or electronic means. 5 (9) The board shall not require a filing or payment of a fee 6 by an individual, firm or qualified unlicensed entity in 7 connection with practicing under this section or section 5.4. 8 Section 5.3. Practice outside this Commonwealth under 9 Substantial Equivalency.--(a) A licensee who practices public 10 accounting in another jurisdiction under substantial equivalency 11 shall be subject to disciplinary action in this Commonwealth for 12 an act or omission in the other jurisdiction if the act or 13 omission: 14 (1) subjects the licensee to discipline in the other 15 jurisdiction; or 16 (2) would subject the licensee to discipline in this 17 Commonwealth. 18 (b) The board shall investigate any complaint made by the 19 board of accountancy or other regulatory authority of another 20 state against a licensee. 21 Section 5.4. Practice by Firms and Unlicensed Entities under 22 Substantial Equivalency.--(a) A firm may practice public 23 accounting in this Commonwealth through an individual who is not 24 a licensee if the individual has the right to practice in this 25 Commonwealth under section 5.2 of this act AND IF THE STATE THE <-- 26 FIRM IS LICENSED IN HAS ALSO ADOPTED INTO LAW A PROVISION 27 ALLOWING FOR PRACTICE UNDER SUBSTANTIAL EQUIVALENCY THAT 28 INCLUDES NO NOTICE AND NO FEE AS PROVIDED FOR IN SECTION 29 5.2(B)(9) OF THIS ACT. The exercise by a firm of the right to 30 practice through such individuals under this subsection 20070S0838B2247 - 26 -
1 constitutes an agreement by the firm: 2 (1) to be subject to the jurisdiction and disciplinary 3 authority of the board with respect to acts or omissions of the 4 individuals through whom it practices under this subsection; 5 (2) to accept service of process from the board on behalf of 6 the individuals through whom it practices under this subsection; 7 and 8 (3) to cooperate in any investigation by the board involving 9 an individual through which the firm has practiced under this 10 subsection even if the individual is no longer an owner of or 11 employed by the firm. 12 (b) A qualified unlicensed entity may practice public 13 accounting in this Commonwealth through an individual who: 14 (1) has the right to practice in this Commonwealth under 15 section 5.2 of this act; or 16 (2) is a licensee. 17 (c) The exercise by a qualified unlicensed entity of the 18 right to practice in this Commonwealth under subsection (b) 19 constitutes: 20 (1) sufficient contact with this Commonwealth for the 21 exercise of personal jurisdiction by the board and the courts of 22 this Commonwealth over the qualified unlicensed entity in any 23 action or proceeding arising out of acts or omissions by an 24 individual associated with the qualified unlicensed entity in 25 any capacity; 26 (2) consent by the qualified unlicensed entity to the 27 personal and subject matter jurisdiction and disciplinary 28 authority of the board; 29 (3) an agreement by the qualified unlicensed entity to 30 comply with the provisions of this act and regulations 20070S0838B2247 - 27 -
1 promulgated by the board; and 2 (4) consent by the qualified unlicensed entity to the 3 appointment of the board of accountancy or other regulatory 4 authority of the state in which the principal place of business 5 of the qualified unlicensed entity is located as the agent upon 6 which process may be served in any action or proceeding by the 7 board against the qualified unlicensed entity. 8 (d) As used in this section "qualified unlicensed entity" 9 means a partnership, corporation or other association that: 10 (1) is not a licensee; 11 (2) does not have an office in this Commonwealth; and 12 (3) may lawfully practice public accounting in another 13 state. 14 Section 7. Sections 8.2 and 8.8 of the act, amended or added 15 December 4, 1996 (P.L.851, No.140), are amended to read: 16 Section 8.2. Licenses to Practice.--(a) Biennial licenses 17 to engage in the practice of public accounting in this 18 Commonwealth shall be issued by the Department of State upon 19 payment of the biennial licensing fee to (i) holders of the 20 certificate of certified public accountant issued by this 21 Commonwealth and public accountants registered in this 22 Commonwealth who [shall have furnished evidence satisfactory to 23 the board of compliance] have certified to the board that they 24 have complied with the requirements of subsection (b) of this 25 section and (ii) qualified associations licensed under section 26 8.8 of this act. Licenses to practice shall expire on the last 27 day of [April of even-numbered] December of odd-numbered years 28 or on such other biennial expiration dates as the department may 29 fix. The renewal application of a certified public accountant or 30 public accountant does not need to list the continuing education 20070S0838B2247 - 28 -
1 courses taken by the applicant except as provided by the rules 2 and regulations of the board. 3 (a.1) A certified public accountant or public accountant who 4 is not engaged in the practice of public accounting may request 5 the board, in writing, to place his name on the inactive roll 6 and thus protect his right to obtain a license at such time as 7 he may become engaged in the practice of public accounting. 8 (b) Each certified public accountant and public accountant 9 filing an application for a license or a renewal thereof to 10 engage in the practice of public accounting in this Commonwealth 11 must, during the reporting period immediately preceding the 12 current biennial period, complete eighty hours of continuing 13 education, in programs approved by the board. The reporting 14 period for licensees shall be January 1 of even-numbered years 15 to December 31 of odd-numbered years. No carry-over of credits 16 shall be permitted from one biennial license period to another. 17 The continuing education requirement shall not apply to firms 18 but shall apply to all natural persons who apply for a license 19 or a renewal thereof under this section. 20 (c) Failure by a licensed certified public accountant or 21 public accountant applying for renewal of his biennial license 22 to furnish [evidence] a certification of completion of the 23 required number of hours of acceptable continuing education 24 shall constitute grounds for denial or refusal to renew such 25 license, unless the board, in its discretion, shall determine 26 [such failure to have been] that the failure to complete the 27 required continuing education was due to reasonable cause, in 28 which case the board shall grant an extension. 29 (d) In issuing rules, regulations and individual orders with 30 respect to requirements of continuing education, the board may 20070S0838B2247 - 29 -
1 rely upon guidelines and pronouncements of recognized 2 educational and professional organizations; may prescribe for 3 content, duration and organization of courses; shall take into 4 account the accessibility of such continuing education as it may 5 require, and any impediments to interstate practice of public 6 accounting which may result from differences in such 7 requirements in other states; and may provide for relaxation or 8 suspension of such requirements in instances of individual 9 hardship such as for reasons of health, military service or 10 other good cause. 11 (e) A certified public accountant or public accountant who 12 is also certified, registered or licensed to practice public 13 accounting in any other state or foreign jurisdiction shall 14 report this information to the board on the biennial renewal 15 application. Any disciplinary action taken in any other state or 16 foreign jurisdiction shall be reported to the board on the 17 biennial renewal application or within thirty days of 18 disposition, whichever is sooner. Multiple certification, 19 registration or licensure shall be noted by the board on the 20 record of the certified public accountant or public accountant, 21 and the other state or foreign jurisdiction shall be notified by 22 the board within thirty days after any disciplinary action is 23 taken against the certified public accountant or public 24 accountant in this Commonwealth. 25 (f) An initial or renewal license shall not be issued after 26 April 30, 2000, to a certified public accountant or public 27 accountant practicing as a sole practitioner unless he complies 28 with the requirements of section 8.9 of this act. 29 Section 8.8. Licensing of Firms.--(a) [An association] A 30 person other than an individual shall not practice public 20070S0838B2247 - 30 -
1 accounting in this Commonwealth unless it is a qualified 2 association, has been granted a license to practice and 3 satisfies the requirements of this section at all times while it 4 is a licensee. A new firm shall apply for its initial license 5 within thirty days after its formation; thereafter, the firm's 6 license shall be subject to renewal in accordance with section 7 8.2 of this act. 8 (b) The initial and all renewal license applications by a 9 firm shall: 10 (1) List the name, home address and license number of each 11 certified public accountant or public accountant who owns an 12 equity interest directly or indirectly in the firm and who is a 13 licensee. 14 (2) List the name and home address of each qualified 15 nonlicensee who owns an equity interest in the firm if the 16 principal residence or the office out of which the individual 17 principally practices is located in this Commonwealth. 18 (3) Include a statement that the firm is in compliance with 19 subsections (d) and (e). 20 (c) An initial or renewal license shall not be issued to a 21 firm after April 30, 2000, unless the firm complies with the 22 requirements of section 8.9 of this act. 23 (d) A firm shall satisfy all of the following requirements: 24 (1) At least one general partner if the firm is a 25 partnership, one record and beneficial owner of common shares if 26 the firm is a corporation or one owner of a similar equity 27 interest if the firm is any other form of qualified association 28 shall be a certified public accountant or public accountant who 29 is a licensee. 30 (2) Except as provided in subsections (e) and (f), each 20070S0838B2247 - 31 -
1 shareholder, partner, member or other owner of an equity
2 interest in the firm must be the holder of a current license to
3 practice public accounting as a certified public accountant or
4 public accountant under the laws of this Commonwealth or another
5 jurisdiction. This clause shall not:
6 (i) apply in the case of a person who withdraws from a firm
7 for such period as may be reasonable under the circumstances to
8 permit the firm to comply with this requirement; or
9 (ii) prohibit payments by a firm to a former equity owner or
10 his estate in connection with his withdrawal from the firm.
11 (3) Each individual in charge of an office that performs any
12 attest activity or business unit of the firm in this
13 Commonwealth shall be a certified public accountant or public
14 accountant who is a licensee.
15 (4) The principal executive officer of the firm shall be a
16 certified public accountant or public accountant who holds a
17 current license to practice public accounting in this
18 Commonwealth or another state.
19 (5) An individual who does not hold a current license to
20 practice public accounting as a certified public accountant or
21 public accountant in this Commonwealth or another state or
22 foreign jurisdiction shall not assume ultimate responsibility
23 for any attest activity.
24 (e) Notwithstanding any other provision of law, a qualified
25 nonlicensee may own an equity interest in a firm if all of the
26 following conditions are met:
27 (1) All of the qualified nonlicensees owning equity
28 interests in the firm shall not:
29 (i) own in the aggregate equity interests in the firm
30 entitling them to cast more than [one-third] forty-nine percent
20070S0838B2247 - 32 -
1 of the votes on any issue or to receive more than [one-third] 2 forty-nine percent of any dividend or other distribution of 3 profits or assets of the firm; or 4 (ii) constitute more than [one-third] forty-nine percent in 5 number of the owners of equity interests in the firm. 6 (2) The qualified nonlicensee shall not hold himself out as 7 a certified public accountant or public accountant. 8 (3) The qualified nonlicensee shall be permitted to 9 designate or refer to himself as a principal, owner, officer, 10 member or shareholder of the firm. The qualified nonlicensee may 11 also use such other titles as may be authorized by the 12 regulations of the board. 13 (4) The qualified nonlicensee shall not: 14 (i) have pleaded guilty to, entered a plea of nolo 15 contendere to or been found guilty or been convicted of a felony 16 under the laws of this Commonwealth or any other jurisdiction; 17 or 18 (ii) be in violation of any regulation of the board 19 regarding the character or conduct of a qualified nonlicensee 20 who is the owner of an equity interest in a firm. 21 (5) The participation of the qualified nonlicensee in the 22 business of the firm must be the principal occupation of the 23 individual and shall be in the nature of providing services to 24 the firm or clients of the firm and not solely as an investor or 25 in another commercial or passive capacity. 26 (6) The qualified nonlicensee has graduated with a 27 baccalaureate or higher degree from a college or university 28 approved at the time of graduation by the Department of 29 Education. 30 (7) The qualified nonlicensee shall comply with all 20070S0838B2247 - 33 -
1 applicable provisions of this act and the regulations of the 2 board. 3 (f) An equity interest in a firm may be owned indirectly but 4 only if all of the ultimate, indirect beneficial owners of the 5 equity interest are licensees. 6 (g) In accordance with the procedure referred to in section 7 9 of this act, the board may revoke the license to practice of a 8 firm if at any time it is in violation of any of the provisions 9 of this section. 10 Section 7.1. Section 8.9(a), (b), (d) and (g) of the act, 11 added December 4, 1996 (P.L.851, No.140), are amended and the 12 section is amended by adding a subsection to read: 13 Section 8.9. Peer Review.--(a) As a condition for granting 14 a firm a renewal license, or an initial license in the case of a 15 firm that has previously been engaged in practice in another 16 jurisdiction, the board shall require that the firm undergo a 17 peer review in accordance with this section unless the firm 18 meets one of the exemptions in subsection (g). [The firm shall 19 submit to the board with its license application a letter from] 20 The initial or renewal license application of a firm that does 21 not meet one of those exemptions shall include a certification 22 that the firm is in compliance with this section and shall state 23 the name of the organization administering the firm's most 24 recent peer review [stating the date on which the peer review 25 was completed.], the date of acceptance of that peer review and 26 the period covered by that peer review. The board shall not 27 require submittal of the letter of acceptance, peer review 28 report, letter of comment, letter of response or working papers 29 related to the peer review process[.], but the board may require 30 the organization administering the firm's most recent peer 20070S0838B2247 - 34 -
1 review to confirm the date of acceptance and the period covered 2 by that peer review. As used in this section, the term "firm" 3 includes, but is not limited to, a sole practitioner. 4 (b) A firm with less than three licensees shall not be 5 required to undergo a peer review more frequently than once 6 every five years and a firm with three or more licensees shall 7 not be required to undergo a peer review more frequently than 8 once every three years, except that: 9 (1) The board may order a firm that has been disciplined 10 under section 9.1 of this act or that has been ordered to take 11 remedial action under subsection (e) to undergo a peer review 12 more frequently. 13 (2) A new firm that is not subject to subsection (j) shall 14 undergo its first peer review within eighteen months after it is 15 granted its initial license. 16 (2.2) A firm that was not previously required to undergo a 17 peer review must notify the board within thirty days after 18 accepting an engagement to perform an attest activity other than 19 a compilation and shall undergo a peer review within eighteen 20 months after commencing the engagement. 21 (3) The regulations of the board may lengthen any of the 22 periods between required peer reviews prescribed in this 23 subsection in such manner, under such circumstances or with 24 respect to such firms as the board in its discretion may 25 consider appropriate. 26 * * * 27 (d) (1) The peer review of a firm that performs one or more 28 audits of historical financial statements or examinations of 29 prospective financial information shall [include an onsite] be a 30 system review, including a study and evaluation of a 20070S0838B2247 - 35 -
1 representative selection of audit, examination, review and 2 compilation reports, the financial information upon which those 3 reports were based and the associated working papers. The 4 [onsite] system review shall include additional procedures 5 relating to the firm's system of quality control sufficient to 6 provide the reviewer with a reasonable basis upon which to issue 7 a peer review report. 8 (2) The peer review of a firm that performs no audit or 9 examination engagements but does perform one or more review 10 engagements shall be required only to be an [offsite] engagement 11 review, including a study and evaluation of a representative 12 selection of reports issued by the firm and the financial 13 information upon which those reports were based; but, if such a 14 firm elects to have [an onsite] a system review, that review 15 shall also be acceptable. The [offsite] engagement review shall 16 [not be required to] include a study of the associated working 17 papers [but shall include] and procedures and inquiries 18 sufficient to provide the reviewer with a reasonable basis upon 19 which to issue a peer review report. 20 (3) A firm that does not perform any audits or reviews, 21 regardless of whether or not the firm performs compilations, 22 shall be exempt from the requirement to undergo a peer review to 23 the extent provided in subsection (g)(2). 24 * * * 25 (g) A firm shall be exempt from the requirement to undergo a 26 peer review if all of the following apply: 27 (1) Within three years before the date of application for 28 initial or renewal licensure, the firm has undergone a peer 29 review conducted in another state or foreign jurisdiction which 30 meets the requirements of subsection (c)(1) and (2). The firm 20070S0838B2247 - 36 -
1 shall submit to the board a letter from the organization 2 administering the firm's most recent peer review stating the 3 date on which the peer review was completed. 4 (2) The firm satisfies all of the following conditions: 5 (i) During the preceding two years, the firm has not 6 accepted or performed any audit or review engagement. 7 (ii) Within the next two years, the firm does not intend to 8 accept or perform any audit or review engagement. 9 [(iii) The firm agrees to notify the board within thirty 10 days of accepting an audit or review engagement and to undergo a 11 peer review within eighteen months of commencing such 12 activities.] 13 (3) For reasons of personal health, military service or 14 other good cause, the board determines that the firm is entitled 15 to an exemption for a period of time not to exceed twelve 16 months. 17 * * * 18 (m) The fees charged by an administering organization under 19 this section shall not vary depending on whether or not a firm 20 or some or all of its owners or employees are members of the 21 administering organization. 22 Section 7.2. Sections 9 and 9.1(a) of the act, amended 23 December 4, 1996 (P.L.851, No.140), are amended to read: 24 Section 9. Disciplinary Procedure; Appeals.--(a) Except as 25 provided in section 2.3(c) of this act, the procedure to be 26 followed in the revocation of a firm's license under section 27 8.8(g) of this act or the imposition of discipline under section 28 9.1 of this act and in appeals taken from disciplinary actions 29 of the board shall be that prescribed under 2 Pa.C.S. Ch. 5 30 Subch. A (relating to practice and procedure of Commonwealth 20070S0838B2247 - 37 -
1 agencies) and Ch. 7 Subch. A (relating to judicial review of 2 Commonwealth agency action), 1 Pa. Code Part II (relating to 3 general rules of administrative practice and procedure) and 4 applicable regulations promulgated by the board. 5 (b) The board shall require an individual whose 6 certification has been suspended or revoked to return his 7 certificate or to certify in such manner as the board directs 8 that it was lost, stolen or destroyed. Failure to comply with 9 the board's directions shall be a misdemeanor of the third 10 degree. 11 (c) The board may assess against the respondent in a 12 disciplinary action under this act, as part of the sanction, the 13 costs of investigation underlying that disciplinary action. 14 Section 9.1. Grounds for Discipline.--(a) In accordance 15 with the procedure provided in section 9 of this act, the board 16 may revoke, suspend, limit or otherwise restrict the certificate 17 of a certified public accountant or the registration of a public 18 accountant, may revoke, suspend, limit or otherwise restrict any 19 license issued under this act, may censure or publicly reprimand 20 the holder of any certificate, registration or license, may 21 require completion of general or a specific number of continuing 22 professional education courses or may require more frequent peer 23 review or other remedial action, or may revoke, suspend or limit 24 the right of an individual to practice under section 5.2 of this 25 act or censure or publicly reprimand an individual practicing 26 under section 5.2 of this act for any one or any combination of 27 the following causes: 28 (1) Fraud or deceit in obtaining: 29 (i) a certificate of certified public accountant [or in 30 obtaining]; 20070S0838B2247 - 38 -
1 (ii) registration under this act [or in obtaining]; 2 (iii) a license to practice under this act[.]; or 3 (iv) a determination that substantial equivalency exists 4 with respect to an individual. 5 (2) Dishonesty, fraud or gross negligence in the [practice 6 of public accounting.] provision of professional services. 7 (3) Violation of any of the provisions of section 12 of this 8 act. 9 (4) Violation of a rule of professional conduct promulgated 10 by the board under the authority granted by this act. 11 (5) Pleading guilty to, entering a plea of nolo contendere 12 to or being found guilty of a felony under any Federal or State 13 law or the laws of any foreign jurisdiction. 14 (6) Pleading guilty to, entering a plea of nolo contendere 15 to or being found guilty of any crime, an element of which is 16 dishonesty or fraud under any Federal or State law or the laws 17 of any foreign jurisdiction. 18 (6.1) Pleading guilty to, entering a plea of nolo contendere 19 to or being found guilty of violating any Federal or State 20 revenue law or the revenue laws of any foreign jurisdiction. 21 (7) Cancellation, revocation, suspension or refusal to renew 22 [his authority to practice] authority to provide professional 23 services as a certified public accountant or public accountant 24 by any other state or foreign jurisdiction for any cause other 25 than failure to pay a registration or other fee in such other 26 state or foreign jurisdiction. 27 (8) Suspension or revocation of the right to [practice] <-- 28 provide professional services before any Federal or State 29 governmental agency. 30 (10) Failure of certified public accountant or public 20070S0838B2247 - 39 -
1 accountant filing an application for a license or renewal 2 thereof to furnish evidence of completion of the requirements 3 for continuing education under section 8.2 of this act or to 4 meet any conditions with respect to continuing education that 5 the board may have ordered in respect to such certified public 6 accountant or public accountant under that section. 7 (12) Failure of a firm or sole proprietorship to satisfy the 8 peer review requirements in section 8.9 of this act. 9 (13) Failure of a firm to satisfy any of the organizational 10 requirements in section 8.8(d) of this act. 11 (14) Conduct that brings the profession of public accounting 12 into disrepute or that lowers public esteem for the profession. 13 (15) Violation of an order of the board. 14 (16) Engaging in unprofessional conduct. Discipline may be 15 imposed under this clause whether or not actual injury or loss 16 to a client is established. 17 (17) An act or omission by a licensee in another 18 jurisdiction under substantial equivalency that subjects the 19 licensee to discipline in the other jurisdiction. 20 * * * 21 Section 8. Section 9.2 of the act, amended December 4, 1996 22 (P.L.851, No.140) and May 9, 1997 (P.L.145, No.9), is amended to 23 read: 24 Section 9.2. Reinstatement.--(a) Except as provided in 25 subsection (b), upon application in writing and after hearing 26 pursuant to notice, the board may reinstate or modify the 27 suspension of any license to practice which has been suspended. 28 Reinstatement shall not be granted under this subsection: 29 (1) To an individual unless he demonstrates that he has 30 completed the biennial continuing education requirements that he 20070S0838B2247 - 40 -
1 would have been required to complete during the immediately 2 preceding reporting period if his license had not been 3 suspended. 4 (2) Unless the person seeking reinstatement pays the current 5 biennial licensing fee plus a reinstatement fee. 6 (b) An individual whose license has been suspended for more 7 than five years shall not be eligible to apply for reinstatement 8 of the license, but instead must take the examination and apply 9 for a certificate of certified public accountant in accordance 10 with section [3.1] 4.2 of this act. 11 (c) Unless ordered to do so by a court, the board shall not 12 reinstate the certificate of a person to practice as a certified 13 public accountant or the registration of a person to practice as 14 a public accountant which has been revoked. A person whose 15 certification or registration has been revoked may take the 16 examination and apply for a certificate in accordance with 17 section [3.1] 4.2 of this act not earlier than five years after 18 his certificate or registration was revoked if he desires to 19 resume the practice of public accounting. 20 (d) A person whose license to practice has expired for 21 failure to make biennial registration or who has been on the 22 inactive roll under section 8.2(a.1) of this act may have the 23 license reinstated upon compliance with the following: 24 (1) In the case of an individual, presentation to the board 25 of satisfactory evidence of having completed eighty hours of 26 continuing education in programs approved by the board under 27 section 8.2(d) of this act within two years preceding the date 28 of the application for reinstatement. 29 (2) Payment of the current biennial licensing fee plus a 30 reinstatement fee. 20070S0838B2247 - 41 -
1 (e) Upon application in writing and after hearing pursuant to 2 notice, the board may reinstate or modify the suspension of an 3 individual's right to practice under section 5.2 of this act 4 which has been revoked or suspended. 5 SECTION 8.1. SECTION 11 OF THE ACT IS AMENDED BY ADDING A <-- 6 SUBSECTION TO READ: 7 SECTION 11. OWNERSHIP OF WORKING PAPERS.--* * * 8 (C) EXCEPT AS PROVIDED BY LAW OTHER THAN THIS ACT, A 9 LICENSEE SHALL KEEP WORKING PAPERS AND OTHER MATERIALS DESCRIBED 10 IN THIS SECTION FOR SEVEN YEARS. 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 20070S0838B2247 - 42 -
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 20070S0838B2247 - 43 -
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." 20070S0838B2247 - 44 -
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 20070S0838B2247 - 45 -
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 20070S0838B2247 - 46 -
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. 20070S0838B2247 - 47 -
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, 20070S0838B2247 - 48 -
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 20070S0838B2247 - 49 -
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)] TEN <-- 19 THOUSAND DOLLARS ($10,000) on any person for a violation of any 20 provision of this act. The board shall levy a civil penalty only 21 after affording the accused party the opportunity for a hearing, 22 as provided in Title 2 of the Pennsylvania Consolidated Statutes 23 (relating to administrative law and procedure). The maximum 24 civil penalty that may be levied by the board shall not be more 25 than two hundred thousand dollars ($200,000) for any related 26 series of violations. The board may not levy a civil penalty 27 with respect to a violation for which the person has been fined 28 or assessed a civil penalty in another jurisdiction. BY THE <-- 29 ACCOUNTANCY REGULATORY AUTHORITY OF ANOTHER STATE. 30 * * * 20070S0838B2247 - 50 -
1 Section 10. This act shall take effect in 60 days. D27L63VDL/20070S0838B2247 - 51 -