2022 Pennsylvania Consolidated & Unconsolidated Statutes
Act 110 - CPA LAW - GENERAL POWERS OF THE BOARD, REQUIREMENTS FOR ISSUANCE OF CERTIFICATE, PEER REVIEW AND UNLAWFUL ACTS

Session of 2022

No. 2022-110

 

HB 1328

 

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.  Section 3(a)(11) of the act of May 26, 1947 (P.L.318, No.140), known as the CPA Law, is 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 a nationally recognized 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.

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Section 2.  Section 4.2(b) introductory paragraph and (3) and (d)(4) of the act are amended and the section is amended by adding a subsection to read:

Section 4.2.  Requirements for Issuance of Certificate.--* * *

(b)  [Before] Except as provided under subsection (b.1), before an individual may take the examination, the board shall be satisfied that the individual:

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(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, technology, 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 shall be in accounting and auditing, business law, economics, technology, 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, technology, finance or tax subjects of a content satisfactory to the board, not necessarily as part of his undergraduate or graduate work.

(b.1)  An individual may take the examination on or after the effective date of this subsection if the board is satisfied that the individual meets the requirements under subsection (b)(1) and (2) and has completed a total of one hundred twenty semester credits of post-secondary education.

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(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:

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(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.

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Section 3.  Sections 8.9 and 12(f)(2) of the act are amended to read:

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] be enrolled in a board-approved peer review program 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 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] recently accepted 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 and period covered by the firm's most recently accepted peer review through a secure website provided by the entity administering the peer review.

(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] have its first peer review [within] due eighteen months [after it is granted its initial license.] from the date it was required to enroll in a board-approved peer review program.

(2.2)  A firm that was not previously required to [undergo a peer review] enroll in a board-approved peer review program 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 months after commencing the engagement.] have its initial peer review due eighteen months from the date it was required to enroll in a board-approved peer review program.

(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)  A firm with fewer than three licensees that was previously not required to undergo a peer review more frequently than once every five years shall, no later than three years before December 31, 2027, and every three years thereafter, undergo a peer review conducted pursuant to peer review standards adopted by the board.

(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 without the firm's permission. 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).

(d)  (1)  The peer review of a firm that performs one or more [audits of historical financial statements or examinations of prospective financial information shall be a system review, including a study and evaluation of a representative selection of audit, examination, review and compilation 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.] engagements under the Statements on Auditing Standards (SAS), Government Auditing Standards, examinations in accordance with the Statements on Standards for Attestation Engagements (SSAE) or engagements under PCAOB standards as their highest level of service shall have a system review.

(2)  The peer review of a firm that performs no [audit or examination engagements] engagements under the Statements on Auditing Standards (SAS), Government Auditing Standards, examination engagements in accordance with the Statements on Standards for Attestation Engagements (SSAE) or engagements under PCAOB standards but does perform one or more review engagements in accordance with the Statements on Standards for Accounting and Review Services (SSARS) or services under the Statements on Standards for Attestation Engagements (SSAE) not included in a system review 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).]

(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.] When the board is made aware that a firm has had the firm's enrollment in peer review dropped or terminated and is not in compliance with the enrollment requirements in this section, the board may consider, pursuant to a hearing or with consent, other measures, including disciplinary action, against the reviewed firm and any individual licensee employed by the reviewed firm. 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] After conducting the hearing, the board 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.] or other actions causing the firm's enrollment in the peer review program to be dropped or terminated and evidence that the firm has reenrolled in peer review. The board shall verify a firm's reenrollment in peer review through a secure website provided by the entity administering the peer review.

(f)  The firm reviewed shall pay for any peer review 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 Facilitated State Board Access. The board shall verify the date of acceptance and period covered by the firm's most recently accepted peer review through a secure website provided by the entity administering the peer review.

(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.

(ii)  Within the next two years, the firm does not intend to accept or perform any audit or review engagement.] attestation engagements other than a compilation.

(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.] firm shall provide to the board a copy of a grant of an extension, including the resulting new due date, within thirty days of receipt from the administering organization.

(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, 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 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.]

(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.] In the event a practice unit is sold, dissolved or merged with the practice of one or more other practice units, the determination of successor or predecessor practice unit, peer review year end and the peer review due date shall be made in accordance with the administering organization's guidance.

(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 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:

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(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 credentials or qualifications.

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

 

APPROVED--The 3rd day of November, A.D. 2022.

 

TOM WOLF