Bill Text: CA AB138 | 2009-2010 | Regular Session | Chaptered
Bill Title: Accounting firms: peer review.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2009-10-11 - Chaptered by Secretary of State - Chapter 312, Statutes of 2009. [AB138 Detail]
Download: California-2009-AB138-Chaptered.html
BILL NUMBER: AB 138 CHAPTERED
BILL TEXT
CHAPTER 312
FILED WITH SECRETARY OF STATE OCTOBER 11, 2009
APPROVED BY GOVERNOR OCTOBER 11, 2009
PASSED THE SENATE SEPTEMBER 3, 2009
PASSED THE ASSEMBLY SEPTEMBER 9, 2009
AMENDED IN SENATE SEPTEMBER 2, 2009
AMENDED IN SENATE JUNE 15, 2009
AMENDED IN ASSEMBLY APRIL 23, 2009
AMENDED IN ASSEMBLY MARCH 10, 2009
INTRODUCED BY Assembly Member Hayashi
JANUARY 20, 2009
An act to amend and repeal Section 5076 of, and to add and repeal
Section 5076.1 of, the Business and Professions Code, relating to
accountants.
LEGISLATIVE COUNSEL'S DIGEST
AB 138, Hayashi. Accounting firms: peer review.
Existing law provides for the licensing and regulation of
certified public accountants and other licensees by the California
Board of Accountancy. Existing law requires an accounting firm
providing attest services, with certain exceptions, to complete a
peer review every 3 years in order to renew its registration, if the
board, prior to September 1, 2011, determines that a peer review
program should be implemented and identifies the resources necessary
for that implementation.
This bill would instead impose a peer review requirement for all
accounting firms relative to accounting and auditing practice, which
would be conducted by a board-recognized peer review program. The
bill would require the board to adopt emergency regulations as
necessary to implement the program and to adopt, by January 1, 2010,
regulations defining a substandard peer review report. The bill would
require an accounting firm and a peer review program provider to
file copies of substandard peer review reports with the board. The
bill would also require the board to appoint a peer review oversight
committee, as specified. The bill would require the board to provide
a report to the Legislature and Governor, by January 1, 2013, that
includes specified information on the impact of these peer review
requirements on certain small firms and sole practitioners. The bill
would specify that these provisions shall become inoperative on
January 1, 2014, unless a later enacted statute, enacted prior to
that date, deletes or extends that date. The bill would also make
specified findings and declarations of the Legislature regarding the
value of peer review.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature hereby finds and declares the
following:
(a) The highest priority of the California Board of Accountancy is
to protect the public in exercising the board's licensing,
regulatory, and disciplinary functions.
(b) The board protects the public by ensuring that only qualified
persons and firms are licensed to practice public accountancy and
that appropriate standards of competency and practice, including
ethics, objectivity, and independence, are established and enforced.
(c) Mandatory peer review is designed to assist the board in
ensuring the competency of licensees and their adherence to
professional standards.
(d) Firms that complete a peer review will be better equipped to
perform quality accounting and auditing engagements.
(e) By completing a peer review, quality control systems can be
designed or refined to ensure that work is performed in conformity
with professional standards and that licensees develop and refine
their technical skills.
(f) Mandatory peer review demonstrates the board's commitment to
enhance the quality of the services provided by accounting firms and
contributes to the public's confidence in the profession.
(g) Consumer confidence is paramount to a healthy economy.
Consumer confidence is achieved in the field of accounting when
consumers feel that the firms providing them with accounting and
auditing services are doing so in accordance with professional
standards.
SEC. 2. Section 5076 of the Business and Professions Code is
amended to read:
5076. (a) In order to renew its registration, a firm, as defined
in Section 5035.1, shall have a peer review report of its accounting
and auditing practice accepted by a board-recognized peer review
program no less frequently than every three years.
(b) For purposes of this article, the following definitions apply:
(1) "Peer review" means a study, appraisal, or review conducted in
accordance with professional standards of the professional work of a
firm by an individual who has a valid and current license,
certificate, or permit to practice public accountancy from this state
or another state and is unaffiliated with the firm being reviewed,
and may include an evaluation of other factors in accordance with
requirements specified by the board in regulations.
(2) "Accounting and auditing practice" includes any services that
are performed using professional standards defined by the board in
regulations.
(c) The board shall adopt regulations as necessary to implement,
interpret, and make specific the peer review requirements in this
section, including, but not limited to, regulations specifying the
requirements for board recognition of a peer review program,
standards for administering a peer review, extensions of time for
fulfilling the peer review requirement, exclusions from the peer
review program, and document submission.
(d) The board shall adopt emergency regulations in accordance with
the Administrative Procedure Act (Chapter 3.5 (commencing with
Section 11340) of Part 1 of Division 3 of Title 2 of the Government
Code) to establish policies, guidelines, and procedures as outlined
in subdivision (c). The adoption of the regulations shall be
considered by the Office of Administrative Law to be necessary for
the immediate preservation of the public peace, health and safety, or
general welfare. The emergency regulations shall be submitted to the
Office of Administrative Law for filing with the Secretary of State
and publication in the California Code of Regulations, and shall be
replaced in accordance with the Administrative Procedure Act.
(e) Nothing in this section shall prohibit the board from
initiating an investigation and imposing discipline against a firm or
licensee, either as the result of a complaint that alleges
violations of statutes, rules, or regulations, or from information
contained in a peer review report received by the board.
(f) A firm issued a substandard peer review report, as defined by
the board in regulation, shall submit a copy of that report to the
board. The board shall establish in regulation the time period that a
firm must submit the report to the board. This period shall not
exceed 60 days from the time the report is accepted by a
board-recognized peer review program provider to the date the report
is submitted to the board.
(g) (1) A board-recognized peer review program provider shall file
a copy with the board of all substandard peer review reports issued
to California-licensed firms. The board shall establish in regulation
the time period that a board-recognized peer review program provider
shall file the report with the board. This period shall not exceed
60 days from the time the report is accepted by a board-recognized
peer review program provider to the date the report is filed with the
board. These reports may be filed with the board electronically.
(2) Nothing in this subdivision shall require a board-recognized
peer review program provider, when administering peer reviews in
another state, to violate the laws of that state.
(h) The board shall, by January 1, 2010, define a substandard peer
review report in regulation.
(i) Any requirements imposed by a board-recognized peer review
program on a firm in conjunction with the completion of a peer review
shall be separate from, and in addition to, any action by the board
pursuant to this section.
(j) Any report of a substandard peer review submitted to the board
in conjunction with this section shall be collected for
investigatory purposes.
(k) Nothing in this section affects the discovery or admissibility
of evidence in a civil or criminal action.
(l) Nothing in this section requires any firm to become a member
of any professional organization.
(m) A peer reviewer shall not disclose information concerning
licensees or their clients obtained during a peer review, unless
specifically authorized pursuant to this section, Section 5076.1, or
regulations prescribed by the board.
(n) By January 1, 2013, the board shall provide the Legislature
and Governor with a report regarding the peer review requirements of
this section that includes, without limitation:
(1) The extent to which mandatory peer review of small firms or
sole practitioners that prepare nondisclosure compiled financial
statements on an other comprehensive basis of accounting enhances
consumer protection.
(2) The impact of peer review required by this section on small
firms and sole practitioners that prepare nondisclosure complied
financial statements on an other comprehensive basis of accounting.
(3) The impact of peer review required by this section on small
businesses, nonprofit corporations, and other entities that utilize
small firms or sole practitioners for the purposes of nondisclosure
compiled financial statements prepared on an other comprehensive
basis of accounting.
(o) This section shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2014, deletes or extends
that date.
SEC. 3. Section 5076.1 is added to the Business and Professions
Code, to read:
5076.1. (a) The board shall appoint a peer review oversight
committee of certified public accountants of this state who maintain
a license in good standing and who are authorized to practice public
accountancy to provide recommendations to the board on any matter
upon which it is authorized to act to ensure the effectiveness of
mandatory peer review.
(b) The committee may request any information from a
board-recognized peer review program provider deemed necessary to
ensure the provider is administering peer reviews in accordance with
the standards adopted by the board in regulations. Failure of a
board-recognized peer review program provider to respond to the
committee shall result in referral by the committee of the provider
to the board for further action. Any information obtained by the
board, its representatives, or the peer review oversight committee in
conjunction with its review of peer review program providers shall
not be a public record, and shall be exempt from public disclosure,
provided, however, this information may be disclosed under any of the
following circumstances:
(1) In connection with disciplinary proceedings of the board.
(2) In connection with legal proceedings in which the board is a
party.
(3) In response to an official inquiry by a federal or state
governmental regulatory agency.
(4) In compliance with a subpoena or summons enforceable by court
order.
(5) As otherwise specifically required by law.
(c) The members of the committee shall be appointed to two-year
terms and may serve a maximum of four consecutive terms.
(d) The board may adopt, as necessary, regulations further
defining the minimum qualifications for appointment as a committee
member and additional administrative elements designed to ensure the
effectiveness of mandatory peer review.
(e) This section shall remain in effect only until January 1,
2014, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2014, deletes or extends
that date.
