Bill Text: CA AB138 | 2009-2010 | Regular Session | Amended
NOTE: There are more recent revisions of this legislation. Read Latest Draft
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-Amended.html
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-Amended.html
BILL NUMBER: AB 138 AMENDED
BILL TEXT
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 Section 5076 of, and to add Sections 5076.1 and
5076.2 to, the Business and Professions Code, relating to
accountants.
LEGISLATIVE COUNSEL'S DIGEST
AB 138, as amended, 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 specify that these provisions shall be operative only
if sufficient appropriations and become inoperative on
June 30, 2010, if sufficient hiring authority are
provided is not granted pursuant to a budget change
proposal to support provide staffing to
implement these activities provisions
. The bill would also make specified findings and declarations
of the Legislature regarding the value of peer review.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
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 with final, permanent regulations within 120 days of their
adoption.
(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.
(f)
(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.
(g)
(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.
(h)
(l) Nothing in this section requires any
firm to become a member of any professional organization.
(i)
(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.
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.
SEC. 4. Section 5076.2 is added to the Business and Professions
Code, to read:
5076.2. The provisions of Sections 5076 and 5076.1 shall
only be operative if, commencing July 1, 2010, there is an
appropriation from the Accountancy Fund in the annual Budget Act to
fund the activities in those sections and sufficient hiring authority
is granted become inoperative on June 30, 2010, if
sufficient hiring authority is not granted pursuant to a budget
change proposal to the board to provide staffing to implement those
sections.
