DAR File No. 32712

Commerce, Occupational and Professional Licensing

R156-26a

Certified Public Accountant Licensing Act Rule

NOTICE OF PROPOSED RULE

DAR File No.: 32712
Filed: 06/04/2009, 04:06
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The Division and the Utah Board of Accountancy reviewed this rule and determined that changes needed to be made.

Summary of the rule or change:

In Section R156-26a-303a, technical amendments are made to comply with the current language and procedures that are specified in peer review requirements established by the American Institute of Certified Public Accountants (AICPA). In Section R156-26a-501, updated the AICPA Code of Professional Conduct to the June 1, 2008 edition.

State statutory or constitutional authorization for this rule:

Section 58-26a-101and Subsections 58-1-106(1)(a) and 58-1-202(1)(a)

This rule or change incorporates by reference the following material:

Updates the "Standards for Performing and Reporting on Peer Reviews" published by the AICPA, from the January 1, 2005 edition to the January 1, 2009 edition; and updates the AICPA "Code of Professional Conduct" from the June 1, 2007 edition to the June 1, 2008 edition

Anticipated cost or savings to:

the state budget:

The Division will incur minimal costs of approximately $50 to print and distribute the rule once the proposed amendments are made effective. Any costs incurred will be absorbed in the Division's current budget.

local governments:

The proposed amendments only apply to licensed certified public accountants, CPA firms, and applicants for licensure in those classifications. As a result, the proposed amendments do not apply to local governments.

small businesses and persons other than businesses:

The proposed amendments only apply to licensed certified public accountants, CPA firms, and applicants for licensure in those classifications. Licensees and applicants for licensure may work in a small business; however, the proposed amendments would not directly affect the business. The updated documents can be printed out via the AICPA website at no cost.

Compliance costs for affected persons:

The proposed amendments only apply to licensed certified public accountants, CPA firms, and applicants for licensure in those classifications. Licensees and applicants for licensure may work in a small business; however, the proposed amendments would not directly affect the business. The updated documents can be printed out via the AICPA website at no cost.

Comments by the department head on the fiscal impact the rule may have on businesses:

No fiscal impact to businesses is anticipated from this rule filing beyond those discussed in the rule summary. Francine A. Giani, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Commerce
Occupational and Professional Licensing
HEBER M WELLS BLDG
160 E 300 S
SALT LAKE CITY UT 84111-2316

Direct questions regarding this rule to:

Dan S. Jones at the above address, by phone at 801-530-6720, by FAX at 801-530-6511, or by Internet E-mail at dansjones@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

07/31/2009

Interested persons may attend a public hearing regarding this rule:

7/01/2009 at 1:00 PM, Heber Wells Bldg, 160 E 300 S, Conference Room 402 (fourth floor), Salt Lake City, UT

This rule may become effective on:

08/07/2009

Authorized by:

Thad LeVar, Deputy Director

R156. Commerce, Occupational and Professional Licensing.

R156-26a. Certified Public Accountant Licensing Act Rule.

R156-26a-303a. Renewal Requirements - Peer Review.

(1) General.

In accordance with Subsections 58-1-308(3)(b) and 58-26a-303(2)(b), there is created a peer review requirement as a condition for renewal of licenses issued under the Certified Public Accountant Licensing Act, providing for review of the work products of CPA and CPA firm licensees[ and firms].

(a) The purpose of the program is to monitor compliance with professional standards[applicable accounting and auditing standards adopted by generally recognized standard setting bodies].

(b) The program shall emphasize education and may include other remedial actions when non-compliance is found[determined appropriate where a firm's work product and services do not comply with established professional standards].

(c) [In the event a firm]If a licensee is unwilling or unable to comply with [established standards, ]or intentionally disregards professional standards[ so as to warrant disciplinary action], the administering organization shall refer the matter to the Division for consultation and determination of[and shall consult with the Division regarding] appropriate action[ to protect the public interest].

(2) Scheduling of the Peer Review.

(a) A firm's initial peer review shall be assigned a due date to require that the initial review be started no later than 18 months after the date of the issuance of its initial report as defined in Subsection 58-26a-102(20).

(b) Not less than once in each three years a firm engaged in the practice of public accounting shall undergo, at its own expense, a peer review commensurate in scope with its practice.

(c) The administering organization will assign the year of review.

(d) A portion of the peer review may be performed by a regulatory body if the Utah Board of Accountancy approves the regulatory body as an administering organization. This does not by itself satisfy the peer review requirement unless the other standards as specified in this rule are fulfilled by the regulatory body.

(3) Selection of a Peer Reviewer or inspector in the case of inspections mandated by law or regulatory bodies.

A firm scheduled for peer review shall engage a reviewer qualified to conduct the peer review. Regulatory bodies will assign inspectors.

(4) Qualifications of a Peer Reviewer and inspectors.

(a) Peer reviewers must provide evidence of one of the two following minimum qualifications to the administering organization:

(i) acceptance as a peer reviewer by the AICPA; or

(ii) compliance with the qualifications required by the AICPA to qualify as a peer reviewer.

(b) Peer reviewers must be licensed or hold a permit to practice as a CPA in the state of Utah or another state or jurisdiction of the United States.

(c) The administering organization will approve reviewers for those reviews not administered by the AICPA.

(d) Regulatory bodies will determine the qualifications of inspectors.

(5) Conduct of the Peer Review or inspection. Peer reviews shall be conducted as follows:

(a) Peer reviews shall be conducted according to the "Standards for Performing and Reporting on Peer Reviews" promulgated by the AICPA, effective January 1, [2005]2009 as amended, which are hereby incorporated by reference and adopted as the minimum standards for peer reviews of all firms. This section shall not require any firm or licensee to become a member of the AICPA or any administering organization.

(b) The Utah Board of Accountancy may review the standards used by the regulatory body to determine if those standards are sufficient to satisfy all or part of the peer review requirements, or what additional review may be required to meet the peer review requirements under this rule.

(6) If an administering organization finds that a peer review was not performed in accordance with this rule or the peer review results in a [modified or adverse]pass with deficiencies or fail report[ or in repeat findings], the Peer Review Committee may require remedial action to assure that the review or performance of the CPA or CPA firm being reviewed meets the objectives of the peer review program.

(7) Review of Multi-State Firms.

(a) With respect to a multi-state firm, the Division may accept a peer review based solely upon work conducted outside of this state as satisfying the requirement to undergo peer review under this rule, if:

(i) the peer review is conducted during the year scheduled or rescheduled under R156-26a-303a(2);

(ii) the peer review is performed in accordance with requirements equivalent to those of this state;

(iii) the peer review:

(A) studies, evaluates and reports on the quality control system of the firm as a whole in the case of [on-site]system reviews; or

(B) results in an evaluation and report on selected engagements in the case of [off-site]engagement reviews;

(iv) the firm's internal inspection procedures require that the firm's personnel from another office outside the state perform the inspection of the office located in this state not less than once in each three year period; and

(v) at the conclusion of the peer review, the peer reviewer issues a report equivalent to that required by R156-26a-303a(5) or in the case of an approved regulatory body, a report is issued under their standards.

(b) A multi-state firm seeking approval under R156-26a-303a(7)(a) shall submit an application to the administering organization by February 1 of the year of review establishing that the peer review it proposes to undergo meets all of the requirements of R156-26a-303a(5).

(8) A firm which does not perform services encompassed in the scope of minimum standards as set out in R156-26a-303a(5)(a) or (b) is exempt from peer review and shall notify the Division of Occupational and Professional Licensing of the exemption at the time of renewal of its registration. A firm which begins providing these services must commence a peer review within 18 months of the date of the issuance of its initial report as defined in Subsection 58-26a-102(16).

(9) Mergers, Combinations, Dissolutions or Separations.

(a) Mergers or combinations: In the event that two or more firms are merged or sold and combined, the surviving firm shall retain the year of review of the largest firm.

(b) Dissolutions or separations: In the event that a firm is divided, the new firms shall retain the year of review of the former firm. In the event that this period is less than 12 months, a new year shall be assigned so that the review occurs after 12 months of operation.

(c) Upon application to the administering organization and a showing of hardship caused solely by compliance with R156-26a-303a(10), the Division may authorize a change in a firm's year of review.

(10) If the firm can demonstrate that the time established for the conduct of a peer review will create an unreasonable hardship upon the firm, the Division may approve an extension not to exceed 180 days from the date the peer review was originally scheduled. A request for extension shall be addressed in writing by the firm to the Division with a copy to the administering organization responsible for administration of that firm's peer review. The written request for extension must be received by the Division and the administering organization not less than 30 days prior to the date of scheduled review or the request will not be considered. The Division shall inform the administering organization of the approval of any extension.

(11) Retention of Documents Relating to Peer Reviews.

(a) All documentation necessary to establish that each peer review was performed in conformity with peer review standards adopted by the Board, including the peer review working papers, the peer review report, comment letters and related correspondence indicating the firm's concurrence or nonconcurrence, and any proposed remedial actions and related implementation shall be maintained.

(b) The documents described in R156-26a-303a(11)(a) shall be retained for a period of time corresponding to the designated retention period of the relevant administering organization. In no event shall the retention period be less than [90]120 days.

(12) Costs and Fees for Peer Review.

(a) All costs associated with firm-on-firm reviews will be negotiated between the firm and the reviewer and paid directly to the reviewer. All costs associated with committee assigned review team (CART) reviews will be set by the administering organization. The administering organization will collect the fees associated with CART reviews and pay the reviewer.

(b) All costs associated with the administration of the review process will be paid from fees charged to the firms. The fees will be collected by the administering organization. The schedule of fees will be included in the administering organization's proposal. The fee schedule will specify how much is to be paid each year and will be based on the firm size.

(13) All financial statements, working papers, or other documents reviewed are confidential. Access to those documents shall be limited to being made available, upon request, to the Peer Review Committee or the technical reviewer for purposes of assuring that peer reviews are performed according to professional standards.

 

R156-26a-501. Unprofessional Conduct.

"Unprofessional conduct" includes:

(1) a licensee willfully failing to comply with continuing professional education or fraudulently reporting continuing professional education; or

(2) commission of an act or omission that fails to conform to the accepted and recognized standards and ethics of the profession including those stated in the "Code of Professional Conduct" of the American Institute of Certified Public Accountants (AICPA) as adopted June 1, [2007]2008, which is hereby incorporated by reference.

 

KEY: accountants, licensing, peer review, continuing professional education

Date of Enactment or Last Substantive Amendment: [September 23, 2008]2009

Notice of Continuation: February 1, 2007

Authorizing, and Implemented or Interpreted Law: 58-26a-101; 58-1-106(1)(a); 58-1-202(1)(a)