Bill Text: CA AB138 | 2009-2010 | Regular Session | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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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-Introduced.html

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BILL NUMBER: AB 138	INTRODUCED
	BILL TEXT


INTRODUCED BY   Assembly Member Hayashi

                        JANUARY 20, 2009

   An act to amend, repeal, and add Section 5076 of, and to add
Section 5076.1 to, the Business and Professions Code, relating to
accountants.



	LEGISLATIVE COUNSEL'S DIGEST


   AB 138, as introduced, 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 repeal these provisions and 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. The bill
would also require the board to appoint a peer review oversight
committee. The bill's provisions would become operative only if
sufficient appropriations and hiring authority, as determined by the
board, are provided in the Budget Act of 2010 to support these
activities.
   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.  Section 5076 of the Business and Professions Code is
amended to read:
   5076.  (a) In order to renew its registration, a firm providing
attest services, other than a sole proprietor or a small firm as
defined in Section 5000, shall complete a peer review within three
years of the commencement of the peer review program and no less
frequently than every three years thereafter.
   (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
licensee or registered firm by another licensee unaffiliated with
the licensee or registered firm being reviewed. The peer review shall
include, but not be limited to, a review of at least one attest
engagement representing the highest level of service performed by the
firm and may include an evaluation of other factors in accordance
with requirements specified by the board in regulations.
   (2) "Attest services" include an audit, a review of financial
statements, or an examination of prospective financial information,
provided, however, "attest services" shall not include the issuance
of compiled financial statements.
   (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 the approval of peer review providers, and
regulations establishing a peer review oversight committee.
   (d) The board shall review and evaluate whether to implement the
program specified in this section, and shall report its findings and
recommendations to the Legislature and the department no later than
September 1, 2011. If the board determines that the program specified
in this section should be implemented, the board shall identify the
resources necessary for implementation and recommend a date when the
program shall commence. 
    (e) This section shall become inoperative upon a determination of
the board that (1) an appropriation has been provided in the Budget
Act of 2010 to fund the activities in Sections 2 and 3 of the act
amending this section in the 2009-2010 Regular Session and (2)
sufficient hiring authority has been granted to the board pursuant to
a budget change proposal to provide staffing to implement those
sections. Upon making that determination, the board shall notify the
Secretary of State and post that information on its Internet Web
site. This section shall be repealed on January 1 of the following
year. 
  SEC. 2.  Section 5076 is added to the Business and Professions
Code, 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 involving a complaint of alleged
violation of statutes or regulations against a firm or licensee.
   (f) Any documents related to a firm's peer review required for
submission as prescribed by the board in regulations shall not be a
public record and shall be exempt from public disclosure.
   (g) Nothing in this section requires any firm to become a member
of any professional organization.
    (h) This section shall become operative upon a determination of
the board that (1) an appropriation has been provided in the Budget
Act of 2010 to fund the activities in this section and Section 5076.1
and (2) sufficient hiring authority has been granted to the board
pursuant to a budget change proposal to provide staffing to implement
these sections. Upon making that determination, the board shall
notify the Secretary of State and post that information on its
Internet Web site.
  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 in good
standing to act as an advisory committee 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 shall have the authority to 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 regulation.
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.
   (c) The members of the committee shall be appointed to one-year
terms and may serve a maximum of eight consecutive terms.
    (d) This section shall become operative upon a determination of
the board that (1) an appropriation has been provided in the Budget
Act of 2010 to fund the activities in this section and Section 2 of
the act adding this section in the 2009-2010 Regular Session and (2)
sufficient hiring authority has been granted to the board pursuant to
a budget change proposal to provide staffing to implement these
sections. Upon making that determination, the board shall notify the
Secretary of State and post that information on its Internet Web
site.