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

California Assembly Bill 138 (Prior Session Legislation)

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 NUMBER: AB 138	AMENDED
	BILL TEXT

	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. 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 hiring
authority are provided to support these activities.  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. 
   SECTION 1.   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  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.   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) 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) Any report of a substandard peer review submitted to the board
in conjunction with this section shall be collected for
investigatory purposes.  
   (g) 
    (h)  Nothing in this section requires any firm to become
a member of any professional organization. 
   (i) 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. 2.   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  to act as an
advisory committee   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  shall have the authority to 
 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  regulation   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. 3.   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
pursuant to a budget change proposal to the board to provide staffing
to implement those sections.