BILL ANALYSIS Ó
SB 773
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Date of Hearing: June 28, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 773 (Negrete McLeod) - As Amended: June 20, 2011
SENATE VOTE : 38-0
SUBJECT : Accountants
SUMMARY : Establishes requirements for ethics courses that
certified public accountants (CPAs) must complete to gain
licensure. Specifically, this bill :
1)Requires, in addition to completing at least 24 semester units
in accounting subjects and 24 semester units in
business-related subjects as required by existing regulations,
an applicant applying for licensure as a CPA to document, to
the satisfaction of the Board of Accountancy (Board), the
completion of an additional 20 semester units of accounting
study and 10 semester units or 15 quarter units of ethics
study, as required by current law.
2)Specifies that satisfactory evidence of educational
qualifications must take the form of certified transcripts of
the applicant's college record, mailed directly to the Board
from the educational institution. In unusual circumstances
the Board may accept such other evidence as it deems
appropriate and reasonably conclusive. For foreign education,
in addition to certified transcripts of the applicant's
college record, satisfactory evidence shall usually take the
form of an evaluation of educational credentials by a
credentials evaluation service approved by the Board.
3)Requires, between January 1, 2014, and January 1, 2017, the 10
semester units or 15 quarter units of ethics study to be
completed from the following course areas: business law; legal
environment of business; accounting ethics or accountant's
professional responsibilities; corporate governance; ethics,
morals, or fraud; organizational behavior; human resources
management; management of organizations; business, government,
and society; business leadership; or, non-accounting courses
specific to professional responsibilities.
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4)Requires, on and after January 1, 2017, three of the 10
semester units or four of the 15 quarter units of ethics study
to be met in a course or courses at an upper division level or
higher course study devoted to accounting ethics or
accountants professional responsibilities. The remaining
seven semester units or 11 quarter units must be completed
from the list of disciplines specified in 3), above, or as
follows, with no more than three semester units or four
quarter units from the following: philosophy; religion;
theology; sociology; psychology; cultural, ethnic, or
diversity studies; economics; or, political science. Courses
in these disciplines must have as its course title the name of
the discipline or, at a minimum, include the following words
or terms in the course title in addition to the name of the
discipline: "Introduction," "Introductory," "General,"
"Fundamentals of," "Principles," "Foundation of," or "Survey
of."
5)Allows applicants to obtain credit for up to one semester unit
of ethics study for completion of a course specific to
financial statement audits.
6)Specifies that one quarter unit is equivalent to two-thirds of
one semester unit.
7)Sunsets the Advisory Committee on Accounting Ethics Curriculum
(Advisory Committee) and related provisions on January 1,
2014.
8)Removes a requirement that the Board adopt Advisory Committee
recommendations via regulation, and related provisions.
EXISTING LAW
1)Licenses and regulates CPAs under the Accountancy Act by the
Board within the Department of Consumer Affairs (DCA).
2)Establishes education requirements for CPA licensure,
including specified ethics courses.
3)Establishes the Advisory Committee within the Board to
recommend to the Board ethics study guidelines, as specified,
and authorizes the Advisory Committee to determine that a
course or a portion of a course of accounting education
satisfies the ethics study requirement.
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FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "In
2009, the Legislature enacted a provision requiring applicants
for the CPA license to have at least 150 hours of education,
including 10 hours devoted to ethics.
"Current law requires an advisory committee to develop
recommendations for how the 10 hours of ethics education can be
achieved in the academic setting. That committee completed its
work on June 7th."
Background . Legislation enacted in 2009 revised CPA license
standards to increase the hours of education required for
licensure from 120 hours to 150 hours, beginning January 1,
2014. It also required that the education include at least 10
units of ethics study and 20 units of accounting study. The 10
units of ethics study must meet guidelines established by the
Board upon the advice of the Advisory Committee , which was also
created by the bill and charged with making recommendations to
the Board by June 1, 2012. The Advisory Committee has finished
that task and this bill implements its recommendations.
Beginning January 1, 2014, and until January 1, 2017, CPA
candidates must satisfy ethics course requirements by completing
10 semester units or 15 quarter units from the following course
areas: business law; legal environment of business; accounting
ethics or accountant's professional responsibilities; corporate
governance; ethics, morals, or fraud; organizational behavior;
human resources management; management of organizations;
business, government, and society; business leadership; or,
non-accounting courses specific to professional
responsibilities.
On and after January 1, 2017, CPA candidates must complete three
semester units or four quarter units in a course or courses at
an upper division level or higher course study devoted to
accounting ethics or accountants professional responsibilities.
The remaining seven semester units or 11 quarter units can be
completed from the list of disciplines specified above or from
the following: philosophy; religion; theology; sociology;
psychology; cultural, ethnic, or diversity studies; economics;
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or, political science. Courses in these subjects cannot exceed
three semester units or four quarter units.
Support . The California Society of CPAs writes, "We believe the
Ethics Study Guideline adopted by the (Advisory Committee) and
set forth in your SB 773 contains both the breadth and depth of
course requirements needed to produce CPA candidates with the
necessary 'framework of ethical reasoning, professional values,
and attitudes for exercising professional skepticism and other
behavior that is in the best interest of the investing and
consuming public and the profession' as required by SB 819."
Related legislation . AB 431 (Ma) authorizes the Board to
establish a retired status license for CPAs and PAs. This bill
is pending in Senate Appropriations Committee.
SB 542 (Price) extended the sunset date on the Board and
extended CPA peer review provisions to correspond with the
Board's sunset date. This bill has been amended to address an
unrelated subject.
Previous legislation . SB 819 (Yee), Chapter 308, Statutes of
2009, increases the education requirement to obtain a CPA
license from 120 hours to 150 hours, effective January 1, 2014,
and establishes the Advisory Committee to recommend ethics study
guidelines to the Board.
AB 138 (Hayashi), Chapter 312, Statutes of 2009, requires, until
January 1, 2014, California-licensed accounting firms to undergo
a peer review of their accounting and auditing services every
three years.
REGISTERED SUPPORT / OPPOSITION :
Support
California Society of CPAs
Opposition
None on file
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301
SB 773
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