BILL NUMBER: AB 138 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 10, 2009
INTRODUCED BY Assembly Member Hayashi
JANUARY 20, 2009
An act to amend, repeal, and add amend
Section 5076 of, and to add Section 5076.1
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 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 bill would specify that these
provisions shall be 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
, 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 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 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) "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.
(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 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.
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.
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. SEC. 2. 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 two-year terms and may serve a maximum
of eight four 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.
SEC. 3. 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.