BILL ANALYSIS
AB 138
Page 1
Date of Hearing: May 13, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 138 (Hayashi) - As Amended: April 23, 2009
Policy Committee: Business and
Professions Vote: 9 - 1
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill requires California-licensed accounting firms to
undergo a peer review of their accounting and auditing services.
Specifically, this bill:
1)Requires all accounting firms to undergo a peer review
process, which would be conducted by a peer review program
recognized by the California Board of Accountancy.
2)Requires CBA to appoint a peer review oversight committee and
adopt the necessary emergency regulations to implement the
program.
3)Makes implementation of the program subject to funds from the
Accountancy Fund being made available in the annual budget
act.
FISCAL EFFECT
1)Special fund costs in excess of $400,000 per year (Accountancy
Fund) for the workload associated with creating and
maintaining a peer review program. Included in that funding is
an estimated $160,000 in enforcement costs related to the
Attorney General's Office investigating an additional 16 cases
each year as a result of audit findings.
COMMENTS
1)Rationale . The author's intent in introducing this legislation
is to improve the quality of the services offered by
accounting firms by requiring a peer review of the firms'
AB 138
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work. The author asserts that the ongoing changes to
professional standards that are designed to ensure accuracy
and quality of accounting and auditing engagements make it
imperative that products and services provided to consumers
meet specific standards. She asserts that requiring firms to
go through the educational process of peer review will make
them better equipped to deliver high quality accounting and
auditing services.
2)Background . Peer review is a study, appraisal, or review of
the accounting and auditing work of a firm by a licensed CPA
who is unaffiliated with the firm being reviewed, and is done
in accordance with applicable professional standards. The
goal of peer review is to increase consumer protection through
a systemic review of accounting firms to ensure that work
conforms to professional standards. Peer review achieves this
goal in two ways: 1) by monitoring and promoting quality
accounting and auditing services provided by accounting firms,
and 2) providing the CBA with an enhanced enforcement
opportunity through reports of firms receiving substandard
peer reviews.
Forty-one state boards of accountancy currently require
mandatory peer review for licensure or license renewal, using
the peer review program developed and managed by the American
Institute of Certified Public Accountants (AICPA).
In 2008, the CBA submitted a Peer Review Report to the
Legislature and concluded "The Board believes that requiring
mandatory peer review is beneficial to consumers by ensuring
only qualified firms are practicing, and is advantageous to
firms by ensuring their personnel maintain a currency of
knowledge related to the services provided to clients."
Analysis Prepared by : Julie Salley-Gray / APPR. / (916)
319-2081