A08555-A
STATE OF NEW YORK
________________________________________________________________________
8555--A
2003-2004 Regular Sessions
IN ASSEMBLY
May 15, 2003
___________
Introduced by COMMITTEE ON RULES -- (at request of M. of A. Canestrari)
-- read once and referred to the Committee on Higher Education --
committee discharged, bill amended, ordered reprinted as amended and
recommitted to said committee
AN ACT to amend the education law, in relation to the practice of public
accountancy
The People of the State of New York, represented in Senate and Assem-
bly, do enact as follows:
1 Section 1. Legislative findings. The legislature hereby declares that
2 serious issues have arisen with the profession of public accountancy as
3 a result of various revelations and questions regarding financial
4 reporting. Restoring public confidence and investor reliance on the
5 profession of public accountancy requires establishment of a program in
6 regulation, enforcement and disciplinary procedures unique from other
7 professions in this state to complement regulation of the practice of
8 public accountancy on the federal level and the changes in process that
9 are transforming public accountancy from a largely self-regulated
10 profession to a profession more highly regulated by government. This
11 program gives the board of regents the authority, resources and stature
12 to meet current challenges to this profession, and to coordinate with
13 the Securities and Exchange Commission and the Public Company Accounting
14 Oversight Board established under the Sarbanes-Oxley Act of 2002 (Public
15 Law 107-204).
16 § 2. Section 7401 of the education law, as amended by chapter 994 of
17 the laws of 1971, is amended to read as follows:
18 § 7401. Definition of practice of public accountancy. 1. The practice
19 of the profession of public accountancy is defined as [holding one's
20 self out to the public, in consideration of compensation received or to
21 be received, offering to perform or performing for other persons,
22 services which involve signing, delivering or issuing or causing to be
23 signed, delivered or issued any financial, accounting or related state-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD14534-02-3
A. 8555--A 2
1 ment or any opinion on, report on, or certificate to such statement if,
2 by reason of the signature, or the stationery or wording employed, or
3 otherwise, it is indicated or implied that the practitioner has acted or
4 is acting, in relation to said financial, accounting or related state-
5 ment, or reporting as an independent accountant or auditor or as an
6 individual having or purporting to have expert knowledge in accounting
7 or auditing]:
8 a. offering to perform or performing attest or compilation services,
9 as defined in section seventy-four hundred one-a of this article;
10 b. offering to perform or performing tax return preparation or tax
11 advisory services while holding out to the public under the title of
12 "Certified Public Accountant" or "Public Accountant" or under the desig-
13 nation of "CPA" or "PA" in consideration of compensation received or to
14 be received;
15 c. incident to the services described in paragraphs a and b of this
16 subdivision, rendering professional services to clients, including
17 employers not required to register under section seventy-four hundred
18 eight of this article, for compensation in any or all matters relating
19 to accounting concepts and to the recording, presentation, or certif-
20 ication of financial information or data; or
21 d. offering to perform or performing for other persons one or more
22 types of services, exclusive of services set forth in paragraphs a, b,
23 and c of this subdivision, involving the use of professional skills or
24 competencies of the licensed accountant, while holding one's self out as
25 a certified public accountant or public accountant or using a "CPA" or
26 "PA" designation, including professional services rendered to employers
27 not required to register under section seventy-four hundred eight of
28 this article.
29 2. Any person not licensed pursuant to this article, and any other
30 legal entity not registered pursuant to this article, may offer the
31 services set forth in paragraphs b, c, and d of subdivision one of this
32 section if the person or other legal entity does not hold itself out as
33 a certified public accountant or public accountant or a firm authorized
34 to practice public accountancy under this article, or otherwise solicit
35 or advertise for clients using a "CPA" or "PA" designation or other
36 similar designation in violation of subdivision three of section seven-
37 ty-four hundred eight of this article.
38 § 3. The education law is amended by adding a new section 7401-a to
39 read as follows:
40 § 7401-a. Definitions. As used in this article: 1. "Certified public
41 accountant" means any person who has received a license or authorization
42 from the department as a certified public accountant for the practice of
43 public accountancy.
44 2. "Public accountant" means any person who has received a license
45 from the department for the practice of public accountancy.
46 3. "Attest" means the providing by licensees of the following public
47 accountancy services which all require the meeting of independence stan-
48 dards established under section seventy-four hundred two-a of this arti-
49 cle:
50 a. any audit of a financial statement to be performed in accordance
51 with generally accepted auditing standards or other similar standards
52 developed by an entity established by federal statute, or by a recog-
53 nized international or national professional accountancy organization,
54 acceptable to the department in accordance with the commissioner's regu-
55 lations.
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1 b. any review of a financial statement to be performed in accordance
2 with standards developed by an entity established by federal statute, or
3 by a recognized international or national professional accountancy
4 organization, acceptable to the department in accordance with the
5 commissioner's regulations.
6 c. any examination of prospective financial information to be
7 performed in accordance with standards developed by an entity estab-
8 lished by federal statute, or by a recognized international or national
9 professional accountancy organization, acceptable to the department in
10 accordance with the commissioner's regulations.
11 d. any attestation engagement to be performed in accordance with
12 attestation standards developed by an entity established by federal
13 statute, or by a recognized international or national professional
14 accountancy organization, acceptable to the department in accordance
15 with the commissioner's regulations.
16 4. "Compilation" means providing a service to be performed in accord-
17 ance with standards developed by an entity established by federal stat-
18 ute, or by a recognized international or national professional accoun-
19 tancy organization, acceptable to the department in accordance with the
20 commissioner's regulations, and that is presenting in the form of finan-
21 cial statements, information that is the representation of management or
22 owners without undertaking to express any assurance on the statements.
23 5. "Firm" means a partnership, a professional service limited liabil-
24 ity partnership, professional service limited liability company, profes-
25 sional corporation or a sole proprietorship.
26 6. "Non-CPA services" means those services that certified public
27 accountants may lawfully provide and that are not prohibited as unau-
28 thorized practice of public accountancy when provided by a person who is
29 not licensed as a certified public accountant or public accountant
30 pursuant to this article.
31 § 4. Section 7402 of the education law, as amended by chapter 994 of
32 the laws of 1971, is amended to read as follows:
33 § 7402. Practice of public accountancy and use of title "certified
34 public accountant" or "public accountant". Only a person licensed or
35 otherwise authorized to practice under this article shall practice
36 public accountancy [and] or use the title "certified public accountant"
37 or the designation ["C.P.A."] "CPA" or "public accountant" or the desig-
38 nation "PA" or any other derivative or designation provided in section
39 seventy-four hundred eight of this article.
40 § 5. The education law is amended by adding a new section 7402-a to
41 read as follows:
42 § 7402-a. Regulation of the practice of public accountancy. 1. The
43 board of regents is empowered to establish standards of practice for
44 attest and compilation services by certified public accountants and
45 public accountants, and by firms registered under section seventy-four
46 hundred eight of this article, provided that such standards shall not
47 conflict with any applicable standard adopted pursuant to federal law,
48 and in the development and establishment of such standards of practice,
49 the board shall consider applicable federal and professional standards
50 for attest and compilation services.
51 2. A certified public accountant who qualified for licensure based
52 upon experience in accounting, tax return preparation, or tax advisory
53 services and who is responsible for supervising attest or compilation
54 services and signs or authorizes someone to sign the accountant's report
55 on the financial statement on behalf of the firm, shall meet competency
56 and experience requirements satisfactory to the state board for public
A. 8555--A 4
1 accountancy and in accordance with the rules of the regents. The experi-
2 ence may include employment in the practice of public accountancy or
3 such other equivalent experience as determined by the state board for
4 public accountancy and shall be supervised and certified by a certified
5 public accountant or public accountant in good standing licensed in this
6 state.
7 3. In any disciplinary proceeding against a licensee on a charge of
8 committing unprofessional conduct in the rendering of non-CPA services
9 based upon:
10 a. violation of a rule of the board of regents or a regulation by the
11 commissioner adopted pursuant to subdivision nine of section sixty-five
12 hundred nine of this title; or
13 b. practicing with gross negligence, gross incompetence, negligence,
14 or incompetence under subdivision two of section sixty-five hundred nine
15 of this title. Such disciplinary proceeding shall be dismissed upon
16 presentation of substantial evidence that the licensee has substantially
17 complied with standards of practice for such non-CPA service promulgated
18 by an entity established by New York or federal statutes, or by an
19 international or national organization whose practice standards for such
20 non-CPA service are generally accepted by other licensing jurisdictions
21 in the United States. An assertion of substantial compliance with such
22 standards of practice may be pleaded in the licensee's answer to the
23 charges or asserted as grounds for a motion to dismiss the charges. A
24 ruling on substantial compliance shall be made by the administrative
25 officer pursuant to paragraph b of subdivision three of section sixty-
26 five hundred ten of this title. Any ruling by the administrative officer
27 on an assertion of substantial compliance which is adverse to the licen-
28 see shall be referred directly to the regents review committee for its
29 review under subdivision four of section sixty-five hundred ten of this
30 title, and the adversary hearing on such charges shall be adjourned
31 pending a decision by the board of regents on such ruling.
32 § 6. The education law is amended by adding two new sections 7403-a
33 and 7403-b to read as follows:
34 § 7403-a. Investigations of professional misconduct and disciplinary
35 proceedings by the state board for public accountancy. 1. Complaints of
36 professional misconduct by a licensee shall be investigated and prose-
37 cuted by the state board for public accountancy in accordance with
38 section sixty-five hundred ten of this title.
39 2. For purposes of investigations, disciplinary proceedings or hear-
40 ings conducted by the state board for public accountancy, all references
41 to "the department" in subdivisions one through three and subdivision
42 seven of section sixty-five hundred ten of this title shall be deemed to
43 mean and refer to the state board for public accountancy.
44 3. Notwithstanding any other provision of law to the contrary, in any
45 investigation under subdivision one of section sixty-five hundred ten of
46 this title, the licensee being investigated shall have the right to be
47 interviewed in order to provide an explanation of the issues under
48 investigation. The licensee may have counsel present during the inter-
49 view, and shall have the right in advance of such interview to a parti-
50 cularized written statement of the alleged professional misconduct and
51 issues under investigation by the state board for public accountancy.
52 The licensee may submit written comments and expert opinion at any time
53 during the investigation. Providing an opportunity for the interview
54 shall be a condition precedent to any preparation of charges under para-
55 graph c of subdivision one of section sixty-five hundred ten of this
56 title.
A. 8555--A 5
1 4. Notwithstanding any other provision of law to the contrary, a
2 violations committee of the state board for public accountancy under
3 paragraph c of subdivision two of section sixty-five hundred ten of this
4 title shall consist of three members of such board, one of whom shall be
5 a public representative.
6 5. Notwithstanding any other provision of law to the contrary, in any
7 adversary proceeding under subdivision three of section sixty-five
8 hundred ten of this title, the licensee shall have the right in advance
9 of the hearing to examine and copy any report of investigation and docu-
10 mentary or testimonial evidence and summaries of evidence in the state
11 board for public accountancy's possession relating to the subject matter
12 of the complaint and charges against the licensee. The board may charge
13 a reasonable fee for such copying.
14 6. The administrative officer assigned to a hearing panel by the state
15 board for public accountancy pursuant to paragraph b of subdivision
16 three of section sixty-five hundred ten of this title shall not be a
17 current employee of the state board for public accountancy or the state
18 education department.
19 7. Any hearing conducted by the state board for public accountancy
20 pursuant to subdivision two or three of section sixty-five hundred ten
21 of this title shall be commenced within one hundred eighty days of the
22 preparation of charges under paragraph c of subdivision one of such
23 section, except that an adjournment of the initial hearing date may be
24 granted by the administrative officer assigned to the hearing panel,
25 upon good cause shown.
26 8. For any hearing conducted by the state board for public accountancy
27 under subdivision three of section sixty-five hundred ten of this title,
28 the last hearing date must be held within one hundred eighty days of the
29 first hearing date. Either party, for good cause shown, may request that
30 the administrative officer extend the last day of the hearing beyond one
31 year. The written report of the hearing panel pursuant to paragraph d
32 of subdivision three of section sixty-five hundred ten of this title
33 shall be rendered within ninety days of the last hearing date.
34 9. Notwithstanding any other provision of law to the contrary, the
35 department shall notify the licensee at least thirty days before the
36 meeting of the regents review committee pursuant to paragraph b of
37 subdivision four of section sixty-five hundred ten of this title. The
38 regents review committee shall transmit a written report of its review
39 to the board of regents under paragraph b of subdivision four of such
40 section within sixty days of the conclusion of the meeting of the
41 regents review committee.
42 10. With respect to any hearing conducted by the state board for
43 public accountancy under section sixty-five hundred ten of this title,
44 the regents shall render a decision and order under paragraph c of
45 subdivision four of such section within sixty days of its receipt of the
46 written report of the regents review committee.
47 § 7403-b. Penalties for professional misconduct. Notwithstanding any
48 provision of section sixty-five hundred eleven of this title, a certi-
49 fied public accountant or public accountant or firm that is found guilty
50 of professional misconduct may be subject to a fine not to exceed ten
51 thousand dollars for a licensed individual or twenty thousand dollars
52 for a firm, upon each specification of charges of which the respondent
53 is determined to be guilty. If the professional misconduct involved
54 fraud, deceit, manipulation or deliberate or reckless disregard of this
55 chapter, rules of the board of regents or regulations of the commission-
56 er, the amount of fine for each specification shall not exceed the
A. 8555--A 6
1 greater of fifty thousand dollars for a licensed individual or two
2 hundred fifty thousand dollars for a firm.
3 § 7. Section 7404 of the education law, as added by chapter 987 of the
4 laws of 1971, paragraph 4 of subdivision 1 as added by chapter 988 of
5 the laws of 1971 and paragraph 8 of subdivision 1 as amended by chapter
6 62 of the laws of 1989, is amended to read as follows:
7 § 7404. Requirements for a license as a certified public accountant.
8 1. To qualify for a license as a certified public accountant, an appli-
9 cant shall fulfill the following requirements:
10 (1) Application: file an application with the department;
11 (2) Education: have received an education, including a bachelor's or
12 higher degree based on a program in accountancy, in accordance with the
13 commissioner's regulations;
14 (3) Experience: have experience satisfactory to the state board for
15 public accountancy and in accordance with the commissioner's regulations
16 involving experience in providing any one or a combination of the
17 following professional services while under the supervision of a certi-
18 fied public accountant or public accountant licensed in New York: (a)
19 attest; (b) auditing; (c) tax return preparation; (d) tax advisory
20 services. Provided however that the state board for public accountancy
21 may in addition provide for qualifying experience based upon a combina-
22 tion of the services specified in paragraphs (a), (b), (c) and (d),
23 together with experience involving generally accepted accounting princi-
24 ples and such other professional services satisfactory to the state
25 board for public accountancy;
26 (4) Examination: pass a written examination satisfactory to the board
27 and in accordance with the commissioner's regulations and the require-
28 ment with respect to such examination may not be waived.
29 (5) Age: be at least twenty-one years of age;
30 (6) Citizenship: meet no requirements as to United States citizenship;
31 (7) Character: be of good moral character as determined by the depart-
32 ment; and
33 (8) Fees: pay a fee of two hundred twenty dollars to the department
34 for admission to a department conducted examination and for an initial
35 license, a fee of one hundred fifteen dollars for each reexamination, a
36 fee of one hundred thirty-five dollars for an initial license for
37 persons not requiring admission to a department conducted examination,
38 and a fee of two hundred ten dollars for each triennial registration
39 period.
40 2. In lieu of professional requirements specified in subparagraphs
41 [(2)] two and [(3)] three of subdivision one of this section, fifteen
42 years in the practice of public accountancy satisfactory to the board
43 may be accepted by the department.
44 § 8. Section 7406 of the education law, as added by chapter 987 of the
45 laws of 1971 and subdivision 2 as amended by chapter 62 of the laws of
46 1989, is amended to read as follows:
47 § 7406. Limited permits and temporary practice permits. 1. Limited
48 permits. On recommendation of the board, the department may issue a
49 limited permit to an applicant of good moral character who is the holder
50 of a certificate, license or degree in a foreign country constituting a
51 recognized qualification for the performance in such country of the acts
52 set forth in section seventy-four hundred one of this article, provided
53 the applicant has professional qualifications satisfactory to the board,
54 the applicant resides or has a place for the regular transaction of
55 business within the state, and equal recognition is granted by the
56 foreign country concerned to certified public accountants and public
A. 8555--A 7
1 accountants licensed in this state. Such limited permit shall be valid
2 for a period of two years and may be renewed on recommendation of the
3 board. Such permit shall authorize the applicant to use only the title
4 or designation under which he is generally known in his own country,
5 followed by the name of the country from which he received his certif-
6 icate, license or degree, notwithstanding the provisions of subdivision
7 two of section seventy-four hundred eight of this article.
8 2. Requirements for temporary practice. a. A certified public account-
9 ant, licensed by another state or other jurisdiction of the United
10 States and in good standing, may temporarily practice public accountancy
11 in this state, if the certified public accountant:
12 (1) Holds a valid license to practice public accountancy in the other
13 state or jurisdiction.
14 (2) Concurrently practices public accountancy in the other state or
15 jurisdiction.
16 (3) Obtains from the department a temporary practice permit prior to
17 performing the temporary work specifying the dates within the calendar
18 year when such right to practice may be exercised.
19 b. The temporary practice permit allows a certified public accountant,
20 who meets the requirements of paragraph a of this subdivision to work
21 for not more than sixty days in this state during any calendar year.
22 3. Applications for temporary practice permits shall be processed by
23 the department within thirty days. Pending such thirty day application
24 period, the applicant may practice and such permit shall be retroactive
25 to the date of initial application, provided, however, that if the
26 application is denied the applicant shall cease any and all work in the
27 state of New York.
28 4. The department shall allow for an automatic sixty day renewal of a
29 temporary practice permit, provided that the applicant remains in good
30 standing and in compliance with all applicable laws, rules and regu-
31 lations.
32 5. Failure to meet requirements for temporary practice permit. A
33 person who wishes to practice public accountancy in this state but does
34 not meet the requirements of paragraph a of subdivision two of this
35 section is subject to the full licensing and registration requirements
36 of this article.
37 6. Notwithstanding any provision of law to the contrary, a certified
38 public accountant who obtains a temporary practice permit under this
39 section and files an application for full licensing under section seven-
40 ty-four hundred four of this article on or before the termination date
41 of such temporary practice permit may continue to practice under such
42 permit for a period coterminous with the period during which his or her
43 application for licensure remains pending with the department.
44 7. Fees. The fee for each limited permit and temporary practice permit
45 and each renewal shall be [one hundred five dollars] established in
46 regulation by the board of regents.
47 § 9. Section 7407 of the education law, as added by chapter 987 of the
48 laws of 1971, is amended to read as follows:
49 § 7407. Exempt persons. Nothing contained in this article shall be
50 construed to prohibit:
51 [a.] 1. Any person other than a certified public accountant or public
52 accountant who is an officer of a corporation or partner of a partner-
53 ship or sole proprietor of a business enterprise or member of a joint
54 venture or member of a committee appointed by stockholders, creditors,
55 courts, trustees, executors or administrators, or an employee of any of
56 the foregoing, in his or her capacity as such, from signing, delivering,
A. 8555--A 8
1 or issuing any financial, accounting or related statement or report
2 thereon, relating to said corporation, partnership, business venture,
3 joint venture, committee, trust or estate, provided, however, that in so
4 doing such person does not hold himself or herself out to be a certified
5 public accountant or public accountant;
6 [b.] 2. An attorney-at-law or [partnership] firm of attorneys-at-law
7 from signing a financial, accounting or related statement or report
8 thereon, prepared by [him or them] the attorney-at-law or firm of attor-
9 neys-at-law as incidental to the practice of law;
10 [c.] 3. Any individual from serving as an employee of a certified
11 public accountant, public accountant or [partnership licensed under this
12 article] any firm registered pursuant to section seventy-four hundred
13 eight of this article;
14 [d.] 4. Any individual, not engaged in practice as a certified public
15 accountant or public accountant within the state, from performing
16 services within the state which are incidental to the practice conducted
17 by him outside the state;
18 [e.] 5. Any official or employee of a governmental unit, agency or
19 instrumentality in the performance of his or her official duties from
20 signing, delivering or issuing any financial, accounting, or related
21 statement or report thereon relating to said unit, agency or instrumen-
22 tality; or
23 [f.] 6. A corporation chartered in the state of New York to engage in
24 the practice of public accountancy and so engaged as its principal
25 activity on and before the first day of July, nineteen hundred fifty-
26 nine, from continuing in such practice as long as its corporate acts
27 comply with the board of regents rules, provided all employees of such
28 corporation performing any acts constituting the practice of public
29 accountancy as defined herein and who are not certified public account-
30 ants or public accountants licensed under this article shall in the
31 performance of such acts be under the supervision of certified public
32 accountants or public accountants licensed in this state.
33 § 10. Section 7408 of the education law, as added by chapter 987 of
34 the laws of 1971, the opening paragraph of subdivision 1 and subdivision
35 2 as amended by chapter 994 of the laws of 1971 and paragraph e of
36 subdivision 1 as amended by chapter 62 of the laws of 1989, is amended
37 to read as follows:
38 § 7408. Special provisions. 1. Nothing contained in this article
39 shall be deemed to prohibit two or more certified public accountants or
40 two or more public accountants, or any combination thereof, from forming
41 a [partnership] firm; provided, however, that no [partnership] firm
42 shall use the words "certified public accountant" or "certified public
43 accountants" or the letters ["C.P.A.'s"] "CPA" or "CPAs" in connection
44 with its name unless the sole proprietor or each partner, member or
45 shareholder of such [partnership] firm, resident or engaged within the
46 United States in practice is in good standing as a certified public
47 accountant of one or more of the states or political subdivisions of the
48 United States, and the sole proprietor or each partner, member or share-
49 holder thereof resident or engaged in practice within the state is
50 licensed under this article.
51 2. The commissioner, with the assistance of the state board for public
52 accountancy, shall establish in regulations a registration process for
53 certified public accountancy firms and public accountancy firms, includ-
54 ing the imposition of application and registration fees and procedures
55 to suspend or revoke a registration or take other disciplinary action
56 for cause.
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1 a. A registration shall be issued to a [partnership] firm upon payment
2 of the fee prescribed by the commissioner upon application showing that:
3 (1) At least one partner, member or shareholder of such [partnership]
4 firm or the sole proprietor is licensed under this article and his or
5 her license to practice is not currently suspended, annulled or revoked
6 in any jurisdiction and he or she is regularly engaged in practice on
7 behalf of the partnership within the state;
8 (2) The [partnership] firm other than a sole proprietorship consists
9 of at least two present partners, members or shareholders; and
10 (3) The [partnership] firm other than a sole proprietorship contains
11 at least as many present partners, members or shareholders as the total
12 number of names in the firm name, or, where the word "company" or abbre-
13 viation "co." is used, the number of present partners shall be greater
14 than the number of names in the firm name.
15 b. Such registration may be revoked or other disciplinary action
16 against the firm may be taken by the board of regents after a hearing
17 conducted by the state board for public accountancy in accordance with
18 the provisions of section sixty-five hundred ten of this title upon
19 proof:
20 (1) That the registration was obtained by either misrepresentation or
21 suppression of any material fact;
22 (2) That the license or authorization to practice of any partner, sole
23 proprietor, member or shareholder is suspended, annulled or revoked in
24 any jurisdiction;
25 (3) That any partner, sole proprietor, member or shareholder in such a
26 [partnership] firm is or has been engaged in the practice of public
27 accountancy in this state who is not licensed in this state; [or]
28 (4) That the [partnership] firm failed to file the written notifica-
29 tion required pursuant to paragraph d of this subdivision of this
30 section;
31 (5) That the firm has willfully interfered with or obstructed the
32 investigation by the department of any licensee who is a partner, sole
33 proprietor, member, shareholder, principal or employee of the firm,
34 provided that no firm shall be disciplined based solely on its assertion
35 of any privilege recognized by law; or
36 (6) That the firm failed to undergo a review of its practice of public
37 accountancy pursuant to section seventy-four hundred ten of this article
38 at least once every three years.
39 c. Personal service on any general partner, member, shareholder or
40 sole proprietor of a notice of hearing to revoke a [partnership] firm
41 registered hereunder shall be deemed service on the [partnership] firm.
42 d. A [partnership] firm registered to practice pursuant to this
43 section shall file with the department on or before July first of each
44 year written notification of:
45 (1) Any admission of a partner, member or shareholder,
46 (2) Any resignation, retirement or death of a partner, member or
47 shareholder,
48 (3) Any termination of [partnership] a firm, or
49 (4) Any occurrence of any event or events which would eliminate as to
50 such [partnership] firm's conformity with the applicable requirements of
51 this section.
52 e. [Partnerships] Firms shall register triennially and pay a fee of
53 fifty dollars.
54 3. Any person shall be guilty of a class A misdemeanor who shall use,
55 in connection with the practice of public accountancy, or in any manner
56 tending to imply that he is an independent accountant or auditor, the
A. 8555--A 10
1 designations "chartered accountant", "certified accountant", "expert
2 accountant", "certified tax accountant", "tax accountant", "enrolled
3 accountant", "enrolled public accountant", "registered accountant",
4 "licensed accountant", "incorporated accountant", "registered public
5 accountant", "licensed public accountant", or any abbreviation thereof,
6 or the letters "C.A.", "E.A.", "C.T.A.", "T.A.", "E.P.A.", "R.A.",
7 "L.A.", "I.A.", "P.A.", "R.P.A.", or, "L.P.A.", except as provided else-
8 where in this article, or any other designation tending to imply that he
9 or she has expert knowledge in accounting or auditing.
10 4. No firm shall hold itself out to the public, in consideration of
11 compensation received or to be received, for the practice of public
12 accountancy as defined in section seventy-four hundred one of this arti-
13 cle in this state or use the title "CPA" or "CPA firm" or "PA" or "PA
14 firm" without a registration from the department. As a condition of
15 registration or its renewal, the firm shall demonstrate that it has
16 complied with the provisions of this article, any other applicable laws
17 and such other requirements as the department may impose, consistent
18 with this article.
19 5. Nothing in this subdivision shall prevent an individual enrolled
20 to practice before the United States internal revenue service, pursuant
21 to regulations promulgated by the internal revenue service, from using
22 the designation "enrolled agent" or the letters "E.A.". This subdivision
23 shall not apply to any designations authorized by a national credential-
24 ing body recognized by the department.
25 6. For purposes of this section, the term "member" means a person who
26 has been admitted as a member of a professional service limited liabil-
27 ity company in accordance with the terms and provisions of the limited
28 liability company law and the operating agreement of such professional
29 service limited liability company, and has a membership interest in such
30 limited liability company with the rights, obligations, preferences and
31 limitations specified under the limited liability company law and such
32 operating agreement.
33 7. An individual not licensed as a certified public accountant or
34 public accountant, or an entity not registered pursuant to this article
35 may prepare a financial statement so long as it is not accompanied by
36 any statement, report, or wording indicating such individual is a certi-
37 fied public accountant or public accountant or that such entity is
38 registered to practice public accountancy under this article. Such non-
39 licensed individuals and non-registered entities shall include the
40 following written language when preparing financial statement(s):
41 a. "(I, We) have prepared the accompanying financial statement(s) of
42 (name of business or organization) as of the (time period) and for the
43 (period) then ended. This presentation is limited to preparing, in the
44 form of a financial statement(s), information that is the representation
45 of (name of business or organization)"; and
46 b. "(I, We) have not audited or reviewed the accompanying financial
47 statement(s) and accordingly do not express an opinion or any other form
48 of assurance on them."
49 § 11. Section 7409 of the education law, as added by chapter 805 of
50 the laws of 1990, is amended to read as follows:
51 § 7409. Mandatory continuing education. 1. [(a)] a. Each licensed
52 certified public accountant and public accountant required under article
53 one hundred thirty of this [chapter] title to register triennially with
54 the department to practice in the state shall comply with the provisions
55 of the mandatory continuing education requirements except as set forth
56 in [paragraphs (b) and (c)] paragraph b of this subdivision. Certified
A. 8555--A 11
1 public accountants and public accountants who do not satisfy the manda-
2 tory continuing education requirements shall not practice until they
3 have met such requirements, they have paid all applicable fees, and they
4 have been issued a registration or conditional registration certificate.
5 [(b)] b. Certified public accountants and public accountants shall be
6 exempt from the mandatory continuing education requirement for the
7 triennial registration period during which they are first licensed. In
8 accordance with the intent of this section, adjustments to the mandatory
9 continuing education requirement may be granted by the department for
10 reasons of health certified by a physician, for extended active duty
11 with armed forces of the United States, or for other good cause accepta-
12 ble to the department which may prevent compliance.
13 [(c) A licensed certified public accountant and a public accountant
14 not engaged in public practice as an individual practitioner, a partner
15 of a partnership, a shareholder of a professional service corporation,
16 or an employee of such practice units, shall be exempt from the mandato-
17 ry continuing education requirement and payment of the mandatory contin-
18 uing education fee upon the filing of a statement with the department
19 declaring such status. Any licensee who returns to the public practice
20 of certified public accountancy or public accountancy during the trien-
21 nial registration period shall notify the department prior to reentering
22 the profession and shall pay the current mandatory continuing education
23 fee and shall meet such mandatory continuing education requirements as
24 shall be prescribed by regulations of the commissioner.]
25 2. a. During each year of the triennial registration period beginning
26 September first, nineteen hundred ninety and ending September first,
27 nineteen hundred ninety-three and each registration period thereafter
28 but ending on the period that ends on December thirty-first, two thou-
29 sand three, an applicant for registration shall have the option of
30 [(a)]: (1) completing a minimum of forty contact hours of acceptable
31 formal continuing education in recognized areas of study, or [(b)] (2)
32 completing a minimum of twenty-four contact hours of acceptable formal
33 continuing education concentrated in any one of the following three
34 subject areas: auditing, accounting, or taxation.
35 b. During the triennial registration period beginning January first,
36 two thousand four and ending December thirty-first, two thousand six and
37 each registration period thereafter, an applicant for registration shall
38 complete no less than one hundred twenty hours of acceptable formal
39 continuing education in recognized areas of study, with a minimum of
40 twenty hours in each year.
41 c. A licensee who has not satisfied the mandatory continuing education
42 requirements shall not be issued a triennial registration certificate by
43 the department and shall not practice unless and until a conditional
44 registration certificate is issued as provided in subdivision three of
45 this section. No hourly credits may be transferred from one year to a
46 subsequent year. The individual licensee shall determine the selection
47 of courses or programs of study pursuant to subdivision four of this
48 section.
49 3. The department, in its discretion, may issue a conditional regis-
50 tration to a licensee who fails to meet the continuing education
51 requirements established in subdivision two of this section but who
52 agrees to make up any deficiencies and take any additional education
53 which the department may require. The fee for such a conditional regis-
54 tration shall be the same as, and in addition to, the fee for the trien-
55 nial registration. The duration of such conditional registration shall
56 be determined by the department. Any licensee who is notified of the
A. 8555--A 12
1 denial of registration for failure to submit evidence, satisfactory to
2 the department, of required continuing education and who practices
3 public accountancy without such registration, may be subject to disci-
4 plinary proceedings pursuant to section [six thousand five] sixty-five
5 hundred ten of this [chapter] title.
6 4. As used in subdivision two of this section, "acceptable formal
7 continuing education" shall mean formal programs of learning which
8 contribute to [professional practice and which meet the standards
9 prescribed by regulations of the commissioner] the growth in the profes-
10 sional knowledge and professional competence of the licensee. Recog-
11 nized areas of study shall include but not be limited to: accounting,
12 attest, auditing, taxation, advisory services, specialized knowledge and
13 applications related to specialized industries, and such other [techni-
14 cal] areas appropriately related to the practice of accounting as may be
15 acceptable to the department. To fulfill the mandatory continuing educa-
16 tion requirement, programs must be taken from sponsors approved by the
17 department, pursuant to the regulations of the commissioner.
18 5. The mandatory continuing education fee shall be determined by the
19 regents, shall be payable on or before the first day of each triennial
20 registration period, and shall be paid in addition to the triennial
21 registration fee required by section [seven thousand four] seventy-four
22 hundred four of this article.
23 § 12. The education law is amended by adding three new sections 7410,
24 7411 and 7412 to read as follows:
25 § 7410. Mandatory peer review of firms. 1. a. As a condition of
26 initial registration, the department may require a firm to undergo a
27 peer review of its attest and compilation services, except that any such
28 firm which within three years immediately preceding the application has
29 received a satisfactory peer review conducted in accordance with a peer
30 review program approved by the department, may submit a copy of the
31 reviewer's report for the purposes of meeting this condition.
32 b. As a condition for renewing the registration of a firm registered
33 in this state, the department shall require the firm to undergo a peer
34 review of its attest and compilation services at least once every three
35 years in accordance with this section. The peer review shall be
36 conducted by a reviewer selected by the firm and acceptable to the
37 department in accordance with the commissioner's regulations, to be
38 selected from a roster of qualified peer reviewers established by such
39 statewide or national professional accounting organizations that are
40 approved by the department. Peer reviewers shall be certified public
41 accountants in good standing, be independent of the firm reviewed, and
42 possess such other qualifications as established by the department. The
43 department may authorize a recognized statewide or national professional
44 accounting organization, or other appropriate third party, to administer
45 the peer review program. The results of peer reviews shall be filed with
46 the department. Failure to participate in the peer review shall consti-
47 tute immediate grounds for disciplinary action against the firm or revo-
48 cation of the registration of the firm.
49 2. A certified public accountancy firm shall undergo a peer review
50 pursuant to standards and procedures approved by the department to
51 determine, verify and report:
52 a. On the degree of compliance of the firm in performing under gener-
53 ally accepted auditing standards, and other similarly recognized techni-
54 cal standards, and
55 b. On the competence of those licensed individuals in the firm who
56 supervise attest and compilation services and sign or authorize any
A. 8555--A 13
1 individual in the firm to sign reports of financial statements on behalf
2 of the firm.
3 3. The results and findings of peer reviews or equivalent inspections
4 of firms conducted in accordance with peer review or inspection require-
5 ments of the securities exchange commission, the public company account-
6 ing oversight board, or federal general accounting office shall be
7 deemed to comply with mandatory peer review of firms pursuant to this
8 section.
9 4. The standards for peer reviews promulgated by the department shall
10 include, at a minimum, procedures for:
11 a. Selecting and training, if necessary, qualified reviewers;
12 b. Developing criteria for assignment of reviewers to specific peer
13 reviews;
14 c. Ensuring the independence and impartiality of the reviewer;
15 d. Evaluating the findings of the reviewer;
16 e. Sanctioning firms or licensed individuals who are not in compliance
17 with applicable professional standards and practice;
18 f. Developing grounds for exemption from the requirement to undergo a
19 peer review; and
20 g. Ensuring that all records and files relating to a peer review are
21 confidential.
22 5. Notwithstanding any provision of law to the contrary, the records
23 submitted by a firm in accordance with this section and the comments of
24 reviewers, or working papers relating thereto shall be confidential,
25 provided however a summary of the results of the peer review shall
26 constitute public records and shall be subject to disclosure under arti-
27 cle seven of the public officers law.
28 § 7411. Commissions and referral fees. 1. Notwithstanding any
29 provisions of law to the contrary, a certified public accountant or
30 public accountant licensed or otherwise authorized to practice under
31 this article or such certified public accountant's or public account-
32 ant's firm shall not accept nor be paid a commission or referral fee
33 from or for any client for whom the certified public accountant, public
34 accountant or firm is engaged to perform attest services or a compila-
35 tion of a financial statement in which the compilation report does not
36 disclose a lack of independence. This prohibition applies during the
37 period in which the licensee or firm is engaged to perform the services
38 identified in this subdivision and the period covered by any historical
39 financial statements or prospective financial information involved in
40 such services. "Commission or referral fee" shall not include compen-
41 sation paid to a certified public accountant or public accountant by
42 such certified public accountant's or public accountant's firm, however
43 calculated.
44 2. Any certified public accountant, public accountant or firm that is
45 paid or expects to be paid a commission, or accepts or expects to accept
46 a referral fee shall provide written disclosure to the client of such
47 payment or acceptance.
48 § 7412. Contingent fees. A certified public accountant or public
49 accountant licensed or otherwise authorized to practice pursuant to this
50 article or such certified public accountant's or public accountant's
51 firm shall not perform for a contingent fee any professional services
52 for, or receive such a fee from a client for whom the licensee or the
53 licensee's firm is engaged to perform attest services or a compilation
54 of a financial statement in which the compilation report does not
55 disclose a lack of independence or prepare an original or amended tax
56 return or claim a tax refund for a contingent fee for any client, except
A. 8555--A 14
1 that no fee shall be deemed to be contingent if fixed by a court or
2 other public authority or, in tax matters, if determined on the basis of
3 the results of judicial proceedings or the findings of a governmental
4 agency.
5 § 13. This act shall take effect on the one hundred eightieth day
6 after it shall have become a law.