S00302-D
STATE OF NEW YORK
________________________________________________________________________
302--D
2003-2004 Regular Sessions
IN SENATE
(Prefiled)
January 8, 2003
___________
Introduced by Sens. LAVALLE, BONACIC, LEIBELL, MORAHAN, RATH, SEWARD,
SPANO -- read twice and ordered printed, and when printed to be
committed to the Committee on Higher Education -- committee
discharged, bill amended, ordered reprinted as amended and recommitted
to said committee -- reported favorably from said committee and
committed to the Committee on Rules -- committee discharged, bill
amended, ordered reprinted as amended and recommitted to said commit-
tee -- committee discharged, bill amended, ordered reprinted as
amended and recommitted to said committee -- 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).
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD02306-09-3
S. 302--D 2
1 § 2. Section 7401 of the education law, as amended by chapter 994 of
2 the laws of 1971, is amended to read as follows:
3 § 7401. Definition of practice of public accountancy. 1. The practice
4 of the profession of public accountancy is defined as [holding one's
5 self out to the public, in consideration of compensation received or to
6 be received, offering to perform or performing for other persons,
7 services which involve signing, delivering or issuing or causing to be
8 signed, delivered or issued any financial, accounting or related state-
9 ment or any opinion on, report on, or certificate to such statement if,
10 by reason of the signature, or the stationery or wording employed, or
11 otherwise, it is indicated or implied that the practitioner has acted or
12 is acting, in relation to said financial, accounting or related state-
13 ment, or reporting as an independent accountant or auditor or as an
14 individual having or purporting to have expert knowledge in accounting
15 or auditing]:
16 a. offering to perform or performing attest or compilation services,
17 as defined in section seventy-four hundred one-a of this article;
18 b. offering to perform or performing tax return preparation or tax
19 advisory services while holding out to the public under the title of
20 "Certified Public Accountant" or "Public Accountant" or under the desig-
21 nation of "CPA" or "PA" in consideration of compensation received or to
22 be received;
23 c. incident to the services described in paragraphs a and b of this
24 subdivision, rendering professional services to clients, including
25 employers not required to register under section seventy-four hundred
26 eight of this article, for compensation in any or all matters relating
27 to accounting concepts and to the recording, presentation, or certif-
28 ication of financial information or data; or
29 d. offering to perform or performing for other persons one or more
30 types of services, exclusive of services set forth in paragraphs a, b,
31 and c of this subdivision, involving the use of professional skills or
32 competencies of the licensed accountant, while holding one's self out as
33 a certified public accountant or public accountant or using a "CPA" or
34 "PA" designation, including professional services rendered to employers
35 not required to register under section seventy-four hundred eight of
36 this article.
37 2. Any person not licensed pursuant to this article, and any other
38 legal entity not registered pursuant to this article, may offer the
39 services set forth in paragraphs b, c, and d of subdivision one of this
40 section if the person or other legal entity does not hold itself out as
41 a certified public accountant or public accountant or a firm authorized
42 to practice public accountancy under this article, or otherwise solicit
43 or advertise for clients using a "CPA" or "PA" designation or other
44 similar designation in violation of subdivision three of section seven-
45 ty-four hundred eight of this article.
46 § 3. The education law is amended by adding a new section 7401-a to
47 read as follows:
48 § 7401-a. Definitions. As used in this article: 1. "Certified public
49 accountant" means any person who has received a license or authorization
50 from the department as a certified public accountant for the practice of
51 public accountancy.
52 2. "Public accountant" means any person who has received a license
53 from the department for the practice of public accountancy.
54 3. "Attest" means the providing by licensees of the following public
55 accountancy services which all require the meeting of independence stan-
S. 302--D 3
1 dards established under section seventy-four hundred two-a of this arti-
2 cle:
3 a. any audit of a financial statement to be performed in accordance
4 with generally accepted auditing standards or other similar standards
5 developed by an entity established by federal statute, or by a recog-
6 nized international or national professional accountancy organization,
7 acceptable to the department in accordance with the commissioner's regu-
8 lations.
9 b. any review of a financial statement to be performed in accordance
10 with standards developed by an entity established by federal statute, or
11 by a recognized international or national professional accountancy
12 organization, acceptable to the department in accordance with the
13 commissioner's regulations.
14 c. any examination of prospective financial information to be
15 performed in accordance with standards developed by an entity estab-
16 lished by federal statute, or by a recognized international or national
17 professional accountancy organization, acceptable to the department in
18 accordance with the commissioner's regulations.
19 d. any attestation engagement to be performed in accordance with
20 attestation standards developed by an entity established by federal
21 statute, or by a recognized international or national professional
22 accountancy organization, acceptable to the department in accordance
23 with the commissioner's regulations.
24 4. "Compilation" means providing a service to be performed in accord-
25 ance with standards developed by an entity established by federal stat-
26 ute, or by a recognized international or national professional accoun-
27 tancy organization, acceptable to the department in accordance with the
28 commissioner's regulations, and that is presenting in the form of finan-
29 cial statements, information that is the representation of management or
30 owners without undertaking to express any assurance on the statements.
31 5. "Firm" means a partnership, a professional service limited liabil-
32 ity partnership, professional service limited liability company, profes-
33 sional corporation or a sole proprietorship.
34 6. "Non-CPA services" means those services that certified public
35 accountants may lawfully provide and that are not prohibited as unau-
36 thorized practice of public accountancy when provided by a person who is
37 not licensed as a certified public accountant or public accountant
38 pursuant to this article.
39 § 4. Section 7402 of the education law, as amended by chapter 994 of
40 the laws of 1971, is amended to read as follows:
41 § 7402. Practice of public accountancy and use of title "certified
42 public accountant" or "public accountant". Only a person licensed or
43 otherwise authorized to practice under this article shall practice
44 public accountancy [and] or use the title "certified public accountant"
45 or the designation ["C.P.A."] "CPA" or "public accountant" or the desig-
46 nation "PA" or any other derivative or designation provided in section
47 seventy-four hundred eight of this article.
48 § 5. The education law is amended by adding a new section 7402-a to
49 read as follows:
50 § 7402-a. Regulation of the practice of public accountancy. 1. The
51 board of regents is empowered to establish standards of practice for
52 attest and compilation services by certified public accountants and
53 public accountants, and by firms registered under section seventy-four
54 hundred eight of this article, provided that such standards shall not
55 conflict with any applicable standard adopted pursuant to federal law,
56 and in the development and establishment of such standards of practice,
S. 302--D 4
1 the board shall consider applicable federal and professional standards
2 for attest and compilation services.
3 2. A certified public accountant who qualified for licensure based
4 upon experience in accounting, tax return preparation, or tax advisory
5 services and who is responsible for supervising attest or compilation
6 services and signs or authorizes someone to sign the accountant's report
7 on the financial statement on behalf of the firm, shall meet competency
8 and experience requirements satisfactory to the state board for public
9 accountancy and in accordance with the rules of the regents. The experi-
10 ence may include employment in the practice of public accountancy or
11 such other equivalent experience as determined by the state board for
12 public accountancy and shall be supervised and certified by a certified
13 public accountant or public accountant in good standing licensed in this
14 state.
15 3. In any disciplinary proceeding against a licensee on a charge of
16 committing unprofessional conduct in the rendering of non-CPA services
17 based upon:
18 a. violation of a rule of the board of regents or a regulation by the
19 commissioner adopted pursuant to subdivision nine of section sixty-five
20 hundred nine of this title; or
21 b. practicing with gross negligence, gross incompetence, negligence,
22 or incompetence under subdivision two of section sixty-five hundred nine
23 of this title. Such disciplinary proceeding shall be dismissed upon
24 presentation of substantial evidence that the licensee has substantially
25 complied with standards of practice for such non-CPA service promulgated
26 by an entity established by New York or federal statutes, or by an
27 international or national organization whose practice standards for such
28 non-CPA service are generally accepted by other licensing jurisdictions
29 in the United States. An assertion of substantial compliance with such
30 standards of practice may be pleaded in the licensee's answer to the
31 charges or asserted as grounds for a motion to dismiss the charges. A
32 ruling on substantial compliance shall be made by the administrative
33 officer pursuant to paragraph b of subdivision three of section sixty-
34 five hundred ten of this title. Any ruling by the administrative officer
35 on an assertion of substantial compliance which is adverse to the licen-
36 see shall be referred directly to the regents review committee for its
37 review under subdivision four of section sixty-five hundred ten of this
38 title, and the adversary hearing on such charges shall be adjourned
39 pending a decision by the board of regents on such ruling.
40 § 6. The education law is amended by adding two new sections 7403-a
41 and 7403-b to read as follows:
42 § 7403-a. Investigations of professional misconduct and disciplinary
43 proceedings by the state board for public accountancy. 1. Complaints of
44 professional misconduct by a licensee shall be investigated and prose-
45 cuted by the state board for public accountancy in accordance with
46 section sixty-five hundred ten of this title.
47 2. For purposes of investigations, disciplinary proceedings or hear-
48 ings conducted by the state board for public accountancy, all references
49 to "the department" in subdivisions one through three and subdivision
50 seven of section sixty-five hundred ten of this title shall be deemed to
51 mean and refer to the state board for public accountancy.
52 3. Notwithstanding any other provision of law to the contrary, in any
53 investigation under subdivision one of section sixty-five hundred ten of
54 this title, the licensee being investigated shall have the right to be
55 interviewed in order to provide an explanation of the issues under
56 investigation. The licensee may have counsel present during the inter-
S. 302--D 5
1 view, and shall have the right in advance of such interview to a parti-
2 cularized written statement of the alleged professional misconduct and
3 issues under investigation by the state board for public accountancy.
4 The licensee may submit written comments and expert opinion at any time
5 during the investigation. Providing an opportunity for the interview
6 shall be a condition precedent to any preparation of charges under para-
7 graph c of subdivision one of section sixty-five hundred ten of this
8 title.
9 4. Notwithstanding any other provision of law to the contrary, a
10 violations committee of the state board for public accountancy under
11 paragraph c of subdivision two of section sixty-five hundred ten of this
12 title shall consist of three members of such board, one of whom shall be
13 a public representative.
14 5. Notwithstanding any other provision of law to the contrary, in any
15 adversary proceeding under subdivision three of section sixty-five
16 hundred ten of this title, the licensee shall have the right in advance
17 of the hearing to examine and copy any report of investigation and docu-
18 mentary or testimonial evidence and summaries of evidence in the state
19 board for public accountancy's possession relating to the subject matter
20 of the complaint and charges against the licensee. The board may charge
21 a reasonable fee for such copying.
22 6. The administrative officer assigned to a hearing panel by the state
23 board for public accountancy pursuant to paragraph b of subdivision
24 three of section sixty-five hundred ten of this title shall not be a
25 current employee of the state board for public accountancy or the state
26 education department.
27 7. Any hearing conducted by the state board for public accountancy
28 pursuant to subdivision two or three of section sixty-five hundred ten
29 of this title shall be commenced within one hundred eighty days of the
30 preparation of charges under paragraph c of subdivision one of such
31 section, except that an adjournment of the initial hearing date may be
32 granted by the administrative officer assigned to the hearing panel,
33 upon good cause shown.
34 8. For any hearing conducted by the state board for public accountancy
35 under subdivision three of section sixty-five hundred ten of this title,
36 the last hearing date must be held within one hundred eighty days of the
37 first hearing date. Either party, for good cause shown, may request that
38 the administrative officer extend the last day of the hearing beyond one
39 year. The written report of the hearing panel pursuant to paragraph d
40 of subdivision three of section sixty-five hundred ten of this title
41 shall be rendered within ninety days of the last hearing date.
42 9. Notwithstanding any other provision of law to the contrary, the
43 department shall notify the licensee at least thirty days before the
44 meeting of the regents review committee pursuant to paragraph b of
45 subdivision four of section sixty-five hundred ten of this title. The
46 regents review committee shall transmit a written report of its review
47 to the board of regents under paragraph b of subdivision four of such
48 section within sixty days of the conclusion of the meeting of the
49 regents review committee.
50 10. With respect to any hearing conducted by the state board for
51 public accountancy under section sixty-five hundred ten of this title,
52 the regents shall render a decision and order under paragraph c of
53 subdivision four of such section within sixty days of its receipt of the
54 written report of the regents review committee.
55 § 7403-b. Penalties for professional misconduct. Notwithstanding any
56 provision of section sixty-five hundred eleven of this title, a certi-
S. 302--D 6
1 fied public accountant or public accountant or firm that is found guilty
2 of professional misconduct may be subject to a fine not to exceed ten
3 thousand dollars for a licensed individual or twenty thousand dollars
4 for a firm, upon each specification of charges of which the respondent
5 is determined to be guilty. If the professional misconduct involved
6 fraud, deceit, manipulation or deliberate or reckless disregard of this
7 chapter, rules of the board of regents or regulations of the commission-
8 er, the amount of fine for each specification shall not exceed the
9 greater of fifty thousand dollars for a licensed individual or two
10 hundred fifty thousand dollars for a firm.
11 § 7. Section 7404 of the education law, as added by chapter 987 of the
12 laws of 1971, paragraph 4 of subdivision 1 as added by chapter 988 of
13 the laws of 1971 and paragraph 8 of subdivision 1 as amended by chapter
14 62 of the laws of 1989, is amended to read as follows:
15 § 7404. Requirements for a license as a certified public accountant.
16 1. To qualify for a license as a certified public accountant, an appli-
17 cant shall fulfill the following requirements:
18 (1) Application: file an application with the department;
19 (2) Education: have received an education, including a bachelor's or
20 higher degree based on a program in accountancy, in accordance with the
21 commissioner's regulations;
22 (3) Experience: have experience satisfactory to the state board for
23 public accountancy and in accordance with the commissioner's regulations
24 involving experience in providing any one or a combination of the
25 following professional services while under the supervision of a certi-
26 fied public accountant or public accountant licensed in New York: (a)
27 attest; (b) auditing; (c) tax return preparation; (d) tax advisory
28 services. Provided however that the state board for public accountancy
29 may in addition provide for qualifying experience based upon a combina-
30 tion of the services specified in paragraphs (a), (b), (c) and (d),
31 together with experience involving generally accepted accounting princi-
32 ples and such other professional services satisfactory to the state
33 board for public accountancy;
34 (4) Examination: pass a written examination satisfactory to the board
35 and in accordance with the commissioner's regulations and the require-
36 ment with respect to such examination may not be waived.
37 (5) Age: be at least twenty-one years of age;
38 (6) Citizenship: meet no requirements as to United States citizenship;
39 (7) Character: be of good moral character as determined by the depart-
40 ment; and
41 (8) Fees: pay a fee of two hundred twenty dollars to the department
42 for admission to a department conducted examination and for an initial
43 license, a fee of one hundred fifteen dollars for each reexamination, a
44 fee of one hundred thirty-five dollars for an initial license for
45 persons not requiring admission to a department conducted examination,
46 and a fee of two hundred ten dollars for each triennial registration
47 period.
48 2. In lieu of professional requirements specified in subparagraphs
49 [(2)] two and [(3)] three of subdivision one of this section, fifteen
50 years in the practice of public accountancy satisfactory to the board
51 may be accepted by the department.
52 § 8. Section 7406 of the education law, as added by chapter 987 of the
53 laws of 1971 and subdivision 2 as amended by chapter 62 of the laws of
54 1989, is amended to read as follows:
55 § 7406. Limited permits and temporary practice permits. 1. Limited
56 permits. On recommendation of the board, the department may issue a
S. 302--D 7
1 limited permit to an applicant of good moral character who is the holder
2 of a certificate, license or degree in a foreign country constituting a
3 recognized qualification for the performance in such country of the acts
4 set forth in section seventy-four hundred one of this article, provided
5 the applicant has professional qualifications satisfactory to the board,
6 the applicant resides or has a place for the regular transaction of
7 business within the state, and equal recognition is granted by the
8 foreign country concerned to certified public accountants and public
9 accountants licensed in this state. Such limited permit shall be valid
10 for a period of two years and may be renewed on recommendation of the
11 board. Such permit shall authorize the applicant to use only the title
12 or designation under which he is generally known in his own country,
13 followed by the name of the country from which he received his certif-
14 icate, license or degree, notwithstanding the provisions of subdivision
15 two of section seventy-four hundred eight of this article.
16 2. Requirements for temporary practice. a. A certified public account-
17 ant, licensed by another state or other jurisdiction of the United
18 States and in good standing, may temporarily practice public accountancy
19 in this state, if the certified public accountant:
20 (1) Holds a valid license to practice public accountancy in the other
21 state or jurisdiction.
22 (2) Concurrently practices public accountancy in the other state or
23 jurisdiction.
24 (3) Obtains from the department a temporary practice permit prior to
25 performing the temporary work specifying the dates within the calendar
26 year when such right to practice may be exercised.
27 b. The temporary practice permit allows a certified public accountant,
28 who meets the requirements of paragraph a of this subdivision to work
29 for not more than sixty days in this state during any calendar year.
30 3. Applications for temporary practice permits shall be processed by
31 the department within thirty days. Pending such thirty day application
32 period, the applicant may practice and such permit shall be retroactive
33 to the date of initial application, provided, however, that if the
34 application is denied the applicant shall cease any and all work in the
35 state of New York.
36 4. The department shall allow for an automatic sixty day renewal of a
37 temporary practice permit, provided that the applicant remains in good
38 standing and in compliance with all applicable laws, rules and regu-
39 lations.
40 5. Failure to meet requirements for temporary practice permit. A
41 person who wishes to practice public accountancy in this state but does
42 not meet the requirements of paragraph a of subdivision two of this
43 section is subject to the full licensing and registration requirements
44 of this article.
45 6. Notwithstanding any provision of law to the contrary, a certified
46 public accountant who obtains a temporary practice permit under this
47 section and files an application for full licensing under section seven-
48 ty-four hundred four of this article on or before the termination date
49 of such temporary practice permit may continue to practice under such
50 permit for a period coterminous with the period during which his or her
51 application for licensure remains pending with the department.
52 7. Fees. The fee for each limited permit and temporary practice permit
53 and each renewal shall be [one hundred five dollars] established in
54 regulation by the board of regents.
55 § 9. Section 7407 of the education law, as added by chapter 987 of the
56 laws of 1971, is amended to read as follows:
S. 302--D 8
1 § 7407. Exempt persons. Nothing contained in this article shall be
2 construed to prohibit:
3 [a.] 1. Any person other than a certified public accountant or public
4 accountant who is an officer of a corporation or partner of a partner-
5 ship or sole proprietor of a business enterprise or member of a joint
6 venture or member of a committee appointed by stockholders, creditors,
7 courts, trustees, executors or administrators, or an employee of any of
8 the foregoing, in his or her capacity as such, from signing, delivering,
9 or issuing any financial, accounting or related statement or report
10 thereon, relating to said corporation, partnership, business venture,
11 joint venture, committee, trust or estate, provided, however, that in so
12 doing such person does not hold himself or herself out to be a certified
13 public accountant or public accountant;
14 [b.] 2. An attorney-at-law or [partnership] firm of attorneys-at-law
15 from signing a financial, accounting or related statement or report
16 thereon, prepared by [him or them] the attorney-at-law or firm of attor-
17 neys-at-law as incidental to the practice of law;
18 [c.] 3. Any individual from serving as an employee of a certified
19 public accountant, public accountant or [partnership licensed under this
20 article] any firm registered pursuant to section seventy-four hundred
21 eight of this article;
22 [d.] 4. Any individual, not engaged in practice as a certified public
23 accountant or public accountant within the state, from performing
24 services within the state which are incidental to the practice conducted
25 by him outside the state;
26 [e.] 5. Any official or employee of a governmental unit, agency or
27 instrumentality in the performance of his or her official duties from
28 signing, delivering or issuing any financial, accounting, or related
29 statement or report thereon relating to said unit, agency or instrumen-
30 tality; or
31 [f.] 6. A corporation chartered in the state of New York to engage in
32 the practice of public accountancy and so engaged as its principal
33 activity on and before the first day of July, nineteen hundred fifty-
34 nine, from continuing in such practice as long as its corporate acts
35 comply with the board of regents rules, provided all employees of such
36 corporation performing any acts constituting the practice of public
37 accountancy as defined herein and who are not certified public account-
38 ants or public accountants licensed under this article shall in the
39 performance of such acts be under the supervision of certified public
40 accountants or public accountants licensed in this state.
41 § 10. Section 7408 of the education law, as added by chapter 987 of
42 the laws of 1971, the opening paragraph of subdivision 1 and subdivision
43 2 as amended by chapter 994 of the laws of 1971 and paragraph e of
44 subdivision 1 as amended by chapter 62 of the laws of 1989, is amended
45 to read as follows:
46 § 7408. Special provisions. 1. Nothing contained in this article
47 shall be deemed to prohibit two or more certified public accountants or
48 two or more public accountants, or any combination thereof, from forming
49 a [partnership] firm; provided, however, that no [partnership] firm
50 shall use the words "certified public accountant" or "certified public
51 accountants" or the letters ["C.P.A.'s"] "CPA" or "CPAs" in connection
52 with its name unless the sole proprietor or each partner, member or
53 shareholder of such [partnership] firm, resident or engaged within the
54 United States in practice is in good standing as a certified public
55 accountant of one or more of the states or political subdivisions of the
56 United States, and the sole proprietor or each partner, member or share-
S. 302--D 9
1 holder thereof resident or engaged in practice within the state is
2 licensed under this article.
3 2. The commissioner, with the assistance of the state board for public
4 accountancy, shall establish in regulations a registration process for
5 certified public accountancy firms and public accountancy firms, includ-
6 ing the imposition of application and registration fees and procedures
7 to suspend or revoke a registration or take other disciplinary action
8 for cause.
9 a. A registration shall be issued to a [partnership] firm upon payment
10 of the fee prescribed by the commissioner upon application showing that:
11 (1) At least one partner, member or shareholder of such [partnership]
12 firm or the sole proprietor is licensed under this article and his or
13 her license to practice is not currently suspended, annulled or revoked
14 in any jurisdiction and he or she is regularly engaged in practice on
15 behalf of the partnership within the state;
16 (2) The [partnership] firm other than a sole proprietorship consists
17 of at least two present partners, members or shareholders; and
18 (3) The [partnership] firm other than a sole proprietorship contains
19 at least as many present partners, members or shareholders as the total
20 number of names in the firm name, or, where the word "company" or abbre-
21 viation "co." is used, the number of present partners shall be greater
22 than the number of names in the firm name.
23 b. Such registration may be revoked or other disciplinary action
24 against the firm may be taken by the board of regents after a hearing
25 conducted by the state board for public accountancy in accordance with
26 the provisions of section sixty-five hundred ten of this title upon
27 proof:
28 (1) That the registration was obtained by either misrepresentation or
29 suppression of any material fact;
30 (2) That the license or authorization to practice of any partner, sole
31 proprietor, member or shareholder is suspended, annulled or revoked in
32 any jurisdiction;
33 (3) That any partner, sole proprietor, member or shareholder in such a
34 [partnership] firm is or has been engaged in the practice of public
35 accountancy in this state who is not licensed in this state; [or]
36 (4) That the [partnership] firm failed to file the written notifica-
37 tion required pursuant to paragraph d of this subdivision of this
38 section;
39 (5) That the firm has willfully interfered with or obstructed the
40 investigation by the department of any licensee who is a partner, sole
41 proprietor, member, shareholder, principal or employee of the firm,
42 provided that no firm shall be disciplined based solely on its assertion
43 of any privilege recognized by law; or
44 (6) That the firm failed to undergo a review of its practice of public
45 accountancy pursuant to section seventy-four hundred ten of this article
46 at least once every three years.
47 c. Personal service on any general partner, member, shareholder or
48 sole proprietor of a notice of hearing to revoke a [partnership] firm
49 registered hereunder shall be deemed service on the [partnership] firm.
50 d. A [partnership] firm registered to practice pursuant to this
51 section shall file with the department on or before July first of each
52 year written notification of:
53 (1) Any admission of a partner, member or shareholder,
54 (2) Any resignation, retirement or death of a partner, member or
55 shareholder,
56 (3) Any termination of [partnership] a firm, or
S. 302--D 10
1 (4) Any occurrence of any event or events which would eliminate as to
2 such [partnership] firm's conformity with the applicable requirements of
3 this section.
4 e. [Partnerships] Firms shall register triennially and pay a fee of
5 fifty dollars.
6 3. Any person shall be guilty of a class A misdemeanor who shall use,
7 in connection with the practice of public accountancy, or in any manner
8 tending to imply that he is an independent accountant or auditor, the
9 designations "chartered accountant", "certified accountant", "expert
10 accountant", "certified tax accountant", "tax accountant", "enrolled
11 accountant", "enrolled public accountant", "registered accountant",
12 "licensed accountant", "incorporated accountant", "registered public
13 accountant", "licensed public accountant", or any abbreviation thereof,
14 or the letters "C.A.", "E.A.", "C.T.A.", "T.A.", "E.P.A.", "R.A.",
15 "L.A.", "I.A.", "P.A.", "R.P.A.", or, "L.P.A.", except as provided else-
16 where in this article, or any other designation tending to imply that he
17 or she has expert knowledge in accounting or auditing.
18 4. No firm shall hold itself out to the public, in consideration of
19 compensation received or to be received, for the practice of public
20 accountancy as defined in section seventy-four hundred one of this arti-
21 cle in this state or use the title "CPA" or "CPA firm" or "PA" or "PA
22 firm" without a registration from the department. As a condition of
23 registration or its renewal, the firm shall demonstrate that it has
24 complied with the provisions of this article, any other applicable laws
25 and such other requirements as the department may impose, consistent
26 with this article.
27 5. Nothing in this subdivision shall prevent an individual enrolled
28 to practice before the United States internal revenue service, pursuant
29 to regulations promulgated by the internal revenue service, from using
30 the designation "enrolled agent" or the letters "E.A.". This subdivision
31 shall not apply to any designations authorized by a national credential-
32 ing body recognized by the department.
33 6. For purposes of this section, the term "member" means a person who
34 has been admitted as a member of a professional service limited liabil-
35 ity company in accordance with the terms and provisions of the limited
36 liability company law and the operating agreement of such professional
37 service limited liability company, and has a membership interest in such
38 limited liability company with the rights, obligations, preferences and
39 limitations specified under the limited liability company law and such
40 operating agreement.
41 7. An individual not licensed as a certified public accountant or
42 public accountant, or an entity not registered pursuant to this article
43 may prepare a financial statement so long as it is not accompanied by
44 any statement, report, or wording indicating such individual is a certi-
45 fied public accountant or public accountant or that such entity is
46 registered to practice public accountancy under this article. Such non-
47 licensed individuals and non-registered entities shall include the
48 following written language when preparing financial statement(s):
49 a. "(I, We) have prepared the accompanying financial statement(s) of
50 (name of business or organization) as of the (time period) and for the
51 (period) then ended. This presentation is limited to preparing, in the
52 form of a financial statement(s), information that is the representation
53 of (name of business or organization)"; and
54 b. "(I, We) have not audited or reviewed the accompanying financial
55 statement(s) and accordingly do not express an opinion or any other form
56 of assurance on them."
S. 302--D 11
1 § 11. Section 7409 of the education law, as added by chapter 805 of
2 the laws of 1990, is amended to read as follows:
3 § 7409. Mandatory continuing education. 1. [(a)] a. Each licensed
4 certified public accountant and public accountant required under article
5 one hundred thirty of this [chapter] title to register triennially with
6 the department to practice in the state shall comply with the provisions
7 of the mandatory continuing education requirements except as set forth
8 in [paragraphs (b) and (c)] paragraph b of this subdivision. Certified
9 public accountants and public accountants who do not satisfy the manda-
10 tory continuing education requirements shall not practice until they
11 have met such requirements, they have paid all applicable fees, and they
12 have been issued a registration or conditional registration certificate.
13 [(b)] b. Certified public accountants and public accountants shall be
14 exempt from the mandatory continuing education requirement for the
15 triennial registration period during which they are first licensed. In
16 accordance with the intent of this section, adjustments to the mandatory
17 continuing education requirement may be granted by the department for
18 reasons of health certified by a physician, for extended active duty
19 with armed forces of the United States, or for other good cause accepta-
20 ble to the department which may prevent compliance.
21 [(c) A licensed certified public accountant and a public accountant
22 not engaged in public practice as an individual practitioner, a partner
23 of a partnership, a shareholder of a professional service corporation,
24 or an employee of such practice units, shall be exempt from the mandato-
25 ry continuing education requirement and payment of the mandatory contin-
26 uing education fee upon the filing of a statement with the department
27 declaring such status. Any licensee who returns to the public practice
28 of certified public accountancy or public accountancy during the trien-
29 nial registration period shall notify the department prior to reentering
30 the profession and shall pay the current mandatory continuing education
31 fee and shall meet such mandatory continuing education requirements as
32 shall be prescribed by regulations of the commissioner.]
33 2. a. During each year of the triennial registration period beginning
34 September first, nineteen hundred ninety and ending September first,
35 nineteen hundred ninety-three and each registration period thereafter
36 but ending on the period that ends on December thirty-first, two thou-
37 sand three, an applicant for registration shall have the option of
38 [(a)]: (1) completing a minimum of forty contact hours of acceptable
39 formal continuing education in recognized areas of study, or [(b)] (2)
40 completing a minimum of twenty-four contact hours of acceptable formal
41 continuing education concentrated in any one of the following three
42 subject areas: auditing, accounting, or taxation.
43 b. During the triennial registration period beginning January first,
44 two thousand four and ending December thirty-first, two thousand six and
45 each registration period thereafter, an applicant for registration shall
46 complete no less than one hundred twenty hours of acceptable formal
47 continuing education in recognized areas of study, with a minimum of
48 twenty hours in each year.
49 c. A licensee who has not satisfied the mandatory continuing education
50 requirements shall not be issued a triennial registration certificate by
51 the department and shall not practice unless and until a conditional
52 registration certificate is issued as provided in subdivision three of
53 this section. No hourly credits may be transferred from one year to a
54 subsequent year. The individual licensee shall determine the selection
55 of courses or programs of study pursuant to subdivision four of this
56 section.
S. 302--D 12
1 3. The department, in its discretion, may issue a conditional regis-
2 tration to a licensee who fails to meet the continuing education
3 requirements established in subdivision two of this section but who
4 agrees to make up any deficiencies and take any additional education
5 which the department may require. The fee for such a conditional regis-
6 tration shall be the same as, and in addition to, the fee for the trien-
7 nial registration. The duration of such conditional registration shall
8 be determined by the department. Any licensee who is notified of the
9 denial of registration for failure to submit evidence, satisfactory to
10 the department, of required continuing education and who practices
11 public accountancy without such registration, may be subject to disci-
12 plinary proceedings pursuant to section [six thousand five] sixty-five
13 hundred ten of this [chapter] title.
14 4. As used in subdivision two of this section, "acceptable formal
15 continuing education" shall mean formal programs of learning which
16 contribute to [professional practice and which meet the standards
17 prescribed by regulations of the commissioner] the growth in the profes-
18 sional knowledge and professional competence of the licensee. Recog-
19 nized areas of study shall include but not be limited to: accounting,
20 attest, auditing, taxation, advisory services, specialized knowledge and
21 applications related to specialized industries, and such other [techni-
22 cal] areas appropriately related to the practice of accounting as may be
23 acceptable to the department. To fulfill the mandatory continuing educa-
24 tion requirement, programs must be taken from sponsors approved by the
25 department, pursuant to the regulations of the commissioner.
26 5. The mandatory continuing education fee shall be determined by the
27 regents, shall be payable on or before the first day of each triennial
28 registration period, and shall be paid in addition to the triennial
29 registration fee required by section [seven thousand four] seventy-four
30 hundred four of this article.
31 § 12. The education law is amended by adding three new sections 7410,
32 7411 and 7412 to read as follows:
33 § 7410. Mandatory peer review of firms. 1. a. As a condition of
34 initial registration, the department may require a firm to undergo a
35 peer review of its attest and compilation services, except that any such
36 firm which within three years immediately preceding the application has
37 received a satisfactory peer review conducted in accordance with a peer
38 review program approved by the department, may submit a copy of the
39 reviewer's report for the purposes of meeting this condition.
40 b. As a condition for renewing the registration of a firm registered
41 in this state, the department shall require the firm to undergo a peer
42 review of its attest and compilation services at least once every three
43 years in accordance with this section. The peer review shall be
44 conducted by a reviewer selected by the firm and acceptable to the
45 department in accordance with the commissioner's regulations, to be
46 selected from a roster of qualified peer reviewers established by such
47 statewide or national professional accounting organizations that are
48 approved by the department. Peer reviewers shall be certified public
49 accountants in good standing, be independent of the firm reviewed, and
50 possess such other qualifications as established by the department. The
51 department may authorize a recognized statewide or national professional
52 accounting organization, or other appropriate third party, to administer
53 the peer review program. The results of peer reviews shall be filed with
54 the department. Failure to participate in the peer review shall consti-
55 tute immediate grounds for disciplinary action against the firm or revo-
56 cation of the registration of the firm.
S. 302--D 13
1 2. A certified public accountancy firm shall undergo a peer review
2 pursuant to standards and procedures approved by the department to
3 determine, verify and report:
4 a. On the degree of compliance of the firm in performing under gener-
5 ally accepted auditing standards, and other similarly recognized techni-
6 cal standards, and
7 b. On the competence of those licensed individuals in the firm who
8 supervise attest and compilation services and sign or authorize any
9 individual in the firm to sign reports of financial statements on behalf
10 of the firm.
11 3. The results and findings of peer reviews or equivalent inspections
12 of firms conducted in accordance with peer review or inspection require-
13 ments of the securities exchange commission, the public company account-
14 ing oversight board, or federal general accounting office shall be
15 deemed to comply with mandatory peer review of firms pursuant to this
16 section.
17 4. The standards for peer reviews promulgated by the department shall
18 include, at a minimum, procedures for:
19 a. Selecting and training, if necessary, qualified reviewers;
20 b. Developing criteria for assignment of reviewers to specific peer
21 reviews;
22 c. Ensuring the independence and impartiality of the reviewer;
23 d. Evaluating the findings of the reviewer;
24 e. Sanctioning firms or licensed individuals who are not in compliance
25 with applicable professional standards and practice;
26 f. Developing grounds for exemption from the requirement to undergo a
27 peer review; and
28 g. Ensuring that all records and files relating to a peer review are
29 confidential.
30 5. Notwithstanding any provision of law to the contrary, the records
31 submitted by a firm in accordance with this section and the comments of
32 reviewers, or working papers relating thereto shall be confidential,
33 provided however a summary of the results of the peer review shall
34 constitute public records and shall be subject to disclosure under arti-
35 cle seven of the public officers law.
36 § 7411. Commissions and referral fees. 1. Notwithstanding any
37 provisions of law to the contrary, a certified public accountant or
38 public accountant licensed or otherwise authorized to practice under
39 this article or such certified public accountant's or public account-
40 ant's firm shall not accept nor be paid a commission or referral fee
41 from or for any client for whom the certified public accountant, public
42 accountant or firm is engaged to perform attest services or a compila-
43 tion of a financial statement in which the compilation report does not
44 disclose a lack of independence. This prohibition applies during the
45 period in which the licensee or firm is engaged to perform the services
46 identified in this subdivision and the period covered by any historical
47 financial statements or prospective financial information involved in
48 such services. "Commission or referral fee" shall not include compen-
49 sation paid to a certified public accountant or public accountant by
50 such certified public accountant's or public accountant's firm, however
51 calculated.
52 2. Any certified public accountant, public accountant or firm that is
53 paid or expects to be paid a commission, or accepts or expects to accept
54 a referral fee shall provide written disclosure to the client of such
55 payment or acceptance.
S. 302--D 14
1 § 7412. Contingent fees. A certified public accountant or public
2 accountant licensed or otherwise authorized to practice pursuant to this
3 article or such certified public accountant's or public accountant's
4 firm shall not perform for a contingent fee any professional services
5 for, or receive such a fee from a client for whom the licensee or the
6 licensee's firm is engaged to perform attest services or a compilation
7 of a financial statement in which the compilation report does not
8 disclose a lack of independence or prepare an original or amended tax
9 return or claim a tax refund for a contingent fee for any client, except
10 that no fee shall be deemed to be contingent if fixed by a court or
11 other public authority or, in tax matters, if determined on the basis of
12 the results of judicial proceedings or the findings of a governmental
13 agency.
14 § 13. This act shall take effect on the one hundred eightieth day
15 after it shall have become a law.