S05628-A
STATE OF NEW YORK
________________________________________________________________________
5628--A
2001-2002 Regular Sessions
IN SENATE
June 17, 2001
___________
Introduced by Sens. LAVALLE, SKELOS, MALTESE -- read twice and ordered
printed, and when printed to be committed to the Committee on Rules --
committee discharged, bill amended, ordered reprinted as amended and
recommitted to said committee
AN ACT to amend the education law and the state finance 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. Section 7401 of the education law, as amended by chapter
2 994 of 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.] performing or offering to perform:
16 a. attest or compilation services, as defined in section seventy-four
17 hundred one-a of this article;
18 b. as an incident to the services described in paragraph a of this
19 subdivision, rendering professional services to clients for compensation
20 in any or all matters relating to accounting concepts and to the record-
21 ing, presentation, or certification of financial information or data; or
22 c. offering to perform or performing for other persons one or more
23 types of services exclusive of services within paragraphs a and b of
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD10699-07-2
S. 5628--A 2
1 this subdivision, involving the use of professional skills or competen-
2 cies, as described in the rules of the board of regents, of the licensed
3 accountant, including professional services rendered to one's employer
4 relating to the recording of financial data or information or the prepa-
5 ration or presentation of financial statements while holding one's self
6 out as a certified public accountant or public accountant or using a
7 "C.P.A." or "P.A." designation.
8 2. Any person not licensed pursuant to this article, and any other
9 legal entity not registered pursuant to this article, may offer the
10 services set forth in paragraph c of subdivision one of this section if
11 the person or other legal entity does not hold itself out as a certified
12 public accountant or public accountant, a registered partnership, a
13 professional service corporation, professional service limited liability
14 partnership, or professional service limited liability company, licensed
15 or authorized to practice public accountancy, or otherwise solicit or
16 advertise for clients using a "C.P.A." or "P.A." designation or other
17 similar designation in violation of subdivision two of section seventy-
18 four hundred eight of this article.
19 § 2. The education law is amended by adding a new section 7401-a to
20 read as follows:
21 § 7401-a. Definitions. As used in this article:
22 1. "Attest" means providing the following public accountancy
23 services which all require the independence of licensees:
24 a. any audit to be performed in accordance with generally accepted
25 auditing standards or other similar standards developed by a recognized
26 international or national professional accountancy organization, accept-
27 able to the department in accordance with the commissioner's regu-
28 lations, that establishes auditing standards;
29 b. any review of a financial statement to be performed in accordance
30 with standards developed by a recognized international or national
31 professional accountancy organization, acceptable to the department in
32 accordance with the commissioner's regulations, that establishes stand-
33 ards for performing such services; or
34 c. any attestation engagement to be performed in accordance with
35 attestation standards developed by a recognized international or
36 national professional accountancy organization, acceptable to the
37 department in accordance with the commissioner's regulations, that
38 establishes standards for performing such services.
39 2. "Certified public accountant" means any person who has received a
40 license from the department as a certified public accountant for the
41 practice of public accountancy.
42 3. "Compilation" means providing a service to be performed in accord-
43 ance with standards developed by a recognized international or national
44 professional accountancy organization, acceptable to the department in
45 accordance with the commissioner's regulations, that establishes such
46 standards, and that is presenting in the form of financial statements
47 information that is the representation of management or owners without
48 undertaking to express any assurance on the statements.
49 4. "Firm" means a sole proprietorship, a professional corporation, a
50 partnership, an incorporated association, a limited liability company, a
51 limited liability partnership, or any other form of organization engaged
52 in the practice of public accountancy.
53 5. "Public accountant" means any person who has received a license
54 from the department as a public accountant for the practice of public
55 accountancy.
S. 5628--A 3
1 § 3. Section 7402 of the education law, as amended by chapter 994 of
2 the laws of 1971, is amended to read as follows:
3 § 7402. Practice of public accountancy and use of title "certified
4 public accountant" or "public accountant". 1. Only a person licensed or
5 otherwise authorized to practice under this article shall practice
6 public accountancy and use the title "certified public accountant" or
7 the designation "C.P.A." or "public accountant" or any other derivative
8 or designation provided in section seventy-four hundred eight of this
9 article.
10 2. Except as otherwise specifically authorized pursuant to the
11 provisions of subdivision two of section seventy-four hundred one of
12 this article, only a certified public accountant or public accountant
13 shall engage in the practice of public accountancy, as defined in para-
14 graphs (a) and (b) of subdivision one of section seventy-four hundred
15 one of this article, provided that such person may engage in such prac-
16 tice in a firm registered pursuant to section seventy-four hundred eight
17 of this article.
18 § 4. Section 7406 of the education law, as added by chapter 987 of the
19 laws of 1971, subdivision 2 as amended by chapter 62 of the laws of
20 1989, is amended to read as follows:
21 § 7406. Limited permits and temporary practice permits. 1. On recom-
22 mendation of the board, the department may issue a limited permit to an
23 applicant of good moral character who is the holder of a certificate,
24 license or degree in a foreign country constituting a recognized quali-
25 fication for the performance in such country of the acts set forth in
26 section seventy-four hundred one of this article, provided the applicant
27 has professional qualifications satisfactory to the board, the applicant
28 resides or has a place for the regular transaction of business within
29 the state, and equal recognition is granted by the foreign country
30 concerned to certified public accountants and public accountants
31 licensed in this state. Such limited permit shall be valid for a period
32 of two years and may be renewed on recommendation of the board. Such
33 permit shall authorize the applicant to use only the title or desig-
34 nation under which he is generally known in his own country, followed by
35 the name of the country from which he received his certificate, license
36 or degree, notwithstanding the provisions of subdivision [two] four of
37 section seventy-four hundred eight of this article.
38 2. Requirements for temporary practice. (a) A certified public
39 accountant or firm composed of certified public accountants, licensed or
40 registered by another state or other jurisdiction of the United States
41 may temporarily practice public accountancy in this state, if the certi-
42 fied public accountant, or firm:
43 (1) holds a valid license or registration to practice public accoun-
44 tancy in the other state or jurisdiction.
45 (2) concurrently practices public accountancy in the other state or
46 jurisdiction.
47 (3) has professional qualifications satisfactory to the board.
48 (4) obtains from the state board for public accountancy a temporary
49 practice permit prior to performing the temporary work.
50 (b) The temporary practice permit: (1) allows a certified public
51 accountant, or firm, who or which meets the requirements of paragraph
52 (a) of this subdivision to work for not more than five hundred hours in
53 this state during a twelve month period, except that such five hundred
54 hour limitation shall not apply if the holder of a temporary practice
55 permit is working only on a single, nonrecurring engagement.
56 (2) is valid for not more than twelve months.
S. 5628--A 4
1 (3) is renewable at the discretion of the board for public accountan-
2 cy.
3 (c) A person, partnership or corporation, or another state or other
4 jurisdiction who wishes to practice public accountancy in this state but
5 does not meet the requirements of paragraph (a) of this subdivision
6 shall be subject to the full licensing and registration requirements of
7 this article.
8 3. Fees. The fee for each limited permit and each renewal shall be one
9 hundred five dollars.
10 § 5. Section 7408 of the education law, as added by chapter 987 of the
11 laws of 1971, the opening paragraph of subdivision 1 and subdivision 2
12 as amended by chapter 994 of the laws of 1971 and paragraph e of subdi-
13 vision 1 as amended by chapter 62 of the laws of 1989, is amended to
14 read as follows:
15 § 7408. Special provisions. 1. Nothing contained in this article
16 shall be deemed to prohibit two or more certified public accountants or
17 two or more public accountants, or any combination thereof, from forming
18 a [partnership] firm; provided, however, that no [partnership] firm
19 shall use the words "certified public accountant", "certified public
20 accountants" or the letters ["C.P.A.'s"] "C.P.A." or "C.P.A.s" in
21 connection with its name unless the sole proprietor or each partner,
22 owner or shareholder of such [partnership] firm, resident or engaged
23 within the United States in practice is in good standing as a certified
24 public accountant of one or more of the states or political subdivisions
25 of the United States, and the sole proprietor or each partner, owner or
26 shareholder thereof resident or engaged in practice within the state is
27 licensed under this article.
28 a. A registration shall be issued to a [partnership] firm upon payment
29 of the fee prescribed by the commissioner upon application showing that:
30 (1) At least one partner, owner or shareholder of such [partnership]
31 firm or the sole proprietorship is licensed under this article and his
32 or her license to practice is not currently suspended, annulled or
33 revoked in any jurisdiction and he or she is regularly engaged in prac-
34 tice on behalf of the [partnership] firm within the state;
35 (2) The [partnership] firm other than a sole proprietorship consists
36 of at least two present [members] partners, owners or shareholders; and
37 (3) The [partnership] firm other than a sole proprietorship contains
38 at least as many present partners, owners or shareholders as the total
39 number of names in the firm name, or, where the word "company" or abbre-
40 viation "co." is used, the number of present partners, owners or share-
41 holders shall be greater than the number of names in the firm name.
42 b. Such registration may be revoked after a hearing conducted in
43 accordance with the provisions of section sixty-five hundred ten of this
44 title upon proof:
45 (1) That the registration was obtained by either misrepresentation or
46 suppression of any material fact;
47 (2) That the license or authorization to practice of any partner, sole
48 proprietor, owner or shareholder is suspended, annulled or revoked in
49 any jurisdiction;
50 (3) That any partner, sole proprietor, owner or shareholder in such a
51 [partnership] firm is or has been engaged in the practice of public
52 accountancy in this state who is not licensed in this state; [or]
53 (4) That the [partnership] firm failed to file the written notifica-
54 tion required pursuant to paragraph d of this subdivision [of this
55 section.]; or
S. 5628--A 5
1 (5) That the firm failed to undergo a review of its attest or compila-
2 tion services pursuant to section seventy-four hundred ten of this arti-
3 cle at least once every three years.
4 c. Personal service on any general partner, sole proprietor, owner or
5 shareholder of a notice of hearing to revoke a [partnership] firm regis-
6 tered hereunder shall be deemed service on the [partnership] firm.
7 d. A [partnership] firm registered to practice pursuant to this
8 section shall file with the department on or before July first of each
9 year written notification of:
10 (1) Any admission of a partner, owner or shareholder,
11 (2) Any resignation, termination, retirement or death of a partner or
12 owner or shareholder,
13 (3) Any termination of [partnership] a firm, or
14 (4) Any occurrence of any event or events which would eliminate as to
15 such [partnership] firm conformity with the applicable requirements of
16 this section.
17 e. [Partnerships] Firms shall register triennially [and pay a fee of
18 fifty dollars].
19 2. a. No firm shall engage in the practice of public accountancy as
20 defined in subdivision one of section seventy-four hundred one of this
21 article or use the title "C.P.A." or "C.P.A. firm" or the title "P.A."
22 or title "P.A. firm" without a registration from the department. As a
23 condition of registration or renewal, except that the provisions of
24 section seventy-four hundred ten of this article shall not apply on
25 initial registration, the firm shall demonstrate that it has complied
26 with the provisions of this article, any other applicable laws and such
27 other requirements as the department may impose, consistent with this
28 article.
29 b. The commissioner, in consultation with the board, shall establish
30 in regulations a registration process for certified public accountancy
31 firms and public accountancy firms, including the imposition of applica-
32 tion and registration fees and procedures to suspend or revoke a regis-
33 tration for cause.
34 3. Any person shall be guilty of a class A misdemeanor who shall use,
35 in connection with the practice of public accountancy, or in any manner
36 tending to imply that he is an independent accountant or auditor, the
37 designations "chartered accountant", "certified accountant", "expert
38 accountant", "certified tax accountant", "tax accountant", "enrolled
39 accountant", "enrolled public accountant", "registered accountant",
40 "licensed accountant", "incorporated accountant", "registered public
41 accountant", "licensed public accountant", or any abbreviation thereof,
42 or the letters "C.A.", "E.A.", "C.T.A.", "T.A.", "E.P.A.", "R.A.",
43 "L.A.", "I.A.", "P.A.", "R.P.A.", or, "L.P.A.", except as provided else-
44 where in this article, or any other designation tending to imply that he
45 or she has expert knowledge in accounting or auditing. The title
46 "enrolled agent" or the designation "E.A." may only be used by individ-
47 uals so designated by the United States Internal Revenue Service.
48 4. An individual not licensed as a certified public accountant or
49 public accountant pursuant to this article may prepare financial state-
50 ments and issue nonattest transmittals or information thereon which do
51 not purport to be attest or compilation services as defined in section
52 seventy-four hundred one-a of this article. Such non-licensed individ-
53 uals shall use the following or substantially equivalent statement when
54 preparing financial statements:
55 "I (We) have prepared the accompanying (financial statements) of (name
56 of entity) as of (time period) for the (period) then ended. This presen-
S. 5628--A 6
1 tation is limited to preparing in the form of financial statement infor-
2 mation that is the representation of management (owners). I (We) have
3 not audited or reviewed the accompanying financial statements and
4 accordingly do not express an opinion or any other form of assurance on
5 them. This document does not express or imply any form of assurance on
6 such financial statements and accordingly does not express an opinion or
7 any other form of assurance on them."
8 § 6. Section 7409 of the education law, as added by chapter 805 of the
9 laws of 1990, is amended to read as follows:
10 § 7409. Mandatory continuing education. 1. [(a)] a. Each licensed
11 certified public accountant and public accountant required under article
12 one hundred thirty of this chapter to register triennially with the
13 department to practice in the state shall comply with the provisions of
14 the mandatory continuing education requirements except as set forth in
15 [paragraphs (b) and (c)] paragraph b of this subdivision. Certified
16 public accountants and public accountants who do not satisfy the manda-
17 tory continuing education requirements shall not practice until they
18 have met such requirements, they have paid all applicable fees, and they
19 have been issued a registration or conditional registration certificate.
20 [(b)] b. Certified public accountants and public accountants shall be
21 exempt from the mandatory continuing education requirement for the
22 triennial registration period during which they are first licensed. In
23 accordance with the intent of this section, adjustments to the mandatory
24 continuing education requirement may be granted by the department for
25 reasons of health certified by a physician, for extended active duty
26 with armed forces of the United States, or for other good cause accepta-
27 ble to the department which may prevent compliance.
28 [(c) A licensed certified public accountant and a public accountant
29 not engaged in public practice as an individual practitioner, a partner
30 of a partnership, a shareholder of a professional service corporation,
31 or an employee of such practice units, shall be exempt from the mandato-
32 ry continuing education requirement and payment of the mandatory contin-
33 uing education fee upon the filing of a statement with the department
34 declaring such status. Any licensee who returns to the public practice
35 of certified public accountancy or public accountancy during the trien-
36 nial registration period shall notify the department prior to reentering
37 the profession and shall pay the current mandatory continuing education
38 fee and shall meet such mandatory continuing education requirements as
39 shall be prescribed by regulations of the commissioner.]
40 2. a. During each year of the triennial registration period beginning
41 September first, nineteen hundred ninety and ending September first,
42 nineteen hundred ninety-three and each registration period thereafter,
43 an applicant for registration shall have the option of [(a)] (1)
44 completing a minimum of forty contact hours of acceptable formal contin-
45 uing education in recognized areas of study, or [(b)] (2) completing a
46 minimum of twenty-four contact hours of acceptable formal continuing
47 education concentrated in any one of the following three subject areas:
48 auditing, accounting, or taxation.
49 b. 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.
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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 the growth in the professional
17 knowledge and professional competence and ethics and professional obli-
18 gations to clients of the licensee which meet the standards prescribed
19 by regulations of the commissioner. Recognized areas of study shall
20 include but not be limited to: accounting, auditing, taxation, advisory
21 services, specialized knowledge and applications related to specialized
22 industries, and such other [technical] areas appropriately related to
23 the practice of accounting as may be acceptable to the department. To
24 fulfill the mandatory continuing education requirement, programs must be
25 taken from sponsors approved by the department, pursuant to the regu-
26 lations of the commissioner.
27 5. The mandatory continuing education fee shall be determined by the
28 regents, shall be payable on or before the first day of each triennial
29 registration period, and shall be paid in addition to the triennial
30 registration fee required by section [seven thousand four] seventy-four
31 hundred four of this article.
32 § 7. The education law is amended by adding three new sections 7410,
33 7411 and 7412 to read as follows:
34 § 7410. Mandatory peer review of certified public accountancy firms.
35 1. a. As a condition of initial registration, the department may require
36 a firm to undergo a peer review of its attest and compilation services,
37 except that any such firm which within three years immediately preceding
38 the application has received a satisfactory peer review conducted in
39 accordance with a peer review program approved by the department, may
40 submit a copy of the reviewer's report for the purposes of meeting this
41 condition.
42 b. As a condition for renewing the registration of a certified public
43 accountancy or public accounting firm registered in this state, the
44 department shall require the firm to undergo a peer review at least once
45 every three years in accordance with this section. The peer review shall
46 be conducted by a reviewer chosen from a roster of qualified individuals
47 appointed by the board of regents. Nominations of persons to the roster
48 shall be submitted from the state professional association or society or
49 statewide specialty societies approved by the department who shall be a
50 certified public accountant in good standing, be independent of the firm
51 reviewed, and possess such other qualifications as established by the
52 department. The department may authorize a recognized statewide or
53 national professional accounting organizations, or other appropriate
54 third party to administer the peer review. Approved reviewers shall file
55 the results of their peer reviews with the department in a manner that
56 is identified in regulations of the commissioner. Failure to participate
S. 5628--A 8
1 in the peer review shall constitute immediate grounds for revocation of
2 the registration of the firm.
3 2. A certified public accountancy firm shall undergo a peer review
4 pursuant to standards and procedures approved by the board to determine,
5 verify and report:
6 a. on the degree of compliance of the firm in performing under gener-
7 ally accepted auditing standards, and other similarly recognized techni-
8 cal standards; and
9 b. on the competence of those licensed individuals in the firm who
10 supervise attest and compilation services and sign or authorize any
11 individual in the firm to sign reports of financial statements on behalf
12 of the firm.
13 3. The standards for peer reviews promulgated by the department shall
14 include, at a minimum, procedures for:
15 a. selecting and training, if necessary, qualified reviewers;
16 b. developing criteria for assignment of reviewers to specific peer
17 reviews;
18 c. ensuring the independence and impartiality of the reviewer;
19 d. evaluating the findings of the reviewer by an oversight committee
20 or board, which may affirm, affirm in part, reverse in part or remand
21 the findings of the reviewer;
22 e. sanctioning firms or licensed individuals who are not in compliance
23 with state laws, rules or regulations or applicable professional stand-
24 ards and practice, including referring the matter to the department for
25 appropriate disciplinary action;
26 f. developing grounds for exemption from the requirement to undergo a
27 peer review;
28 g. relying on the results and finding of peer reviews of firms
29 conducted in accordance with peer review requirements of the securities
30 exchange commission or federal general accounting office which the
31 department deems substantially equivalent to the requirements of this
32 section; and
33 h. ensuring that all records and files relating to a peer review are
34 confidential except as provided in subdivision five of this section.
35 4. The standards of peer reviews promulgated by the department shall
36 also include criteria for assessment of peer reviews by a peer review
37 oversight committee chosen from a roster of qualified individuals
38 appointed by the board of regents. Nominations of persons to the roster
39 shall be submitted from the state professional association or society or
40 statewide speciality societies approved by the department, which shall
41 be authorized to refer appropriate peer reviews to the department for
42 disciplinary action.
43 5. Notwithstanding any provision of law to the contrary, the records
44 submitted by a certified public accountancy firm in accordance with this
45 section; the comments of reviewers, the oversight committee or the board
46 on reports submitted by certified public accountancy firms or working
47 papers relating thereto shall be confidential, provided however the
48 results of the peer review shall constitute public records and shall be
49 subject to disclosure under article six of the public officers law.
50 § 7411. Penalties for professional misconduct. Notwithstanding any
51 provision of section sixty-five hundred eleven of this title, a certi-
52 fied public accountant or public accountant or firm that performs
53 professional services for a client and is found guilty of professional
54 misconduct may be subject to a fine not to exceed twenty thousand
55 dollars for a licensed individual or two hundred thousand dollars for a
56 firm, upon each specification of charges of which the respondent is
S. 5628--A 9
1 determined to be guilty. The amount of the fine for each specification
2 shall not exceed the greater of fifty thousand dollars for a licensed
3 individual or one hundred fifty thousand dollars for a firm, if the
4 professional misconduct involved fraud, deceit, manipulation or deliber-
5 ate or reckless disregard of the education law, rules of the board of
6 regents or regulations of the commissioner.
7 § 7412. Public accountancy oversight account. All firm registration
8 fees provided for in section seventy-four hundred eight and seventy-four
9 hundred ten of this article and fines for professional misconduct pursu-
10 ant to section seventy-four hundred eleven of this article, shall be
11 paid into the New York state public accountancy oversight account pursu-
12 ant to section ninety-nine-i of the state finance law.
13 § 8. The state finance law is amended by adding a new section 99-i to
14 read as follows:
15 § 99-i. New York state public accountancy oversight account. 1. There
16 is hereby established in the custody of the comptroller, a special fund
17 to be known as the "New York state public accountancy oversight
18 account".
19 2. The account shall consist of all moneys received from firm regis-
20 tration fees provided for in section seventy-four hundred eight and
21 seventy-four hundred ten of the education law and all moneys received
22 from fines for professional misconduct imposed pursuant to section
23 seventy-four hundred eleven of the education law, all moneys transferred
24 to such account pursuant to law and all moneys required by the
25 provisions of this section or any other law to be paid into or credited
26 to such account, including all moneys received by the account or donated
27 to it. Moneys in the account shall be kept separate and shall not be
28 commingled with any other moneys otherwise appropriated or received
29 except as hereby provided.
30 3. Moneys of the account, when allocated, shall be available to the
31 state board for public accountancy to carry out the purposes of article
32 one hundred forty-nine of the education law.
33 4. The legislature shall annually appropriate from the remaining
34 available moneys, funding for the state board for public accountancy to
35 carry out the purposes of article one hundred forty-nine of the educa-
36 tion law. At the end of any fiscal year, any funds not encumbered for
37 these purposes shall be reallocated for the costs of carrying out the
38 purposes of such article one hundred forty-nine by the state board for
39 public accountancy.
40 5. Nothing contained in this section shall prevent the state board for
41 public accountancy or the comptroller from receiving grants, gifts or
42 bequests for the purposes of the fund as defined in this section and
43 depositing them into the account according to law.
44 § 9. This act shall take effect on the one hundred eightieth day after
45 it shall have become a law.
NEW YORK STATE SENATE
INTRODUCER'S MEMORANDUM IN SUPPORT
submitted in accordance with Senate Rule VI. Sec 1
RETRIEVE BILL
BILL NUMBER: S5628A
SPONSOR: LAVALLE
TITLE OF BILL: An act to amend the education law and the state
finance law, in relation to the practice of public accountancy
PURPOSE: This bill (the "Bill") would clarify and expand the scope of
practice for certified public accountants ("CPAs") and public account-
ants ("Public Accountants"). The Bill would enhance public protection by
ensuring that CPAs are professionally accountable for functions they
currently perform, but which may be beyond the audit and attest defi-
nition contained in section 7401 of the Education Law.
The Bill also clarifies those activities within the profession of
accounting which are authorized and appropriate to be performed by
persons who are not licensed as CPAs.
SUMMARY OF PROVISIONS: Section 1 of the bill amends Education Law §
7401 to provide greater clarity in the definition of both the central
audit and attest functions and other services performed by Certified
Public accountants and Public Accountants. The bill designates the
existing language of § 7401 a subdivision (1) and adds new paragraphs as
follows:
§ 7401(l)(a)-(b) sets out specific services that are at the core of the
audit and attest services performed by Certified Public Accountants and
Public Accountants.
§ 7401(l)(c) adds services such as those performed in reliance on the
expertise of a CPA or PA to the scope of practice of public accountancy.
§ 7401(2) provides that services defined within the new § 7401(l)(c) may
be performed by an unlicensed individual or entity so long as the person
or entity does not hold itself out as a certified public accountant,
public accountant or firm as defined in § 7401-a or use the designation
CPA or PA or other similar designation contained in § 7408 of this arti-
cle.
Section 3 amends § 7402 provides that services defined within the new §
7401(1)(a) and (b) may only be performed by a certified public account-
ant or public accountant provided that such person may engage in such
practice in a firm registered with the State Education Department pursu-
ant to § 7402 of this article.
Section 4 of the bill amends § 7406 to add requirements for temporary
practice permits.
Section 5 of the bill amends § 7408 to add special provisions regarding
the registration of various entities to practice accountancy with a
procedure for the application process.
This section also includes statutory provisions for the use of accepta-
ble safe harbor language and authorizes the use of the U.S. Internal
Revenue Service designations.
Section 6 amends § 7409 by removing an existing exemption from mandatory
continuing education for licensed certified public accountants and
public accountants not engaged in the practice of public accountancy as
an individual practitioner or through a firm. All licensed certified
public accountants or public accountants employed in private industry,
government or academia would be required to participate in mandatory
continuing education.
Section 7 adds three new sections 7410, 7411, 7412.
§ 7410 establishes a mandatory peer review program for firms registered
to perform attest and compilation services in this State. The State
Education Department (Department) is authorized to promulgate standards
for the peer review program and establish a peer review oversight
committee of the state board for public accountancy. The Department is
also authorized to establish a mechanism to approve those individuals
and firms conducting peer review engagements and may authorize a third
party to administer the program in New York. Failure of a firm to
participate in the mandatory peer review program shall constitute imme-
diate grounds for revocation of the registration of a firm. All records
submitted by the firm undergoing a peer review shall be confidential
provided that the results of the peer review shall constitute public
records and shall be subject to disclosure under article six of public
officer law. The Department is authorized to investigate any reported
violations or substandard practices reported as part of the peer review
process.
§ 7411 establishes penalties for professional misconduct.
§ 7412 creates a public accountancy oversight account.
Section 8 amends state finance law by adding a new section 99-i to
establish the "New York State public accountancy oversight account".
JUSTIFICATION: Recent events have heightened the public's attention
to the accounting profession. This legislation is intended to reassure
the public's concern with the accounting profession as well as strength-
en the State's role in licensing and disciplining the CPA practitioner.
In 1886, certified public accountancy became the fourth profession
licensed in New York State. Our CPAs and public accountants are commit-
ted to the highest standards of practice under State laws, rules and
regulations for licensure. These rules serve to sustain the core values
of the accounting profession: independence, objectivity, honesty and
integrity.
As with most professions, the practice of public accountancy has evolved
substantially over the years. Therefore, the assessment of their scope
of practice is of critical importance to the public and the profession.
Public accounting occupies a unique role and function in our capital
markets and in the world financial system. Individuals and businesses
alike look to the independent auditor's analysis and advice when making
investment and financial decisions.
Therefore, confidence in the integrity of the financial reporting system
and the effectiveness of financial statements audited by independent
accountants is of critical importance.
The Legislation seeks to balance the connection between licensure and
the discipline of public accountants and the interrelationship between
the State Education Department and the regulatory oversight of the
Federal government. This bill is seeking to restore New Yorkers' confi-
dence in our licensed accounting professionals, professionals who
continue to serve the public with skill, integrity and competence. As
the epicenter of the world financial market, it is essential that New
York CPAs are governed by meaningful legislation. This legislation, by
strengthening the oversight of SED through expanded licensure, firm
registration and peer review would provide additional protection for the
New York State citizens as well as guarantee that the profession contin-
ues to be strong and viable.
LEGISLATIVE HISTORY: 1990-00 S.4133/A.8789
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: This act shall take effect on the one hundred eight-
ieth day after it shall become law.