2016 -- S 2784 SUBSTITUTE A

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LC005124/SUB A

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2016

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A N   A C T

RELATING TO BUSINESSES AND PROFESSIONS -- ACCOUNTANCY

     Introduced By: Senator William A. Walaska

     Date Introduced: March 23, 2016

     Referred To: Senate Commerce

     (Business Regulation)

It is enacted by the General Assembly as follows:

     SECTION 1. Sections 5-3.1-3, 5-3.1-7, 5-3.1-9 and 5-3.1-12 of the General Laws in

Chapter 5-3.1 entitled "Public Accountancy" are hereby amended to read as follows:

     5-3.1-3. Definitions. -- As used in this chapter, unless the context requires otherwise, the

following terms are construed as follows:

      (1) "Attest" means providing the following financial statement services:

      (i) Any audit or other engagement to be performed in accordance with the Statements on

Auditing Standards (SAS) as adopted by the American Institute of Certified Public Accountants;

      (ii) Any review of a financial statement to be performed in accordance with the

Statement on Standards for Accounting and Review Services (SSARS) as adopted by the

American Institute of Certified Public Accountants;

      (iii) Any examination of prospective financial information to be performed in accordance

with the Statements on Standards for Attestation Engagements (SSAE) as adopted by the

American Institute of Certified Public Accountants;

      (iv) Any services considered attest by the American Institute of Certified Public

Accountants Any engagement to be performed in accordance with the standards of the public

company accounting oversight board;

      (v) Any services that will provide assurance on financial information and will be

performed in accordance with appropriate professional standards; Any examination, review, or

agreed upon procedures engagement to be performed in accordance with the SSAE, other than an

examination described in subsection (1)(iii) of this section; and

      (vi) The statements on standards specified in this definition shall be adopted by reference

by the board pursuant to rulemaking and shall be those standards developed by the American

Institute of Certified Public Accountants developed for general application by recognized national

accountancy organizations, such as the American Institute of Certified Public Accountants, and

the public company accounting oversight board.

      (2) "Authority" means an authority to practice as a public accountant in this state granted

by the public accountants advisory commission under former § 5-3-6, (P.L. 1962, chapter 228,

Section 1, as amended by P.L. 1970, chapter 272, Section 1).

      (3) "Board" means the board of accountancy, a public authority created by § 5-3.1-4.

      (4) "Certificate" means a certificate as certified public accountant issued under this

chapter or corresponding provisions of prior law, or a corresponding certificate as certified public

accountant issued after examination under the law of any other state.

      (5) "Certified public accountant" or "CPA" means a person holding a certificate issued

under this chapter or corresponding provisions of prior law or under the accountancy act or

similar law of any other state.

      (6) "Compilation" means providing a service to be performed in accordance with the

Statement on Standards for Accounting and Review Services (SSARS) as adopted by the

American Institute of Certified Public Accountants that is presenting in the form of financial

statements, information that is the representation of management without undertaking to express

any assurance on the statements.

      (7) "Entity" includes a general partnership, limited liability company, limited liability

partnership, a corporation, a sole proprietor, a trust and joint venture.

      (8) "Good moral character" for purposes of this section, means lack of a history of

dishonest or felonious acts.

      (9) "Licensee" means the holder of a certificate, authority or permit issued under this

chapter or under the prior laws of this state.

      (10) "Majority" refers to more than fifty percent (50%) ownership in terms of financial

interests and voting rights.

      (11) "Peer review" means a study, appraisal, or review of one or more aspects of the

professional work of a practice unit engaged in the practice of public accountancy in this state, by

a licensee or licensees who are not affiliated with the practice unit being reviewed.

      (12) "Permit" means a permit to practice public accountancy issued under § 5-3.1-7, 5-

3.1-8, or 5-3.1-9, or under corresponding provisions of prior law, or under corresponding

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provisions of the law of any other state.

      (13) "Practice of (or practicing) public accounting or accountancy" means the

performance of or the offering to perform, in an independent posture, for a client or potential

client, one or more kinds of services involving the use of accounting or auditing skills, in

connection with the issuance of reports on financial statements as defined in §5-3.1-3.

      (14) "Practice unit" means a sole proprietorship, corporation, partnership or other entity

engaged in the practice of public accounting in this state. For the purpose of this chapter, the

office of the Auditor General is considered a practice unit.

      (15) "Principal residence" means the state in which a person has the right to register to

vote for, or the right to vote in, general elections and in which he or she qualifies to file a resident

state income tax return.

      (16) "Public accountant" or "PA" means a person holding an authority as a public

accountant issued under the prior laws of this state.

      (17) "Report" means an opinion, report, or other form of language that states or implies

assurance as to the reliability of the attested information or compiled financial statements and that

also includes or is accompanied by a statement or implication that the person or practice unit

issuing the financial statements has special knowledge or competence in accounting or auditing.

A statement or implication of special knowledge or competence may arise from use by the issuer

of the report of names or titles indicating that the issuer is an accountant or auditor, or from the

language of the report itself. The term "report" includes any form of language which disclaims an

opinion when that language is conventionally understood to imply any positive assurance as to

the reliability of the attested information or compiled financial statements referred to and/or any

special competence on the part of the person or practice unit issuing that language; and it also

includes any other form of language that is conventionally understood to imply that assurance

and/or special knowledge or competence.

      (18) "State" means the states of the United States, the District of Columbia, Puerto Rico,

Guam, and the U.S. Virgin Islands. The term "this state" means the state of Rhode Island.

      (19) "Substantial equivalency" means a determination by the board of accountancy that

the education, examination and experience requirements contained in the statutes and

administrative rules of another state or jurisdiction are comparable to or exceed the education,

examination and experience requirements included in this chapter or that an individual CPA's

education, examination and experience qualifications are comparable to or exceed the education,

examination and experience requirements contained in this chapter. In ascertaining substantial

equivalency as used in this chapter the board shall take into account the qualifications without

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regard to the sequence in which experience, education or examination requirements were attained.

     5-3.1-7. Permits for public accountants and certified public accountants. -- (a)

Annual permits to engage in the practice of public accounting in this state shall be issued by the

board, upon application for the permit and payment of the required fee, to certified public

accountants qualified under § 5-3.1-5 or eligible under the substantial equivalency standard set

out in subsection (g) of this section, and to public accountants qualified under § 5-3.1-6. Effective

January 1, 2009, all permits issued by the board shall be valid for a period of three (3) years and

shall expire upon the last day of June of the year in which the permit is scheduled to expire. To

transition existing licensees to a three (3) year licensing cycle, the board shall have the authority

and discretion in 2008 to issue permits under this section that are valid for one, two (2), or three

(3) years. All such permits issued during 2008 shall expire upon the last day of June of the year in

which the permit is scheduled to expire. The board's authority to issue permits valid for one or

two (2) years shall cease as of December 31, 2008.

      (b) A certified public accountant who holds a permit issued by another state and who

desires to practice in this state shall apply for a permit in this state if that person does not qualify

for reciprocity under the substantial equivalency standard set out in subsection (g) of this section.

Upon the date of filing the completed application with the board, the applicant is deemed

qualified to practice and may practice public accounting in this state pending board review of the

application; provided, that the applicant meets all other applicable requirements under this

chapter. Submission of the application constitutes the appointment of the secretary of state as an

agent for the applicant for service of process in any action or proceeding arising out of any

transaction or operation connected with or incidental to the practice of public accounting in this

state by the applicant.

      (c) Applications for renewal of a permit under this section shall be submitted to the

board by February 15 of the year in which the permit is scheduled to expire and shall be

accompanied by evidence that the applicant has satisfied the continuing professional education

requirements promulgated by board regulation. That evidence shall be in a form that the board

requires. Failure to furnish that evidence constitutes grounds for refusal to renew the permit

unless the board in its discretion determines that the failure was due to reasonable cause or

excusable neglect.

      (d) Applications for renewal of a permit under this section shall also identify any

practice unit with which the applicant is affiliated. In the event the practice unit fails to comply

with § 5-3.1-9 or 5-3.1-10, the board may refuse to renew the applicant's individual permit if the

board determines that the applicant was personally and substantially responsible for the failure of

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the practice unit to meet the requirements of §§ 5-3.1-9 and 5-3.1-10.

      (e) All applicants for a permit under this section shall list in the application all other

states in which the applicant has applied for or holds a permit to practice. Each applicant for or

holder of a permit issued under this section or any individual who has entered the state under the

provisions of substantial equivalency shall, within thirty (30) days of the occurrence of the event,

notify the board in writing:

      (1) Of the issuance, denial, revocation, or suspension of any certificate, license, degree,

or permit by any other state; or

      (2) Of the commencement of any disciplinary or enforcement action against the

applicant, holder or individual by any other state.

      (f) Fees for the issuance and renewal of permits under this section shall be established

from time to time by the board. In no case shall the three (3) year renewal fee be less than three

hundred and seventy-five dollars ($375). The required fee shall be paid by the applicant at the

time the application is filed with the board.

      (g) Substantial equivalency.

      (1) An individual whose principal place of business or principal residence is not in this

state having a valid certificate or license as a certified public accountant from any state whose

licensure requirements are determined to be substantially equivalent with the conditions of this

section shall have all the privileges of certificate holders and licensees of this state without the

need to obtain a certificate or permit from this state under this section as long as the conditions of

this section are met. The individual must have one year or more of experience. This experience

shall include providing any type of service or advice involving the use of accounting, attest,

management advisory, financial advisory, tax or consulting skills all of which was verified by a

licensee, meeting requirements prescribed by the board by rule. This experience is acceptable if it

was gained through employment in government, industry, academia or public practice.

Notwithstanding any other provision of law, an individual who offers or renders professional

services, whether in person, by mail, telephone or electronic means, under this section shall be

granted practice privileges in this state and no notice or other submission shall be provided by any

such individual. Such an individual shall be subject to the requirements in subdivision (g)(3). If

this individual is responsible for supervising attest services and signs or authorizes another

licensee to sign the accountant's report on the financial statements on behalf of the firm, this

individual shall meet the experience requirements set out in the professional standards for such

services. If this individual is responsible for signing or authorizing another licensee to sign the

accountant's report on the financial statements on behalf of the firm, this individual shall meet the

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experience requirements set out in the professional standards for such services. The board may

use the NASBA National Qualification Appraisal Service to determine which other states have

substantial equivalence with this chapter.

      (2) An individual whose principal place of business is not in this state and who holds a

valid certificate or license as a certified public accountant from any state which the NASBA

National Qualification Appraisal Service has not verified to be in substantial equivalence with the

CPA licensure requirements if the AICPAASBA AICPA/NASBA Uniform Accountancy Act

shall be presumed to have qualifications substantially equivalent to this state's requirements and

shall have all the privileges of certificate holders and licenses of this state without the need to

obtain a certificate or permit under this section if such individual obtains from the NASBA

National Qualification Appraisal Service verification that such individual's CPA qualifications

are substantially equivalent to the CPA licensure requirements of the AICPAASBA

AICPA/NASBA Uniform Accountancy Act. Any individual who passed the Uniform CPA

Examination and holds a valid license issued by any other state prior to January 1, 2012 may be

exempt from the education requirement in subdivision 5-3.1-5(a)(3) for purposes of this section.

      (3) Any individual licensee of another state exercising the privilege afforded under this

section and the CPA firm which employs that licensee hereby simultaneously consents, as a

condition of the granting of this privilege:

      (i) To the personal and subject matter jurisdiction and disciplinary authority of the board;

      (ii) To comply with this chapter and the board's rules;

      (iii) That in the event the certificate or license from the state of the individual's principal

place of business is no longer valid, the individual will cease offering or rendering professional

services in this state individually and on behalf of a CPA firm; and

      (iv) To the appointment of the board which issued their license as their agent upon whom

process may be served in any action or proceeding by this board against the licensee.

      (4) A licensee of this state offering or rendering services or using their CPA title in

another state shall be subject to disciplinary action in this state for an act committed in another

state for which the licensee would be subject to discipline for an act committed in the other state.

     5-3.1-9. Permits for practice units. -- (a) Permits to engage in the practice of public

accounting in this state as a practice unit shall be issued by the board, upon application therefore

and payment of the required fee, to an entity that demonstrates its qualifications in accordance

with this chapter or to certified public accounting firms originally licensed in another state that

establish an office in this state. A practice unit must hold a permit issued under this section in

order to provide attest and compilation services as defined or to use the title "CPAs" or "CPA

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firm." An applicant entity for initial issuance or renewal of a permit to practice under this section

shall be required to register each office of the firm within this state with the board and to show

that all attest and compilation services as defined in this chapter rendered in this state are under

the charge of a person holding a valid certificate issued under this chapter, or the corresponding

provision of prior law or some other state.

      (b) An entity shall satisfy the following requirements:

      (1) For corporations, general partnerships, joint ventures, limited liability partnerships

and limited liability companies:

      (i) The principal purpose and business of the partnership must be to furnish public

accounting services to the public not inconsistent with this chapter and the rules and regulations

of the board;

      (ii) A majority of the ownership of the entity, in terms of financial interests and voting

rights of all partners, shareholders or members, belongs to holders of a certificate who shall hold

a certificate and a permit from some state, and such partners, shareholders or members, whose

principal place of business is in this state and who perform professional services in this state, hold

a valid permit issued under this chapter or are public accountants registered under § 5-3.1-7.

Although firms may include non-licensee owners, the firm and its ownership and all parties must

comply with rules promulgated by the board. For firms of public accountants, a majority of the

ownership of the firm, in terms of financial interests and voting rights, must belong to holders of

permits under § 5-3.1-7, and provided, that any such entity as defined by this subsection may

include non-licensee owners provided that:

      (A) The entity designates a licensee of this state, who is responsible for the proper

registration of the firm and identifies that individual to the board;

      (B) All non-licensee owners are active individual participants in the entity;

      (C) The entity complies with such other requirements as the board may impose by rule;

      (D) Any individual licensee who is responsible for supervising attest and compilation

services and signs or authorizes another licensee to sign the accountant's report on the financial

statements on behalf of the firm, shall meet the experience requirements as set out in professional

standards for such services;

      (E) Any individual licensee who signs or authorizes another licensee to sign the

accountants' report on the financial statements on behalf of the firm shall meet the experience

requirement as set out in professional standards for such services.

      (iii) At least one partner, shareholder or member must be a certified public accountant or

a public accountant holding a certificate or authority under this chapter and a permit to practice in

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this state under § 5-3.1-7;

      (iv) The address of every office of the entity located in this state must be listed in the

application for the permit.

      (2) For a sole proprietorship:

      (i) The principal purpose and business of the sole proprietorship must be to furnish

public accounting services to the public not inconsistent with this chapter and the rules and

regulations of the board;

      (ii) The sole proprietor must be a certified public accountant or a public accountant

holding a certificate or authority under this chapter and a permit to practice in this state under § 5-

3.1-7;

      (iii) The address of every office of the sole proprietorship located in this state must be

listed in the application for the permit.

      (iv) Any individual licensee who is responsible for supervising attest and compilation

services and signs or authorizes another licensee to sign the accountant's report on the financial

statements on behalf of the sole proprietor shall meet the experience requirements as set out in

professional standards for such services; and

      (v) Any individual licensee who signs or authorizes another licensee to sign the

accountants' report on the financial statements on behalf of the firm shall meet the experience

requirement as set out in professional standards for such services.

      (c) Application for a permit under this section must be made upon the affidavit of the

partner, shareholder, member or sole proprietor who holds a permit to practice in this state under

§ 5-3.1-7 as a certified public accountant or a public accountant. All applications for a permit

under this section must include, in addition to any other information required by this chapter or

by rule or regulation of the board to be stated in the application, a list of all other states in which

the entity has applied for or holds a permit. Upon receipt of the application, the board shall

determine whether the entity is eligible for a permit. In the event the board determines the entity

is ineligible for a permit under this section, that determination shall be stated in writing and

delivered to the applicant at the address that is stated in the application.

      (d) All applicants for or holders of a permit under this section shall notify the board in

writingwithin thirty (30) days of the occurrence of the event:

      (1) Of any change in the identities of the partners, officers, directors, or shareholders

who are personally engaged in this state in the practice of public accounting;

      (2) Of any change in the number or location of offices within this state required to be

listed in the application pursuant to this section;

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      (3) Of any change in the identities of the persons supervising the offices;

      (4) Of any issuance, denial, revocation, or suspension of a permit by any other state. The

board may prescribe fees, which are to be paid by the applicants or holders upon the notification;

and

      (5) Of a reduction below a majority of the ownership in the entity in terms of financial

interests and voting rights.

      (e) All permits issued by the board under this section subsequent to January 1, 2009,

shall be valid for a period of three (3) years and shall expire on the last day of June of the year in

which the permit is scheduled to expire unless the permit is renewed in accordance with the

provisions of this section. To transition existing licensees to a three (3) year licensing cycle, the

board shall have the authority and discretion in 2008 to issue permits under this section that are

valid for one, two (2), or three (3) years. All such permits issued during 2008 shall expire upon

the last day of June of the year in which the permit is scheduled to expire. The board's authority

to issue permits valid for one or two (2) years shall cease as of December 31, 2008.

      Effective January 1, 2009, permits issued pursuant to this section may be renewed for a

period of three (3) years, and the renewed permit shall expire on the last day of June of the year in

which the renewed permit is scheduled to expire, unless the renewed permit is again renewed by

its holder. All applications for renewal of permits under this section shall be submitted to the

board by February 15 of the year in which a permit or renewed permit is scheduled to expire. All

applicants for permit renewal shall satisfy the quality review requirements prescribed in § 5-3.1-

10.

      (f) Fees to be paid upon application for initial issuance or renewal of a permit under this

section shall be established from time to time by the board. Fees shall be paid at the time the

application is filed with the board.

      (g) An annual permit to engage in the practice of public accounting in this state shall be

issued by the board, upon application for it and payment of the required fee, to the office of the

auditor general provided the office is in compliance with § 5-3.1-10.

      (h) An entity which falls out of compliance with the provisions of this section due to

changes in firm ownership or personnel, after receiving or renewing a permit, shall take

corrective action to bring the firm into compliance as quickly as possible. The board may grant a

reasonable period of time for a firm to take such corrective action. Failure to bring the firm into

compliance within a reasonable period as defined by the board will result in the suspension or

revocation of the permit.

     5-3.1-12. Revocation or suspension of certificate, authority or permit. -- (a) After

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notice and a hearing as provided in § 5-3.1-14, the board may: (1) suspend, for a period not to

exceed two (2) years, or revoke any certificate issued under § 5-3.1-5, or any predecessor

provision, and any authority as a public accountant issued under the prior laws of this state; (2)

revoke or suspend any permit issued under §§ 5-3.1-7, 5-3.1-8, 5-3.1-9, or their predecessor

provisions; and (3) reprimand or censure in writing, limit the scope of practice, impose an

administrative fine upon, not to exceed one thousand dollars ($1,000), or place on probation, all

with or without terms, conditions, or limitations, a licensee, for any of the causes specified in

subsection (b) of this section.

      (b) The board may take action specified in subsection (a) of this section for any one or

more of the following causes:

      (1) Fraud or deceit in obtaining a certificate or permit under this chapter;

      (2) Dishonesty, fraud, or gross negligence in the practice of public accounting or in the

filing or failing to file the licensee's own income tax returns;

      (3) Violation of any of the provisions of this chapter;

      (4) Violation of any rules and regulations, including, but not limited to, any rules of

professional conduct, promulgated by the board under the authority granted by this chapter;

      (5) Conviction of, or pleading guilty or nolo contendere to, a crime or an act constituting

a crime of forgery, embezzlement, obtaining money under false pretenses, bribery, larceny,

extortion, conspiracy to defraud, misappropriation of funds, tax evasion, or any other similar

offense or offenses involving moral turpitude, in a court of competent jurisdiction of this or any

other state or in federal court;

      (6) Cancellation, revocation, or suspension of, or refusal to renew, the licensee's

certificate or permit from another state by the other state for any cause other than failure to pay a

fee or to meet the requirements of continuing education in that other state;

      (7) Suspension or revocation of the right to practice public accounting before any state or

federal agency;

      (8) As to accountants licensed by foreign countries, cancellation, revocation, suspension,

or refusal to renew the person's certificate, license, or degree evidencing his or her qualification to

practice public accounting by the foreign country issuing the certificate, license, or degree, the

certificate, license, or degree having qualified the accountant for issuance of an annual limited

permit to practice under § 5-3.1-8;

      (9) Failure to furnish the board or any persons acting on behalf of the board any

information that is legally requested by the board;

      (10) Any conduct reflecting adversely upon the licensee's fitness to engage in the

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practice of public accountancy; and

      (11) Any other conduct discreditable to the public accounting profession.

     SECTION 2. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO BUSINESSES AND PROFESSIONS -- ACCOUNTANCY

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     This act would amend certain provisions of the general laws governing the licensing of

accountants to eliminate outmoded, inconsistent and unnecessary regulations.

     This act would take effect upon passage.

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