HB-6196, As Passed House, June 30, 2010
May 19, 2010, Introduced by Reps. Johnson, Stamas and Rocca and referred to the Committee on Regulatory Reform.
A bill to amend 1980 PA 299, entitled
"Occupational code,"
by amending sections 720, 725, 726, 727, 728, 729, and 734 (MCL
339.720, 339.725, 339.726, 339.727, 339.728, 339.729, and 339.734),
sections 720, 728, and 734 as amended by 2008 PA 161, sections 725
and 729 as amended by 2007 PA 1, and sections 726 and 727 as added
by 1997 PA 10.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 720. (1) As used in this article:
(a) "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.
(ii) Any review of a financial statement to be performed in
accordance with the statements on standards for accounting and
review services.
(iii) Any examination of prospective financial information to be
performed in accordance with the statements on standards for
attestation engagements.
(iv) Any engagement to be performed in accordance with the
public company accounting oversight board auditing standards.
(b) "Certified public accountant" means an individual who is
either of the following:
(i) Qualified by education, examination, and experience to
engage or offer to engage in the practice of public accounting as
evidenced by the issuance of a certificate as a certified public
accountant under section 725 or 726 and a license or registration
issued under section 727.
(ii) An individual whose principal place of business is not in
this state and who satisfies the requirements set forth in section
727a.
(c) "Client" means a person or entity that engages a licensee
or licensee's employer to receive any service in the practice of
public accounting.
(d) "Compilation" means providing a service to be performed in
accordance with statements on standards for accounting and review
services that are presenting, in the form of financial statements,
information that is the representation of management or owners
without undertaking to express any assurance on the statements.
(e) "Firm" means a corporation, partnership, limited liability
company, unincorporated association, sole proprietorship operating
under an assumed name, or other legal entity.
(f) "Home office" means the location specified by the client
as the address to which a service described in subdivision (a) or
(d) is directed.
(g) Subject to subsection (2), "practice of public accounting"
means rendering or offering to render an opinion on or attesting to
or offering to attest to the reliability of a representation or
estimate, including, but not limited to, the giving of an opinion
in substance that financial information as set forth presents
fairly the condition of the entity reviewed or audited, in regard
to an entity embracing 1 or more of the following:
(i) Financial information.
(ii) Facts respecting compliance with conditions established by
law or contract, including, but not limited to, a statute,
ordinance, regulation, grant, loan, or appropriation.
(iii) The scope of the accounting procedures rendered in
connection with the presentation of a financial statement.
(h) "Principal place of business" means the office location
designated by the licensee for the purposes of substantial
equivalency and reciprocity.
(i) "Report", when used with reference to financial
statements, means an opinion, report, or other form of language
that states or implies assurance as to the reliability of any
financial statements and that also includes, or is accompanied by,
any statement or implication that the person or firm issuing it has
special knowledge or competence in accounting or auditing. Such 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 person or firm is an accountant or auditor or
from the language of the report itself. Report includes any form of
language which disclaims an opinion when that form of language is
conventionally understood to imply any positive assurance as to the
reliability of the financial statements referred to or special
competence on the part of the person or firm issuing such language,
or both, and includes any other form of language that is
conventionally understood to imply that assurance or special
knowledge and competence, or both.
(2) In addition to the definition set forth in subsection
(1)(g), practice of public accounting includes 1 or more of the
following activities when performed or offered to be performed by a
person holding himself or herself out as a certified public
accountant for a client or a potential client:
(a) The issuance of reports on financial statements.
(b) One or more kinds of management advisory, financial
advisory, or consulting services, including, but not limited to,
business valuation, forensic accounting, and fraud examination
services.
(c) The preparation of tax returns.
(d) The furnishing of advice on tax matters.
Sec. 725. (1) The department shall issue a certificate as a
certified public accountant to an individual who meets all of the
following requirements:
(a) Is of good moral character.
(b) Has complied with the education requirements of subsection
(2).
(c) Has passed an examination meeting the requirements of
subsection (3).
(d) Has complied with the experience requirements of
subsection (4).
(e) Has completed at least 150 semester hours of college
education, including a baccalaureate degree or higher degree with a
concentration in accounting, at an educational institution approved
by the board.
(2) An individual who has completed a curriculum required for
a baccalaureate degree with a concentration in accounting at an
educational institution approved by the board may sit for the
examination required under subsection (3).
(3) An applicant for a certificate as a certified public
accountant shall pass an examination in accounting, auditing, and
other related subjects, acceptable to the department and the board,
that is given reciprocal status in the plurality of states as
compared to other examinations.
(4)
An applicant for a certificate as a certified public
accountant
shall have 1 year of qualifying experience under the
direction
and supervision of a licensed certified public accountant
of
this or another state in either of the following:
(a)
The practice of public accounting with experience obtained
in
1 financial audit and in all of the following areas that may be
performed
under the direction and supervision of a licensed
certified
public accountant while the applicant was meeting the
education
requirements of subsection (2):
(i) The application of a variety of auditing
procedures and
techniques
to the usual and customary financial transactions
recorded
in accounting records.
(ii) The preparation of working papers covering the
examination
of
the accounts usually found in accounting records for audit,
review,
and compilation.
(iii) The participation in the planning of the program
of work
including
the selection of the procedures to be followed for audit,
review,
and compilation.
(iv) The participation in the preparation of reports,
including
written
explanations and comments on the findings of the
examinations
and on the content of the accounting records.
(v) The participation in the preparation and analysis
of
financial
statements together with explanations and notes.
(b)
The practice of public accounting with a governmental
agency
involving either of the following:
(i) The auditing of the books and accounts or
financial
activities
of persons engaged in 3 or more distinct lines of
commercial
or industrial business in accordance with generally
accepted
auditing standards or generally accepted government
auditing
standards.
(ii) The auditing of the books and accounts of
financial
activities
of 3 or more distinct governmental agencies or
independent
organizational units other than an employer of the
applicant
in accordance with generally accepted auditing standards
or
generally accepted government auditing standards, and in which
the
results of the auditing are reported to a third party.
(5)
In complying with the requirement of subsection (4) that
an
applicant shall have performed 1 financial audit, an applicant
may
submit an audit performed under the direction and supervision
of
a licensed certified public accountant who is not the
applicant's
employer or an audit performed while the applicant was
meeting
the educational requirements of subsection (2).
(4) For an application for a certificate as a certified public
accountant received on or after the effective date of the
amendatory act that added this subsection, or an application
received before that date if a certificate of certified public
accountant has not been issued, the applicant shall have 1 year of
qualifying experience, all of which is verified by a certified
public accountant of this state, any other state, or any
jurisdiction of the United States, submitted on a form prescribed
by the department. Qualified experience is experience gained
through employment in government, industry, academia, or public
practice in 1 or more of the following areas:
(a) Audits of financial statements in accordance with the
applicable standards at the time of engagement.
(b) Reviews of financial statements in accordance with the
applicable standards at the time of engagement.
(c) Compilations of financial statements with complete
disclosure in accordance with the applicable standards at the time
of engagement.
(d) Attestation engagements in accordance with the applicable
standards at the time of engagement.
(e) Other auditing in accordance with applicable standards at
the time of engagement that leads to an expression of a written
opinion including any of the following:
(i) Reviews regarding internal control.
(ii) Operational audits.
(iii) Compliance audits.
(iv) Expressions of an opinion on financial forecasts and
projections.
(f) Performance of an independent internal audit function.
(g) Compliance audits of government contracts performed on
behalf of a government agency that result in the issuance of an
opinion or report.
(h) Audits performed on behalf of a government audit agency
that result in the issuance of an opinion or report.
(i) Preparation of income and nonprofit tax returns for any
taxing jurisdiction.
(j) Properly documented tax research.
(k) Representation of a client before a government agency on a
tax matter.
(l) Financial forecasts, analyses, and projections.
(m) Management advisory services including, but not limited
to, business valuation, forensic accounting, and fraud examination
services that meet applicable standards.
(n) Management and supervision of accounting functions and
preparing financial statements for profit or nonprofit entities.
(o) Professional accounting-related work in a public
accounting firm.
House Bill No. 6196 as amended June 30, 2010
(p) Other work generally associated with the profession of
public accounting.
(5) An applicant for certification under this section shall
not receive credit as qualifying experience for the following:
(a) Experience consisting of nonprofessional work, including
recruiting, industrial engineering, administration, bookkeeping,
and appraisals.
(b) Paraprofessional work that does not comply with subsection
(4)(o).
[Sec. 726. (1) The department shall issue a certificate as a
certified public accountant to an individual who meets
both of the
following requirements:
(a) Holds holds
a valid and unrevoked certificate as a certified
public accountant issued by or under the authority of another state or
United States jurisdiction . and meets either of the following
conditions:
(a) (b) Provides proof that the
applicant's original certificate as
a certified public accountant was secured on the basis of requirements
that the board determines are equivalent to the standards required for
qualification in this state at the same time the applicant was issued his
or her original certificate.
(b) Has had 4 years of experience of the type described in section
725(4) after having passed the examination upon which the applicant's
certificate was based, within 10 years immediately preceding the date of
application.
(2) The department shall issue a certificate as a certified public
accountant to an individual who meets both of the
following requirements:
House Bill No. 6196 as amended June 30, 2010
(a) Holds holds
a valid and unrevoked certificate as a certified
public accountant or an equivalent title issued by or under the authority
of a jurisdiction outside the United States that the board determines to
be equivalent
to the requirements to obtain a certificate of certified
public accountant in this state as described in section 725.
(b) Has passed an examination on topics specific to
the practice of
public accounting in the United States and approved by the board.
]
Sec. 727. After obtaining a certificate as a certified public
accountant under section 725 or 726, an individual seeking to use a
title authorized by this article shall do 1 of the following:
(a) If the individual only seeks to use a title authorized by
this article, the individual shall apply for registration under
this article.
(b) If the individual seeks to use a title authorized by this
article and to engage in the practice of public accounting, the
individual shall apply for licensure under this article. A
nonresident member of a firm who has authority for the firm's
practice of public accounting in this state is considered to be
engaged in the practice of public accountancy in this state.
Sec.
728. (1) A firm organized for the practice of public
accounting
shall apply for and obtain a Michigan
license under this
article in order to engage in the practice of public accounting in
this state if either of the following apply:
(a) The firm establishes or maintains an office in this state.
(b) An individual representing the firm performs any
engagement described in section 720(1)(a)(i), (iii), or (iv) for any
client having its home office in this state.
(2) Reports produced pursuant to engagements in subsection
(1)(b) may be supervised or signed, or the report's signature may
be authorized for the firm, by an individual practicing public
accounting in Michigan pursuant to section 727a.
(3) A firm applying for licensure under this article shall
meet all of the following requirements:
(a) At least a simple majority of the equity and voting rights
of the firm are held directly or beneficially by individuals who
are licensed in good standing as certified public accountants of
this or another state or the equivalent in another licensing
jurisdiction acceptable to the board. Owners who are not certified
public accountants as defined by section 720(1)(b) must be active
individual participants in the firm or its affiliated entities. An
individual with practice privileges under section 727a who performs
services
for which a firm permit license
is required under this
section is not required to obtain a certificate under section 726
or a registration or license under section 727.
(b) The principal officer of the firm and each officer or
director having authority for the practice of public accounting by
the firm are licensed in good standing as certified public
accountants in this or another state or the equivalent in another
licensing jurisdiction acceptable to the board.
(c) Has filed the required certificate of authority with the
department pursuant to the business corporations act, 1972 PA 284,
MCL
450.2001 450.1101 to 450.2098, if applicable.
(4) A firm shall provide a change in address to the department
within 30 days of the change.
(5) A firm not required to obtain a Michigan license under
subsection (1) may perform a review engagement in accordance with
the statements on standards for accounting and review services or a
compilation for a client having its home office in this state, may
use the title "CPA" or "CPA firm", and may practice public
accountancy as authorized in this section without a license issued
under subsection (1) only if it meets both of the following
conditions:
(a) It has met the requirements in subsection (3)(a) and (b)
and section 729(2).
(b) It performs such services through an individual with
practice privileges under section 727a.
(6) A firm not required to obtain a Michigan license under
subsection (1) and that is not seeking to practice under subsection
(5) may perform other professional services within the practice of
public accountancy while using the title "CPA" or "CPA firm" in
this state without a license issued under subsection (1) only if it
meets both of the following conditions:
(a) It performs such services though an individual with
practice privileges under section 727a.
(b) It can lawfully do so in the licensing jurisdiction where
such individuals with practice privilege have their principal place
of business.
Sec. 729. (1) As a condition of license renewal, an individual
licensee shall complete at least 40 hours of continuing education
for each year since the issuance of the original license or the
last renewal. Of the 40 hours of continuing education credits, the
board shall not require more than 8 of those hours to be in the
areas of auditing and accounting. The board may make exceptions
from the continuing education requirements of this subsection for
reasons of health, military service, or other good cause.
(2) Each licensed firm and sole practitioner that performs
attest
any of the following services
, including audits, reviews,
and
compilations that are relied upon by third parties, shall
participate in a peer review program established by rule of the
department
and approved by the board: .
(a) Audit.
(b) Review.
(c) Compilations that are relied upon by third parties.
(3)
An applicant for renewal or
relicensure shall submit to
the department, on a form prescribed by the department and at the
time
of renewal, or relicensure proof of peer review obtained
within the 3 years immediately preceding the application.
(4) A firm or sole practitioner required to participate in a
peer review program under this subsection shall notify the
department
within 30 days after receipt of an adverse report a fail
rating
or second modified peer review
report consecutive pass with
deficiencies rating. Verbal testimony or documents, or both,
pertaining to a peer review shall be considered confidential and
shall be exempt from disclosure to the department, except in the
case
of an adverse a fail or second consecutive modified opinion
pass with deficiencies rating.
(5) (3)
The peer review requirements under
subsection (2) for
licensees become effective as follows:
(a) For licensed firms and sole practitioners whose attest
services include audits, beginning March 1, 2008.
(b) For licensed firms and sole practitioners whose attest
services include compilation with disclosures relied upon by third
parties, or review, or both compilation with disclosures and
review, but not audits under subdivision (a), beginning March 1,
2009.
(c) For licensed firms and sole practitioners whose attest
services include compilation without disclosures relied upon by
third parties, but not audits under subdivision (a) or any
compilation with disclosures relied upon by third parties, or
review, or both compilation with disclosures and review under
subdivision (b), beginning March 1, 2010.
Sec. 734. (1) A holder of a certificate, registration, or
license as a certified public accountant or an individual
exercising the practice privilege granted under section 727a and
the firm employing that individual is subject to the penalties of
section 602 for 1 or more of the following:
(a) Fraud or deceit in obtaining a certificate or registration
as a certified public accountant, a license to practice public
accounting, or a practice privilege under this article.
(b) Dishonesty, fraud, or negligence in the practice of public
accounting.
(c) Violation of a rule of professional conduct promulgated
under this article.
(d) Departure from standards of professional practice
applicable to the engagement, at the time of engagement.
(e) (d)
Conviction of a felony under the
laws of this or
another state or the United States or conviction of a crime, an
element of which is dishonesty, fraud, or negligence, under the
laws of this or another state or of the United States, including,
but not limited to, the failure to file a personal federal, state,
or local income tax return.
(f) (e)
Cancellation, revocation,
suspension, or refusal to
renew authority to practice as a certified public accountant by
another state or any jurisdiction of the United States for a cause
other than failure to pay a licensure or other required fee in that
state.
(g) (f)
Suspension or revocation for
cause of the right to
engage in the practice of public accounting before a state or
federal agency or a public accounting oversight board.
(h) (g)
Conduct discreditable to the public
accounting
profession.
(i) (h)
Determination of mental
incompetency by a court of
law.
(j) (i)
A violation of this article or a
rule promulgated
under this article.
(k) (j)
A violation of the provisions of
section 604.
(l) (k)
A violation of professional
standards regarding the
issuance of reports on financial statements; 1 or more kinds of
management advisory, financial advisory, or consulting services;
the preparation of tax returns; or the furnishing of advice on tax
matters.
(2) Notwithstanding section 602(e), a person that violates
this article or a rule or order promulgated or issued under or
related to this article is liable for an administrative fine
payable to the department of not more than $25,000.00 per
violation.
(3) Within 30 days after a final determination rendered by a
federal or state administrative agency or a judgment or conviction
issued by a federal court, a state court, or any other court of
record, a licensee or registrant shall report to the department in
writing or electronically a determination, order, judgment, or
conviction regarding a violation in which dishonesty, fraud, or
negligence is an element of that determination, order, judgment, or
conviction.