2016 -- H 7838 SUBSTITUTE A

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LC004966/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: Representatives O'Brien, McKiernan, Almeida, Carnevale, and Marshall

     Date Introduced: March 03, 2016

     Referred To: House Corporations

     (Business Regulation)

It is enacted by the General Assembly as follows:

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     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

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

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

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following terms are construed as follows:

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

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

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

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

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

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American Institute of Certified Public Accountants;

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

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

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American Institute of Certified Public Accountants;

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

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

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company accounting oversight board;

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

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

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

 

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

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

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

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

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

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the public company accounting oversight board.

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

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

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

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

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

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

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

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

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

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similar law of any other state.

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

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

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

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

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any assurance on the statements.

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

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

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

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dishonest or felonious acts.

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

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chapter or under the prior laws of this state.

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

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interests and voting rights.

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

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

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

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

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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.

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

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

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

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

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

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

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office of the Auditor General is considered a practice unit.

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

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

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state income tax return.

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

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accountant issued under the prior laws of this state.

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

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

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

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

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

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

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

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

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

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

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

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and/or special knowledge or competence.

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

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

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

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

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

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

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

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

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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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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state by the applicant.

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

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

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

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

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

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

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excusable neglect.

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

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

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

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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.

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

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

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

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

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notify the board in writing:

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

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or permit by any other state; or

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

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applicant, holder or individual by any other state.

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

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

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

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time the application is filed with the board.

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      (g) Substantial equivalency.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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

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

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substantial equivalence with this chapter.

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

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

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

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

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

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

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

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

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are substantially equivalent to the CPA licensure requirements of the AICPAASBA

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

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

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

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

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

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condition of the granting of this privilege:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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

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

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

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

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provision of prior law or some other state.

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      (b) An entity shall satisfy the following requirements:

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

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and limited liability companies:

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

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

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of the board;

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

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

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

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

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

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

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

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

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

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include non-licensee owners provided that:

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

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

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

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

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

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

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

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standards for such services;

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

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

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requirement as set out in professional standards for such services.

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

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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;

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

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application for the permit.

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      (2) For a sole proprietorship:

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

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

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regulations of the board;

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

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

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3.1-7;

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

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listed in the application for the permit.

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

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

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

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professional standards for such services; and

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

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

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requirement as set out in professional standards for such services.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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;

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

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

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and

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

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interests and voting rights.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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10.

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

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

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application is filed with the board.

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

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

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

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

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

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

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

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

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revocation of the permit.

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     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

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

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

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

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

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

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

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subsection (b) of this section.

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

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more of the following causes:

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

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

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

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

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

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

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

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

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

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

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other state or in federal court;

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

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

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

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

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federal agency;

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

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

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

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

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permit to practice under § 5-3.1-8;

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

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information that is legally requested by the board;

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

 

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practice of public accountancy; and

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

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     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

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accountants to eliminate outmoded, inconsistent and unnecessary regulations.

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     This act would take effect upon passage.

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