Chapter 151

2007 -- S 0301 SUBSTITUTE B

Enacted 06/30/07

A N A C T

RELATING TO BUSINESSES AND PROFESSIONS -- PUBLIC ACCOUNTANCY

Introduced By: Senators Walaska, and McCaffrey

Date Introduced: February 07, 2007

It is enacted by the General Assembly as follows:

     SECTION 1. Sections 5-3.1-7 and 5-3.1-9 of the General Laws in Chapter 5-3.1 entitled

"Public Accountancy" are hereby amended to read as follows:

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 section 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 section 5-3.1-6.

All of those permits expire on the last day of June of each year unless the permit is renewed in

accordance with subsection (c) of this section. Permits may be renewed for a period of one year.

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 each year 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 section 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 the practice unit to meet the requirements of sections 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) (1) Substantial equivalency. - 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 shall notify the board,

in writing, of his or her intent to enter the state under this provision. The individual must have one

year or more of experience and state so on the written notice to the board. 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 and

supervised 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. 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 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) Any licensee of another state exercising the privilege afforded under this section

hereby consents, as a condition of the granting of this privilege:

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

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

      (iii) 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;

      (iv) To be subject to disciplinary action in this state for an act committed in this state.

      (3) 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) An annual permit 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 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 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 section 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 section 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

this state under section 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

section 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

section 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

writing within 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;

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

      (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.

      (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 each 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 Permits may be

renewed for a period of one year three (3) years, and the renewed permit shall expire on the last

day of June in of the year following the year in which they are renewed in which the renewed

permit is scheduled to expire, unless they are again the renewed permit is again renewed by their

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

the board by February 15 of each year 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 section 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 section 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.

     SECTION 2. This act shall take effect on January 1, 2008.

=======

LC01340/SUB B

=======