HF 744

as introduced - 89th Legislature (2015 - 2016) Posted on 03/25/2015 12:28pm

A bill for an act
relating to state government; modifying standards for accountancy examinations
and peer reviews; authorizing rulemaking; amending Minnesota Statutes 2014,
sections 326A.01, subdivisions 2, 12, 13a, 15, 16; 326A.02, subdivisions 3, 5;
326A.05, subdivisions 1, 3; 326A.08, subdivision 7; 326A.10.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2014, section 326A.01, subdivision 2, is amended to read:

Subd. 2.

Attest.

"Attest" means deleted text begin to provide deleted text end new text begin providing any of new text end the following deleted text begin financial
statement deleted text end services:

(1) an audit or other engagement performed in accordance with the Statements on
Auditing Standards (SAS);

(2) a review of a financial statement performed in accordance with the Statements on
Standards for Accounting and Review Services (SSARS);

(3) an examination of prospective financial information performed in accordance
with the Statements on Standards for Attestation Engagements (SSAE); deleted text begin and
deleted text end

(4) deleted text begin any deleted text end new text begin an new text end engagement performed in accordance with deleted text begin auditing and related deleted text end new text begin the new text end
standards of the Public Company Accounting Oversight Board new text begin (PCAOB); and
new text end

new text begin (5) an examination, review, or agreed-upon procedures engagement performed in
accordance with SSAE, other than an examination described in clause (3) new text end .

Sec. 2.

Minnesota Statutes 2014, section 326A.01, subdivision 12, is amended to read:

Subd. 12.

Peer review.

"Peer review" means deleted text begin an independent deleted text end new text begin a new text end study, appraisal, or
review of one or more aspects of the professional work of a licensee new text begin or CPA firm new text end that
issues attest or compilation reports, or the professional work of a person registered under
section 326A.06, paragraph (b), by persons who are not affiliated with the licensee new text begin or
CPA firm new text end being reviewed.

Sec. 3.

Minnesota Statutes 2014, section 326A.01, subdivision 13a, is amended to read:

Subd. 13a.

Principal place of business.

"Principal place of business" means the
office location designated by the licensee for purposes of substantial equivalency and
reciprocity deleted text begin in this state and in other states deleted text end .

Sec. 4.

Minnesota Statutes 2014, section 326A.01, subdivision 15, is amended to read:

Subd. 15.

Report.

"Report," when used with reference to deleted text begin financial statements deleted text end new text begin an
attest or compilation service new text end , means an opinion, report, or other form of language that
states or implies assurance as to the reliability of deleted text begin any deleted text end new text begin the attested information or compiled
new text end financial statements and that also includes or is accompanied by a 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. The term "report" includes
any form of language that disclaims an opinion when the form of language is conventionally
understood to imply any positive assurance as to the reliability of the new text begin attested information
or compiled new text end financial statements referred to or special competence on the part of the person
or firm issuing the language. It includes any other form of language that is conventionally
understood to imply such assurance or such special knowledge or competence.

Sec. 5.

Minnesota Statutes 2014, section 326A.01, subdivision 16, is amended to read:

Subd. 16.

State.

"State" means any state of the United States, the District of
Columbia, Puerto Rico, the U.S. Virgin Islands, new text begin the Commonwealth of the Northern
Mariana Islands, new text end and Guam; except that "this state" means the state of Minnesota.

Sec. 6.

Minnesota Statutes 2014, section 326A.02, subdivision 3, is amended to read:

Subd. 3.

Officers; proceedings.

The board shall elect one of its deleted text begin number deleted text end new text begin members new text end
as chair, another as vice-chair, and another as secretary and treasurer. The officers shall
hold their respective offices for a term of one year and until their successors are elected.
The affirmative vote of a majority of the qualified members of the board, or a majority of
a quorum of the board at any meeting duly called, is considered the action of the board.
The board shall meet at such times and places as may be fixed by the board. Meetings
of the board are subject to chapter 13D. A majority of the board members then in office
constitutes a quorum at any meeting duly called. The board shall retain or arrange for the
retention of all applications and all documents under oath that are filed with the board and
also records of its proceedings, and it shall maintain a registry of the names and addresses
of all licensees and registrants under this chapter. In any proceeding in court, civil or
criminal, arising out of or founded upon any provision of this chapter, copies of records of
the proceeding certified as true copies by the board chair or executive director shall be
admissible in evidence as tending to prove the contents of the records.

Sec. 7.

Minnesota Statutes 2014, section 326A.02, subdivision 5, is amended to read:

Subd. 5.

Rules.

The board may adopt rules governing its administration and
enforcement of this chapter and the conduct of licensees and persons registered under
section 326A.06, paragraph (b), including:

(1) rules governing the board's meetings and the conduct of its business;

(2) rules of procedure governing the conduct of investigations and hearings and
discipline by the board;

(3) rules specifying the educational and experience qualifications required for the
issuance of certificates and the continuing professional education required for renewal
of certificates;

(4) rules of professional conduct directed to controlling the quality and probity
of services by licensees, and dealing among other things with independence, integrity,
and objectivity; competence and technical standards; and responsibilities to the public
and to clients;

(5) rules governing the professional standards applicable to licensees including
adoption of the standards specified in section 326A.01, subdivision 2, and as developed
for general application by recognized national accountancy organizations such as the
American Institute of Certified Public Accountants or the Public Company Accounting
Oversight Board;

new text begin (6) rules that incorporate by reference the standards for attesting listed in section
326A.01, subdivision 2, that are consistent with the standards of general applicability
recognized by national accountancy organizations, including the American Institute of
Certified Public Accountants and the Public Company Accounting Oversight Board;
new text end

deleted text begin (6) deleted text end new text begin (7) new text end rules governing the manner and circumstances of use of the titles "certified
public accountant," "CPA," "registered accounting practitioner," and "RAP";

deleted text begin (7) deleted text end new text begin (8) new text end rules regarding peer review that may be required to be performed under
provisions of this chapter;

deleted text begin (8) deleted text end new text begin (9) new text end rules on substantial equivalence to implement section 326A.14;

deleted text begin (9) deleted text end new text begin (10) new text end rules regarding the conduct of the certified public accountant examination;

deleted text begin (10) deleted text end new text begin (11) new text end rules regarding the issuance and renewals of certificates, permits, and
registrations;

deleted text begin (11) deleted text end new text begin (12) new text end rules regarding transition provisions to implement this chapter;

deleted text begin (12) deleted text end new text begin (13) new text end rules specifying the educational and experience qualifications for
registration, rules of professional conduct, rules regarding peer review, rules governing
standards for providing services, and rules regarding the conduct and content of
examination for those persons registered under section 326A.06, paragraph (b);

deleted text begin (13) deleted text end new text begin (14) new text end rules regarding fees for examinations, certificate issuance and renewal,
firm permits, registrations under section 326A.06, paragraph (b), notifications made under
section 326A.14, and late processing fees; and

deleted text begin (14) deleted text end new text begin (15) new text end upon any change to this chapter, if the board determines a change in
Minnesota Rules is required, the board may initiate the expedited process under section
14.389 up to one year after the effective date of the change to this chapter.

Sec. 8.

Minnesota Statutes 2014, section 326A.05, subdivision 1, is amended to read:

Subdivision 1.

General.

The board shall grant or renew permits to practice as
a CPA firm to entities that make application and demonstrate their qualifications in
accordance with this section.

(a) The following must hold a permit issued under this section:

(1) any firm with an office in this state performing attest services as defined in
section 326A.01, subdivision 2;

(2) to the extent required by section 326A.10, paragraph (k), any firm with an office
in this state performing compilation services as defined in section 326A.01, subdivision 6;

(3) any firm with an office in this state that uses the title "CPA" or "CPA firm"; or

(4) any firm that does not have an office in this state but performs attest services
as described in section 326A.01, subdivision 2, paragraph (1), (3), or (4), for a client
having its headquarters in this state.

(b) A firm possessing a valid permit from another state which does not have an office
in this state may perform services described in section 326A.01, subdivision 2, clause (2) new text begin
or (5) new text end , or subdivision 6, for a client having its headquarters in this state and may use the
title "CPA" or "CPA firm" without a permit issued under this section only if:

(1) it has the qualifications described in subdivision 3, paragraph (b);

(2) as a condition to the renewal of the firm's permit issued by the other state, that
state requires a peer review which contains the requirements equivalent to subdivision 8,
paragraphs (a) and (e); and

(3) it performs the services through an individual who has been granted practice
privileges under section 326A.14.

(c) A firm possessing a valid permit from another state that does not have an office
in this state and which is not subject to the requirements of paragraph (a), clause (4), or
(b), may perform other professional services while using the title "CPA" or "CPA firm" in
this state without a permit issued under this section only if the firm:

(1) has the qualifications described in subdivision 3, paragraph (b);

(2) performs the services through an individual who has been granted practice
privileges under section 326A.14; and

(3) can lawfully perform the services in the state where the individuals with practice
privileges have their principal place of business.

Sec. 9.

Minnesota Statutes 2014, section 326A.05, subdivision 3, is amended to read:

Subd. 3.

Qualifications.

(a) An applicant for initial issuance or renewal of a permit
to practice under this section shall comply with the requirements in this subdivision.

(b) Notwithstanding chapter 319B or any other provision of law, a simple majority
of the ownership of the firm, in terms of financial interests and voting rights of all partners,
officers, shareholders, members, or managers, must belong to holders of certificates who
are licensed in some state, and the partners, officers, shareholders, members, or managers,
whose principal place of business is in this state, and who perform professional services in
this state, must hold valid certificates issued under section 326A.04 or the corresponding
provision of prior law. Although firms may include nonlicensee owners, the firm and
its ownership must comply with rules adopted by the board. The firm shall register all
nonlicensee owners with the state board as set forth by rule. An individual who has been
granted practice privileges under section 326A.14 and who performs services for which
a firm permit is required under section 326A.14, subdivision 1, paragraph (d), is not
required to obtain a certificate from the board under section 326A.04.

(c) A CPA firm may include nonlicensee owners provided that:

(1) the firm designates a licensee of this state, or in the case of a firm that must
have a permit according to section 326A.14, subdivision 1, paragraph (d), a licensee of
another state who meets the requirements in section 326A.14, subdivision 1, paragraph
(a) or (b), who is responsible for the proper registration of the firm and identifies that
individual to the board;

(2) all nonlicensee owners are persons of good moral character and are active
individual participants in the CPA firm or affiliated entities; and

(3) the firm complies with other requirements imposed by the board in rule.

(d) An individual licensee and any individual granted practice privileges under
section 326A.14 who is responsible for supervising attest or compilation services and
signs or authorizes someone to sign the accountant's report deleted text begin on the financial statements deleted text end
on behalf of the firm, shall meet the competency requirements set out in the professional
standards for such services.

(e) An individual licensee and any individual granted practice privileges under section
326A.14 who signs or authorizes someone to sign the accountants' report deleted text begin on the financial
statements deleted text end on behalf of the firm shall meet the competency requirement of paragraph (d).

Sec. 10.

Minnesota Statutes 2014, section 326A.08, subdivision 7, is amended to read:

Subd. 7.

Violation; penalties; costs of proceeding.

(a) The board may impose
a civil penalty not to exceed deleted text begin $2,000 deleted text end new text begin $5,000 new text end per violation upon a person or a firm that
violates an order, statute, or rule that the board has issued or is empowered to enforce.

(b) The board may, in addition, impose a fee to reimburse the board for all or
part of the cost of the proceedings, including reasonable investigative costs, resulting
in disciplinary or corrective action authorized by this section, the imposition of civil
penalties, or the issuance of a cease and desist order. The fee may be imposed when the
board shows that the position of the person or firm that violates a statute, rule, or order
that the board has issued or is empowered to enforce is not substantially justified, unless
special circumstances make an award unjust, notwithstanding the provisions of Minnesota
Rules, part 1400.8401. The costs include, but are not limited to, the amount paid by the
board for services from the office of administrative hearings, attorney and reasonable
investigative fees, court reporters, witnesses, reproduction of records, board members' per
diem compensation, board staff time, and expense incurred by board members and staff.

Sec. 11.

Minnesota Statutes 2014, section 326A.10, is amended to read:

326A.10 UNLAWFUL ACTS.

(a) Only a licensee and individuals who have been granted practice privileges
under section 326A.14 may issue a report on financial statements of any person, firm,
organization, or governmental unit that results from providing attest services, or offer to
render or render any attest service. Only a certified public accountant, an individual who
has been granted practice privileges under section 326A.14, a CPA firm, or, to the extent
permitted by board rule, a person registered under section 326A.06, paragraph (b), may
issue a report on financial statements of any person, firm, organization, or governmental
unit that results from providing compilation services or offer to render or render any
compilation service. These restrictions do not prohibit any act of a public official or
public employee in the performance of that person's duties or prohibit the performance
by any nonlicensee of other services involving the use of accounting skills, including
the preparation of tax returns, management advisory services, and the preparation of
financial statements without the issuance of reports on them. Nonlicensees may prepare
financial statements and issue nonattest transmittals or information on them which do not
purport to be in compliance with the Statements on Standards for Accounting and Review
Services (SSARS). Nonlicensees registered under section 326A.06, paragraph (b), may,
to the extent permitted by board rule, prepare financial statements and issue nonattest
transmittals or information on them.

(b) Licensees and individuals who have been granted practice privileges under
section 326A.14 performing attest or compilation services must provide those services in
accordance with professional standards. To the extent permitted by board rule, registered
accounting practitioners performing compilation services must provide those services in
accordance with standards specified in board rule.

(c) A person who does not hold a valid certificate issued under section 326A.04
or a practice privilege granted under section 326A.14 shall not use or assume the title
"certified public accountant," the abbreviation "CPA," or any other title, designation,
words, letters, abbreviation, sign, card, or device tending to indicate that the person is a
certified public accountant.

(d) A firm shall not provide attest services or assume or use the title "certified public
accountants," the abbreviation "CPA's," or any other title, designation, words, letters,
abbreviation, sign, card, or device tending to indicate that the firm is a CPA firm unless
(1) the firm has complied with section 326A.05, and (2) ownership of the firm is in
accordance with this chapter and rules adopted by the board.

(e) A person or firm that does not hold a valid certificate or permit issued under
section 326A.04 or 326A.05 or has not otherwise complied with section 326A.04 or
326A.05 as required in this chapter shall not assume or use the title "certified accountant,"
"chartered accountant," "enrolled accountant," "licensed accountant," "registered
accountant," "accredited accountant," "accounting practitioner," "public accountant,"
"licensed public accountant," or any other title or designation likely to be confused
with the title "certified public accountant," or use any of the abbreviations "CA," "LA,"
"RA," "AA," "PA," "AP," "LPA," or similar abbreviation likely to be confused with the
abbreviation "CPA." The title "enrolled agent" or "EA" may only be used by individuals
so designated by the Internal Revenue Service.

(f) Persons registered under section 326A.06, paragraph (b), may use the title
"registered accounting practitioner" or the abbreviation "RAP." A person who does not
hold a valid registration under section 326A.06, paragraph (b), shall not assume or use
such title or abbreviation.

(g) Except to the extent permitted in paragraph (a), nonlicensees may not use
language in any statement relating to the financial affairs of a person or entity that is
conventionally used by licensees in reports on financial statements new text begin or on an attest service new text end .
In this regard, the board shall issue by rule safe harbor language that nonlicensees may
use in connection with such financial information. A person or firm that does not hold a
valid certificate or permit, or a registration issued under section 326A.04, 326A.05, or
326A.06, paragraph (b), or has not otherwise complied with section 326A.04 or 326A.05
as required in this chapter shall not assume or use any title or designation that includes the
word "accountant" or "accounting" in connection with any other language, including the
language of a report, that implies that the person or firm holds such a certificate, permit,
or registration or has special competence as an accountant. A person or firm that does
not hold a valid certificate or permit issued under section 326A.04 or 326A.05 or has not
otherwise complied with section 326A.04 or 326A.05 as required in this chapter shall not
assume or use any title or designation that includes the word "auditor" in connection with
any other language, including the language of a report, that implies that the person or firm
holds such a certificate or permit or has special competence as an auditor. However,
this paragraph does not prohibit any officer, partner, member, manager, or employee of
any firm or organization from affixing that person's own signature to any statement in
reference to the financial affairs of such firm or organization with any wording designating
the position, title, or office that the person holds, nor prohibit any act of a public official or
employee in the performance of the person's duties as such.

(h)(1) No person holding a certificate or registration or firm holding a permit under
this chapter shall use a professional or firm name or designation that is misleading about
the legal form of the firm, or about the persons who are partners, officers, members,
managers, or shareholders of the firm, or about any other matter. However, names of one
or more former partners, members, managers, or shareholders may be included in the
name of a firm or its successor.

(2) A common brand name or network name part, including common initials, used
by a CPA firm in its name, is not misleading if the firm is a network firm as defined in
the American Institute of Certified Public Accountants (AICPA) Code of Professional
Conduct in effect July 1, 2011, and when offering or rendering services that require
independence under AICPA standards, the firm must comply with the AICPA code's
applicable standards on independence.

(i) Paragraphs (a) to (h) do not apply to a person or firm holding a certification,
designation, degree, or license granted in a foreign country entitling the holder to engage
in the practice of public accountancy or its equivalent in that country, if:

(1) the activities of the person or firm in this state are limited to the provision of
professional services to persons or firms who are residents of, governments of, or business
entities of the country in which the person holds the entitlement;

(2) the person or firm performs no attest or compilation services and issues no
reports with respect to the deleted text begin financial statements deleted text end new text begin information new text end of any other persons, firms, or
governmental units in this state; and

(3) the person or firm does not use in this state any title or designation other than
the one under which the person practices in the foreign country, followed by a translation
of the title or designation into English, if it is in a different language, and by the name
of the country.

(j) No holder of a certificate issued under section 326A.04 may perform attest services
through any business form that does not hold a valid permit issued under section 326A.05.

(k) No individual licensee may issue a report in standard form upon a compilation
of financial information through any form of business that does not hold a valid permit
issued under section 326A.05, unless the report discloses the name of the business through
which the individual is issuing the report, and the individual:

(1) signs the compilation report identifying the individual as a certified public
accountant;

(2) meets the competency requirement provided in applicable standards; and

(3) undergoes no less frequently than once every three years, a peer review
conducted in a manner specified by the board in rule, and the review includes verification
that the individual has met the competency requirements set out in professional standards
for such services.

(l) No person registered under section 326A.06, paragraph (b), may issue a report
in standard form upon a compilation of financial information unless the board by rule
permits the report and the person:

(1) signs the compilation report identifying the individual as a registered accounting
practitioner;

(2) meets the competency requirements in board rule; and

(3) undergoes no less frequently than once every three years a peer review conducted
in a manner specified by the board in rule, and the review includes verification that the
individual has met the competency requirements in board rule.

(m) Nothing in this section prohibits a practicing attorney or firm of attorneys from
preparing or presenting records or documents customarily prepared by an attorney or firm
of attorneys in connection with the attorney's professional work in the practice of law.

(n) The board shall adopt rules that place limitations on receipt by a licensee or a
person who holds a registration under section 326A.06, paragraph (b), of:

(1) contingent fees for professional services performed; and

(2) commissions or referral fees for recommending or referring to a client any
product or service.

(o) Anything in this section to the contrary notwithstanding, it shall not be a violation
of this section for a firm not holding a valid permit under section 326A.05 and not having
an office in this state to provide its professional services in this state so long as it complies
with the applicable requirements of section 326A.05, subdivision 1.