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COMMITTEE REPORT
May 27, 2008
H. 4867
S. Printed 5/27/08--S.
Read the first time May 21, 2008.
To whom was referred a Bill (H. 4867) to amend Section 40-2-20, as amended, Code of Laws of South Carolina, 1976, relating to the definition of terms used in the licensure and regulation, etc., respectfully
That they have duly and carefully considered the same and recommend that the same do pass:
W. GREG RYBERG for Committee.
TO AMEND SECTION 40-2-20, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE DEFINITION OF TERMS USED IN THE LICENSURE AND REGULATION OF ACCOUNTANTS, SO AS TO REVISE THE DEFINITION OF "ATTEST" AND "SUBSTANTIAL EQUIVALENCY" AND TO DEFINE "HOME OFFICE" AND "PRINCIPAL PLACE OF BUSINESS"; TO AMEND SECTION 40-2-30, AS AMENDED, RELATING TO THE REQUIREMENT TO BE LICENSED TO RENDER CERTAIN SERVICES AND TO USE CERTAIN TITLES, SO AS TO PROVIDE THAT INDIVIDUALS AND FIRMS MAY ALSO RENDER THESE SERVICES AND USE CERTAIN TITLES IF CERTAIN QUALIFICATIONS ARE MET; TO AMEND SECTION 40-2-40, AS AMENDED, RELATING TO REGISTRATION REQUIREMENTS FOR ACCOUNTING FIRMS, SO AS TO PROVIDE THE CONDITIONS UNDER WHICH AN OUT-OF-STATE FIRM MAY RENDER CERTAIN SERVICES WITHOUT HAVING A REGISTRATION; AND TO AMEND SECTION 40-2-245, RELATING TO REQUIREMENTS FOR AN INDIVIDUAL IN AN OUT-OF-STATE FIRM TO OBTAIN PRACTICE PRIVILEGES IN THIS STATE, SO AS TO REVISE AND FURTHER SPECIFY THESE REQUIREMENTS.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 40-2-20(2) and (21) of the 1976 Code, as amended by Act 289 of 2004, is further amended to read:
"(2) 'Attest' means providing the following financial statement services:
(a) an audit or other engagement to be performed in accordance with the Statements on Auditing Standards (SAS); or
(b) a review of a financial statement to be performed in accordance with the Statements on Standards for Accounting and Review Services (SSARS); or
(c) an examination of prospective financial information to be performed in accordance with the Statements on Standards for Attestation Engagements (SSAE); or
(d) any engagement to be performed in accordance with Public Company Accounting Oversight Board (PCAOB) Auditing Standards.
(21) 'Substantial equivalency' is a determination by the Board of Accountancy or its designee that the education, examination, and experience requirements contained in the statutes and administrative rules of another jurisdiction are comparable to, or exceed the education, examination, and experience requirements contained in this chapter Section 40-2-245(A)(1), or that an individual licensee's education, examination, and experience qualifications are comparable to or exceed the education, examination, and experience requirements contained in this chapter Section 40-2-245(A)(2). In ascertaining substantial equivalency as used in this chapter, the board or its designee shall take into account the qualifications without regard to the sequence in which experience, education, or examination requirements were attained."
SECTION 2. Section 40-2-20 of the 1976 Code, as amended by Act 289 of 2004, is further amended by adding at the end:
"(23) 'Home office' means the location specified by the client as the address to which an attest or compilation service is directed.
(24) 'Principal place of business' means the office location designated by the licensee for purposes of substantial equivalency and reciprocity."
SECTION 3. Section 40-2-30 of the 1976 Code, as amended by Act 289 of 2004, is further amended to read:
"Section 40-2-30. (A) It is unlawful for a person to engage in the practice of accountancy as regulated by this board without holding a valid license or registration or without qualifying for a practice privilege pursuant to Section 40-2-245.
(B) Only licensed certified public accountants or public accountants or individuals qualifying for a practice privilege pursuant to Section 40-2-245 may issue a report on financial statements of a person, firm, organization, or governmental unit or offer to render or render any attest or compilation service as defined, except as provided in Section 40-2-340. This restriction does not prohibit an 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 the financial statements.
(C) Persons, other than certified public accountants or public accountants, may prepare financial statements and issue nonattest transmittals or information thereon which do not purport to be in compliance with the Statements on Standards for Accounting and Review Services (SSARS). Transmittals using the following language must not be considered the unlicensed practice of accountancy:
'I (we) have prepared the accompanying (financial statements) of (name of entity) as of (time period) for the (period) then ended. This presentation is limited to preparing in the form of financial statements information that is the representation of management (owners).
I (we) have not audited or reviewed the accompanying financial statements and accordingly do not express an opinion or any other form of assurance on them.'
(D) Only a person holding a valid license as a certified public accountant or qualifying for a practice privilege under Section 40-2-245 shall use or assume the title 'Certified Public Accountant', or the abbreviation 'CPA' or any other title, designation, words, letters, abbreviation, sign, card, or device indicating that the person is a certified public accountant.
(E) A firm may not provide attest services or assume or use the title 'Certified Public Accountants', 'Public Accountants' or the abbreviation 'CPAs', and 'PAs', or any other title, designation, words, letters, abbreviation, sign, card, or device indicating the firm is a CPA firm unless:
(1) the firm holds a valid registration issued under this chapter or is exempt from the registration requirement by operation of subsection (I); and
(2) ownership of the firm is in accordance with this chapter Section 40-2-40(C) and implementing regulations promulgated by the board, unless the firm is exempt from the registration requirement by operation of subsection (I); and
(3) owners who are not certified public accountants must be permitted to use the titles 'principal', 'partner', 'owner', 'officer', 'member', or 'shareholder' but must not hold themselves out to be certified public accountants.
(F) A person must not assume or use the title 'Public Accountant', or the abbreviation 'PA', or any other title, designation, words, letters, abbreviation, sign, card, or device indicating that the person is a public accountant unless that person holds a valid registration issued under this chapter.
(G) Only a person or firm holding a valid license or registration issued under this chapter, an individual qualifying for practice privileges under Section 40-2-245, or a firm exempt from the registration requirement by operation of subsection (I) shall assume or use any title or designation likely to be confused with the titles 'Certified Public Accountant' or 'Public Accountant' or use a similar abbreviation likely to be confused with the abbreviations 'CPA' or 'PA'. The title 'Enrolled Agent' or 'EA' may only be used by individuals designated by the Internal Revenue Service.
Persons or firms that are not licensed or registered, individuals qualifying for practice privileges under Section 40-2-245, and firms exempt from the registration requirement by operation of subsection (I) may use designations granted by national accrediting organizations so long as those designations do not imply qualification to render any attest or compilation service.
(H) This section does 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; whose activities 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; who performs no attest or compilation services and who issues no reports with respect to the financial statements of any other persons, firms, or governmental units in this State; and who does not use in this State any title or designation other than the one under which the person practices in their country, followed by a translation of the title or designation into the English language, if it is in a different language, and by the name of the country.
(I)(1) Firms that do not have an office in this State, and that do not perform the services described in Section 40-2-20(2)(a) (audits), (c) (examinations), or (d) (services under PCAOB Auditing Standards) for a client having its home office in this State, may engage in the practice of accounting, without obtaining a registration pursuant to Section 40-2-40, as specified in this subsection.
(2) A firm described in subsection (I)(1) may perform services described in Section 40-2-20(2)(b) or (5) for a client having its home office in this State, may engage in the practice of accounting, as specified in this section, and may use the title 'CPA' or 'CPA firm' only if the firm:
(a) has the qualifications described in Section 40-2-40(C) and Section 40-2-255(C); and
(b) performs these services through an individual with practice privileges under Section 40-2-245.
(3) A firm described in subsection (I)(1) that is not subject to the requirements of subsection (I)(2) may perform other professional services within the practice of accounting while using the title 'CPA' or 'CPA firm' in this State only if the firm:
(a) performs these services through an individual with practice privileges under Section 40-2-245; and
(b) can lawfully do so in the state where these individuals with practice privileges have their principal place of business.
(4) Notwithstanding any other provision of this section, it is not a violation of this section for a firm that does not hold a valid permit under Section 40-2-40 and which does not have an office in this State to provide its professional services or to engage in the practice of accounting so long as it complies with the requirements of subsection (I)(2) or (3), whichever is applicable."
SECTION 4. Section 40-2-40 of the 1976 Code, as amended by Act 289 of 2004, is further amended to read:
"Section 40-2-40. (A) The board shall grant or renew registration to practice as a firm to entities that make application and applicants that demonstrate the required their qualifications in accordance with this section. A firm
(B)(1) The following must hold a registration issued pursuant to this section in order to engage in the practice of accounting or to use the title 'Certified Public Accountant' or 'Accounting Firm':
(a) a firm with an office in this State performing attest services as defined in Section 40-2-20(2) or engaging in the practice of accounting;
(b) a firm with an office in this State that uses the title 'CPA' or 'CPA firm'; or
(c) a firm that does not have an office in this State but performs attest services described in Section 40-2-20(2)(a) (audits), (c) (examinations), or (d) (services under PCAOB Auditing Standards) for a client having a home office in this State.
(2) A firm not subject to subsection (B)(1) may be exempted from the registration requirement provided for in Section 40-2-30(I).
(BC) Qualifications for registration as a certified public accountant firm are as follows:
(1) A super majority, sixty-six and two thirds percent of the ownership of the firm in terms of financial interests and voting rights must belong to certified public accountants currently licensed in some state. The noncertified public accountant owner must be actively engaged as a firm member of the firm or its affiliated entities in providing services to the firm's clients as his or her principal occupation. Ownership by investors or commercial enterprises is prohibited.
(2) 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 a valid license issued pursuant to this section. An individual who has practice privileges under Section 40-2-245 who performs services for which a firm permit is required pursuant to Section 40-2-245(D) must not be required to obtain a license from this State pursuant to Section 40-2-35.
(3) For firms registering under subsection (B)(1)(a) or (b), there must be a designated resident manager in charge of each office in this State who must be a certified public accountant licensed in this State.
(4) Noncertified public accountant owners must not assume ultimate responsibility for any financial statement, attest, or compilation engagement.
(5) Noncertified public accountant owners shall abide by the code of professional ethics adopted pursuant to this chapter.
(6) Owners shall at all times maintain ownership equity in their own right and must be the beneficial owners of the equity capital ascribed to them. Provision must be made for the ownership to be transferred to the firm or to other qualified owners if the noncertified public accountant ceases to be actively engaged in the firm.
(CD) Registration must be initially issued and renewed annually. Applications for registration must be made in such form, and in the case of applications for renewal, between such dates as the board by regulation may specify, and the board shall grant or deny any such application after filing in proper form.
(DE) An applicant for initial issuance or renewal of a registration to practice pursuant to this chapter shall register each office of the firm within this State with the board and shall demonstrate that all attest and compilation services rendered in this State are under the charge of a person holding a valid license issued pursuant to this section or the corresponding provision of prior law or of some other state.
(EF) The board shall charge a fee for each application for initial issuance or renewal of a registration issued pursuant to this section.
(FG) An applicant for initial issuance or renewal of a registration to practice pursuant to this chapter shall list on the application all states in which the firm has applied for or holds registration and shall list any past denial, revocation, or suspension of a registration by any other state.
(GH) Each holder of or applicant for a registration issued pursuant to this section shall notify the board in writing, within thirty days after its occurrence, of any change in the identities of partners, officers, shareholders, members, or managers whose principal place of business is in this State, any change in the number or location of offices within this State, any change in the identity of the licensee in charge of these offices, and any issuance, denial, revocation, or suspension of a registration by any other state.
(HI) A firm that 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 back into compliance as quickly as possible. The board may grant a reasonable period of time for a firm to take this corrective action. Failure to bring the firm back into compliance within a reasonable period as defined by the board shall result in the suspension or revocation of the firm permit."
SECTION 5. Section 40-2-245 of the 1976 Code, as added by Act 289 of 2004, is amended to read:
"Section 40-2-245. (A) The board may grant An individual whose principal place of business is outside this State the privilege to perform or offer to perform services in this State as a certified public accountant is presumed to have qualifications substantially equivalent to this state's requirements and may exercise all the privileges of licensees of this State without the need to obtain a license under Section 40-2-35 if the individual meets all of the following conditions:
(1) holds a valid and unrevoked license or permit to practice as a certified public accountant issued by another from any state, a territory of the United States, or the District of Columbia and that jurisdiction's requirements for licensure are substantially equivalent to the requirements of this chapter which requires, as a condition of licensure, that an individual:
(a) have at least 150 semester hours of college education including a baccalaureate or higher degree conferred by a college or university;
(b) achieve a passing grade on the Uniform Certified Public Accountant Examination; and
(c) possess at least one year of experience including providing any type of service or advice involving the use of accounting, attest, compilation, management advisory, financial advisory, tax, or consulting skills, which may be obtained through government, industry, academic, or public practice all of which was verified by a licensee; or
(2) notifies the board that the person intends to perform or offers to perform services in this State as a certified public accountant; holds a valid license as a certified public accountant from any state that does not meet the requirements of subsection (A)(1) but such individual's CPA qualifications are substantially equivalent to those requirements. An individual who passed the Uniform CPA Examination and holds a valid license issued by any other state before January 1, 2012, may be exempt from the education requirement in subsection (A)(1)(a) for purposes of this item.
(B) Notwithstanding any other provision of law, an individual who offers or renders professional services, whether in person or by mail, telephone, or electronic means pursuant to this section is granted practice privileges in this State and no notice, fee, or other submission may be required of the individual. The individual is subject to the requirements of subsection (C).
(C) An individual licensee or holder of a permit to practice of another state exercising the privilege afforded under this section and the firm that employs that licensee simultaneously consents, as a condition of exercising this privilege:
(1) to the personal and subject matter jurisdiction and disciplinary authority of the board;
(32) agrees to comply with the provisions of this section and the regulations promulgated regarding notification and practice pursuant to this section;
(3) that in the event the license or permit to practice from the state of the individual's principal place of business is no longer valid, to cease offering or rendering professional services in this State individually and on behalf of a firm; and
(4) lists all jurisdictions, foreign and domestic, in which the applicant has applied for or holds a designation to practice public accountancy, and each holder of a certificate issued under this section shall notify the board in writing within thirty days after its occurrence of any issuance, denial, revocation, or suspension of a designation or commencement of a disciplinary or enforcement action by any jurisdiction;
(5) consents to have an administrative notice of hearing served on the board in the individual's principal state of business; in any action or proceeding by this board against the licensee.
(6) files an application and pays an annual fee sufficient to cover the cost of administering this section.
(D) An individual who qualifies for practice privileges under this section who performs any of the following services for an entity with its home office in this State may only perform these services through a firm that has obtained a registration issued under Section 40-2-40:
(1) a financial statement audit or other engagement to be performed in accordance with the Statements on Auditing Standards;
(2) an examination of prospective financial information to be performed in accordance with the Statements on Standards for Attestation Engagements; or
(3) an engagement to be performed in accordance with Pubic Company Accounting Oversight Board Auditing Standards.
(E) A licensee of this State offering or rendering services or using his or her CPA title in another state is 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. The board shall investigate any complaint made by the board of accountancy of another state."
SECTION 6. This act takes effect upon approval by the Governor.
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