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S.B. 226

             1     

ACCOUNTANCY PRACTICE ACT

             2     
2000 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Sponsor: John L. Valentine

             5      AN ACT RELATING TO OCCUPATIONAL AND PROFESSIONAL LICENSING,
             6      CORPORATIONS, AND PARTNERSHIPS; RECODIFYING THE CERTIFIED PUBLIC
             7      ACCOUNTANT LICENSING ACT; AMENDING PROVISIONS RELATING TO
             8      PROFESSIONAL CORPORATIONS, LIMITED LIABILITY COMPANIES, AND LIMITED
             9      PARTNERSHIPS TO INTERFACE WITH PROFESSIONAL LICENSING PROVISIONS; AND
             10      MAKING TECHNICAL CHANGES.
             11      This act affects sections of Utah Code Annotated 1953 as follows:
             12      AMENDS:
             13          16-11-7, as enacted by Chapter 20, Laws of Utah 1963
             14          16-11-8, as enacted by Chapter 20, Laws of Utah 1963
             15          16-11-13, as last amended by Chapter 6, Laws of Utah 1992, Third Special Session
             16          16-11-14, as last amended by Chapter 277, Laws of Utah 1992
             17          48-1-48, as enacted by Chapter 61, Laws of Utah 1994
             18          48-2b-105, as enacted by Chapter 258, Laws of Utah 1991
             19      ENACTS:
             20          58-26a-101, Utah Code Annotated 1953
             21          58-26a-102, Utah Code Annotated 1953
             22          58-26a-201, Utah Code Annotated 1953
             23          58-26a-301, Utah Code Annotated 1953
             24          58-26a-302, Utah Code Annotated 1953
             25          58-26a-303, Utah Code Annotated 1953
             26          58-26a-304, Utah Code Annotated 1953
             27          58-26a-305, Utah Code Annotated 1953


             28          58-26a-306, Utah Code Annotated 1953
             29          58-26a-307, Utah Code Annotated 1953
             30          58-26a-401, Utah Code Annotated 1953
             31          58-26a-501, Utah Code Annotated 1953
             32          58-26a-502, Utah Code Annotated 1953
             33          58-26a-601, Utah Code Annotated 1953
             34          58-26a-602, Utah Code Annotated 1953
             35      REPEALS:
             36          58-26-1, as repealed and reenacted by Chapter 242, Laws of Utah 1990
             37          58-26-2, as last amended by Chapter 297, Laws of Utah 1993
             38          58-26-3, as last amended by Chapter 297, Laws of Utah 1993
             39          58-26-4, as last amended by Chapter 10, Laws of Utah 1997
             40          58-26-5, as last amended by Chapter 313, Laws of Utah 1994
             41          58-26-6, as last amended by Chapter 313, Laws of Utah 1994
             42          58-26-7, as last amended by Chapter 297, Laws of Utah 1993
             43          58-26-8, as last amended by Chapter 313, Laws of Utah 1994
             44          58-26-9, as last amended by Chapter 297, Laws of Utah 1993
             45          58-26-10, as repealed and reenacted by Chapter 242, Laws of Utah 1990
             46          58-26-11, as last amended by Chapter 313, Laws of Utah 1994
             47          58-26-12, as repealed and reenacted by Chapter 242, Laws of Utah 1990
             48          58-26-13, as last amended by Chapter 297, Laws of Utah 1993
             49          58-26-14, as last amended by Chapter 313, Laws of Utah 1994
             50          58-26-15, as repealed and reenacted by Chapter 297, Laws of Utah 1993
             51          58-26-18, as repealed and reenacted by Chapter 242, Laws of Utah 1990
             52      Be it enacted by the Legislature of the state of Utah:
             53          Section 1. Section 16-11-7 is amended to read:
             54           16-11-7. Issuance of shares of capital stock -- Restrictions.
             55          (1) A professional corporation may issue the shares of its capital stock and a shareholder
             56      may voluntarily transfer shares of capital stock in a professional corporation only to:
             57          (a) persons who are duly licensed to render the same specific professional services as those
             58      for which the corporation was organized[. A shareholder may voluntarily transfer his shares in a


             59      professional corporation only to a person who is duly licensed to render the same specific
             60      professional services as those for which the corporation was organized.]; or
             61          (b) persons other than those meeting the requirements of Subsection (1)(a) to the extent
             62      and in the proportions allowed by the applicable licensing act for the profession for which the
             63      corporation is organized.
             64          (2) Any shares issued in violation of this section are void.
             65          Section 2. Section 16-11-8 is amended to read:
             66           16-11-8. Requirement to be an officer, director, or shareholder.
             67          (1) No person may be an officer, director, or shareholder of a professional corporation
             68      [who is not] unless that person is:
             69          (a) an individual duly licensed to render the same specific professional services as those
             70      for which the corporation was organized; [provided, however, a] or
             71          (b) qualified to be an officer, director, or shareholder under the applicable licensing act for
             72      the profession for which the corporation is organized.
             73          (2) Notwithstanding the provisions of Subsection (1), a nonlicensed person may serve as
             74      secretary or treasurer.
             75          Section 3. Section 16-11-13 is amended to read:
             76           16-11-13. Purchase or redemption of shares of disqualified shareholder.
             77          (1) The articles of incorporation may provide for the purchase or redemption of the shares
             78      of any shareholder upon the [death] failure to qualify or disqualification of [such] that shareholder,
             79      or the same may be provided in the bylaws or by private agreement. In the absence of such a
             80      provision in the articles of incorporation, the bylaws, or by private agreement, the professional
             81      corporation shall purchase the shares of [a deceased shareholder or] a shareholder [no longer] who
             82      is not qualified to own shares in [such] the corporation within 90 days after the [death of the
             83      shareholder] failure to qualify or disqualification of the shareholder[, as the case may be].
             84          (2) The price for [such] shares purchased under this section shall be their reasonable fair
             85      value as of the date of [death] failure to qualify or disqualification of the shareholder.
             86          (3) If the corporation [shall fail] fails to purchase [said] shares [by the end of said 90 days,
             87      then the executor or administrator or other personal representative of a deceased shareholder or]
             88      as required by Subsection (1), any disqualified shareholder or personal representative of a
             89      disqualified shareholder may bring an action in the district court of the county in which the


             90      principal office or place of practice of the professional corporation is located for the enforcement
             91      of this [provision] section. The court shall have power to award the plaintiff the reasonable fair
             92      value of his shares, or within its jurisdiction, may order the liquidation of the corporation. Further,
             93      if the plaintiff is successful in [such] the action, he shall be entitled to recover a reasonable
             94      attorney's fee and costs.
             95          (4) The professional corporation shall repurchase [such] shares as required by this section
             96      without regard to restrictions upon the repurchase of shares provided by Title 16, Chapter 10a,
             97      Utah Revised Business Corporation Act.
             98          Section 4. Section 16-11-14 is amended to read:
             99           16-11-14. Annual certificate -- Filing -- Contents -- Filing fee.
             100          During the month of the anniversary date of incorporation, each professional corporation
             101      shall file with the division an annual report as specified by Section 16-10a-1607 , giving the names
             102      and residence addresses of all shareholders of the professional corporation as of its anniversary
             103      date of incorporation next preceding, and certifying that all of [such] the shareholders are duly
             104      licensed to render the same specific professional services as those for which the corporation was
             105      organized or otherwise qualify to be shareholders pursuant to the applicable licensing act for the
             106      profession for which the corporation was organized.
             107          Section 5. Section 48-1-48 is amended to read:
             108           48-1-48. Limited liability partnerships providing professional services.
             109          (1) A limited liability partnership organized under Sections 48-1-41 through 48-1-48 to
             110      render professional services may render only one specific type of professional service, and services
             111      ancillary to that type of professional service, and may not engage in any business other than
             112      rendering the professional service that it was organized to render and services ancillary to those
             113      services.
             114          (2) A limited liability partnership organized to render professional services:
             115          (a) may include partners and employees authorized under the laws of the jurisdiction where
             116      they reside to provide similar services; [and]
             117          (b) may include partners who are not licensed or registered by the state to render those
             118      professional services to the extent allowed by the applicable licensing act relating to those
             119      professional services; and
             120          [(b)] (c) may render professional services in Utah only through its partners and employees


             121      who are licensed or registered by the state to render those professional services.
             122          (3) A limited liability partnership organized to render professional services shall have the
             123      powers provided a limited liability partnership under this chapter.
             124          Section 6. Section 48-2b-105 is amended to read:
             125           48-2b-105. Powers.
             126          (1) Each limited liability company organized and existing under this chapter may:
             127          (a) sue or be sued, or institute or defend any action, arbitration, or proceeding, whether
             128      judicial, administrative, or otherwise, in its own name;
             129          (b) purchase, take, receive, lease, or otherwise acquire, own, hold, improve, use, or
             130      otherwise deal in or with real or personal property or an interest in real or personal property,
             131      wherever situated;
             132          (c) sell, convey, mortgage, pledge, create a security interest in, lease, exchange or transfer,
             133      or otherwise dispose of all or any part of its property or assets;
             134          (d) lend money to and otherwise assist its employees and managers;
             135          (e) purchase, take, receive, subscribe for, or otherwise acquire, own, hold, vote, use,
             136      employ, sell, mortgage, lend, pledge, otherwise dispose of, or otherwise use or deal in or with:
             137          (i) shares or other interests in or obligations of other foreign or domestic limited liability
             138      companies, domestic or foreign corporations, associations, general or limited partnerships, or
             139      individuals; or
             140          (ii) direct or indirect obligations of the United States or any other government, state,
             141      territory, governmental district, or municipality or of any instrumentality of them;
             142          (f) make contracts or guarantees or incur liabilities, borrow money at such rates of interest
             143      as the limited liability company may determine, issue its notes, bonds, or other obligations, or
             144      secure any of its obligations by mortgage or pledge of all or any part of its property, franchises, and
             145      income;
             146          (g) lend money for any lawful purpose, invest or reinvest its funds, or take and hold real
             147      or personal property as security for the payment of funds so loaned or invested;
             148          (h) conduct its business and maintain offices and exercise the powers granted by this
             149      chapter within or without this state, in any state, territory, district, or possession of the United
             150      States or in any foreign country;
             151          (i) elect or appoint managers and agents of the limited liability company, define their


             152      duties, and fix their compensation;
             153          (j) make and alter an operating agreement, not inconsistent with its articles of organization
             154      or with the laws of this state, for the administration and regulation of its affairs;
             155          (k) make donations for the public welfare or for charitable, scientific, religious, or
             156      educational purposes;
             157          (l) indemnify a member or manager or any other person to the same extent that a
             158      partnership may indemnify any of the partners, managers, employees, or agents of the partnership
             159      against expenses actually and reasonably incurred by the member or manager in connection with
             160      the defense of an action, suit, or proceeding, whether civil or criminal, in which the member or
             161      manager is made a party;
             162          (m) cease its activities and surrender its certificate of organization;
             163          (n) have and exercise all powers necessary or convenient to effect any or all of the
             164      purposes for which the company is organized;
             165          (o) transact any lawful business which the members or the managers find to be in aid of
             166      governmental policy;
             167          (p) pay pensions and establish pension plans, profit-sharing plans, and other incentive
             168      plans for any or all of its managers and employees;
             169          (q) be a promoter, incorporator, general partner, limited partner, member, associate, or
             170      manager of any corporation, partnership, limited partnership, limited liability company, joint
             171      venture, trust, or other enterprise; and
             172          (r) render professional services, if each member of a limited liability company who renders
             173      professional services in Utah is licensed or registered to render those professional services pursuant
             174      to applicable Utah law.
             175          (2) A limited liability company organized to render professional services under this chapter
             176      may render only one specific type of professional services, and services ancillary to them, and may
             177      not engage in any business other than rendering the professional services which it was organized
             178      to render, and services ancillary to them.
             179          (3) A limited liability company organized to render professional services:
             180          (a) may include members, managers, and employees authorized under the laws of the
             181      jurisdiction where they reside to provide similar services;
             182          (b) may include members who are not licensed or registered by the state to render those


             183      professional services to the extent allowed by the applicable licensing act relating to those
             184      professional services;
             185          [(b)] (c) may render professional services in [Utah] this state only through its members,
             186      managers, and employees who are licensed or registered by [the] this state [of Utah] to render
             187      those professional services; and
             188          [(c)] (d) shall have all of the other powers provided under this section.
             189          Section 7. Section 58-26a-101 is enacted to read:
             190     
CHAPTER 26a. CERTIFIED PUBLIC ACCOUNTANT LICENSING ACT

             191     
Part 1. General Provisions

             192          58-26a-101. Title.
             193          This chapter is known as the "Certified Public Accountant Licensing Act."
             194          Section 8. Section 58-26a-102 is enacted to read:
             195          58-26a-102. Definitions.
             196          In addition to the definitions in Section 58-1-102 , as used in this chapter:
             197          (1) "Accounting experience" means applying accounting and auditing skills and principles
             198      that are taught as a part of the professional education qualifying a person for licensure under this
             199      chapter and generally accepted by the profession, under the supervision of a licensed certified
             200      public accountant.
             201          (2) "Board" means the Utah Board of Accountancy created in Section 58-26a-201 .
             202          (3) "Certified Public Accountant" or "CPA" means an individual currently licensed by this
             203      state or any other state to practice public accountancy or who has been granted a certificate as a
             204      certified public accountant under prior law or this chapter.
             205          (4) "Certified Public Accountant firm" or "CPA firm" means a qualified business entity
             206      holding a valid registration as a Certified Public Accountant firm under this chapter.
             207          (5) "Client" means the person who retains a licensee for the performance of one or more
             208      of the services included in the definition of the practice of public accountancy. "Client" does not
             209      include a CPA's employer when the licensee works in a salaried or hourly rate position.
             210          (6) "Compilation of financial statements" means the presentation in the form of financial
             211      statements of information that is the representation of management or owners accompanied by a
             212      report stating the compilation has been performed in accordance with standards established by the
             213      American Institute of Certified Public Accountants.


             214          (7) "Experience" means:
             215          (a) accounting experience;
             216          (b) professional experience; or
             217          (c) qualifying experience.
             218          (8) "Licensee" means the holder of a current valid license issued under this chapter.
             219          (9) "Practice of public accounting" means the offer to perform or the performance by a
             220      person holding himself out as a certified public accountant of one or more kinds of services
             221      involving the use of auditing or accounting skills including the issuance of reports or opinions on
             222      financial statements, performing attestation engagements, the performance of one or more kinds
             223      of advisory or consulting services, or the preparation of tax returns or the furnishing of advice on
             224      tax matters for a client.
             225          (10) "Peer review" means a study, appraisal, or review of one or more aspects of the
             226      professional work of a person or qualified business entity in the practice of public accountancy,
             227      by a licensee or any other qualified person in accordance with rules adopted pursuant to this
             228      chapter and who is not affiliated with the person or qualified business entity being reviewed.
             229          (11) "Professional experience" means experience lawfully obtained while licensed as a
             230      certified public accountant in another jurisdiction, recognized by rule, in the practice of public
             231      accountancy performed for a client, which includes expression of assurance or opinion, for at least
             232      300 hours collectively in the following areas:
             233          (a) applying Generally Accepted Auditing Standards (GAAS) to the usual and customary
             234      financial transactions recorded in the accounting records;
             235          (b) preparing audit working papers in accordance with GAAS covering the examination
             236      of the accounts usually found in accounting records;
             237          (c) planning the audit scope in accordance with GAAS, including the audit program to be
             238      followed;
             239          (d) preparing written explanations and comments on the findings of the examination and
             240      on the content of the accounting records; and
             241          (e) preparing and analyzing financial statements in accordance with GAAS.
             242          (12) "Qualified business entity" means a sole proprietorship, corporation, limited liability
             243      company, or partnership engaged in the practice of public accountancy.
             244          (13) "Qualified continuing professional education" means a formal program of education


             245      that contributes directly to the professional competence of a certified public accountant.
             246          (14) "Qualifying examinations" means:
             247          (a) the AICPA Uniform CPA Examination;
             248          (b) the AICPA Examination of Professional Ethics for CPAs;
             249          (c) the Utah Laws and Rules Examination; and
             250          (d) any other examination approved by the board and adopted by the division by rule in
             251      accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act.
             252          (15) "Qualifying experience" means experience in the practice of public accountancy under
             253      the direction and supervision of a licensed certified public accountant performed for a client, which
             254      includes expression of assurance or opinion, for at least 300 hours collectively in the following
             255      areas:
             256          (a) applying Generally Accepted Auditing Standards (GAAS) to the usual and customary
             257      financial transactions recorded in the accounting records;
             258          (b) preparing audit working papers in accordance with GAAS covering the examination
             259      of the accounts usually found in accounting records;
             260          (c) planning the audit scope in accordance with GAAS, including the audit program to be
             261      followed;
             262          (d) preparing written explanations and comments on the findings of the examination and
             263      on the content of the accounting records; and
             264          (e) preparing and analyzing financial statements in accordance with GAAS.
             265          (16) "Report" means:
             266          (a) when used with reference to financial statements, an opinion, report or other form of
             267      language that:
             268          (i) states or implies assurance as to the reliability of any financial statements; or
             269          (ii) implies that the person or firm issuing it has special knowledge or competence in
             270      accounting or auditing and specifically includes compilations and reviews; such an implication of
             271      special knowledge or competence may arise from use by the issuer of the report of names or titles
             272      indicating that the person or firm is a public accountant or auditor, or from the language of the
             273      report itself; or
             274          (b) any disclaimer of opinion when it is conventionally understood to imply any positive
             275      assurance as to the reliability of the financial statements referred to or language suggesting special


             276      competence on the part of the person or firm issuing such language; and it includes any other form
             277      of language that is conventionally understood to imply such assurance or such special knowledge
             278      or competence.
             279          (17) "Review of financial statements" means performing inquiry and analytical procedures
             280      which provide a reasonable basis for expressing limited assurance that there are no material
             281      modifications that should be made to the statements in order for them to be in conformity with
             282      generally accepted accounting principles or, if applicable, with another comprehensive basis of
             283      accounting; and, the issuance of a report on the financial statements stating that a review was
             284      performed in accordance with the standards established by the American Institute of Certified
             285      Public Accountants.
             286          (18) (a) "Substantial equivalency" means that the education, examination, and experience
             287      required by another jurisdiction are comparable to or exceed the education, examination, and
             288      experience requirements of this chapter, or that an individual's education, examination, and
             289      experience qualifications are comparable to or exceed the education, examination, and experience
             290      requirements of this chapter.
             291          (b) "Substantial equivalency" is determined by the board in accordance with rules made
             292      by the division in collaboration with the board.
             293          (19) "Unlawful conduct" is as defined in Sections 58-1-501 and 58-26a-501 .
             294          (20) "Unprofessional conduct" is as defined in Sections 58-1-501 and 58-26a-502 and as
             295      may be further defined by rule.
             296          (21) "Year of experience" means 2,000 hours of cumulative experience.
             297          Section 9. Section 58-26a-201 is enacted to read:
             298     
Part 2. Board

             299          58-26a-201. Board.
             300          (1) There is created the Utah Board of Accountancy consisting of four licensed certified
             301      public accountants and one member of the general public.
             302          (2) The board shall be appointed and shall serve in accordance with Section 58-1-201 .
             303          (3) The duties and responsibilities of the board shall be in accordance with Sections
             304      58-1-202 and 58-1-203 . In addition, the board shall designate one of its members on a permanent
             305      or rotating basis to:
             306          (a) assist the division in reviewing complaints concerning the unlawful or unprofessional


             307      conduct of a licensee; and
             308          (b) advise the division in its investigation of these complaints.
             309          (4) A board member who has, under Subsection (3), reviewed a complaint or advised in
             310      its investigation may be disqualified from participating with the board when the board serves as
             311      a presiding officer of an administrative proceeding concerning the complaint.
             312          Section 10. Section 58-26a-301 is enacted to read:
             313     
Part 3. Licensing

             314          58-26a-301. Licensure or registration required -- License and registration
             315      classifications.
             316          (1) (a) A license is required for an individual to engage in the practice of public
             317      accounting, except as specifically provided in Section 58-26a-305 or 58-1-307 .
             318          (b) Registration with the division is required for a qualified business entity to engage in
             319      the practice of public accounting, except as specifically provided in Section 58-26a-305 or
             320      58-1-307 .
             321          (2) (a) The division shall issue to an individual who qualifies under this chapter a license
             322      in the classification of Certified Public Accountant.
             323          (b) The division shall issue to a qualified business entity which qualifies under this chapter
             324      a registration in the classification of Certified Public Accountant Firm.
             325          Section 11. Section 58-26a-302 is enacted to read:
             326          58-26a-302. Qualifications for licensure and registration -- Licensure by
             327      endorsement -- Transitional provisions.
             328          (1) Each applicant for licensure under this chapter as a certified public accountant shall:
             329          (a) submit an application in a form prescribed by the division;
             330          (b) pay a fee determined by the department under Section 63-38-3.2 ;
             331          (c) show evidence of good moral character;
             332          (d) submit a certified transcript of credits from an accredited institution acceptable to the
             333      board showing:
             334          (i) successful completion of a total of 150 semester hours or 225 quarter hours of collegiate
             335      level education with a concentration in accounting, auditing, and business;
             336          (ii) a baccalaureate degree or its equivalent at a college or university approved by the
             337      board; and


             338          (iii) compliance with any other education requirements established by rule by the division
             339      in collaboration with the board in accordance with Title 63, Chapter 46a, Utah Administrative
             340      Rulemaking Act;
             341          (e) submit evidence of one year of accounting experience in a form prescribed by the
             342      division;
             343          (f) submit evidence of having successfully completed the qualifying examinations in
             344      accordance with Section 58-26a-306 ; and
             345          (g) submit to an interview by the board, if requested, for the purpose of examining the
             346      applicant's competence and qualifications for licensure.
             347          (2) The division may issue a license under this chapter to a person who holds a license as
             348      a certified public accountant issued by any other jurisdiction of the United States if the applicant
             349      for licensure by endorsement:
             350          (a) submits an application in a form prescribed by the division;
             351          (b) pays a fee determined by the department under Section 63-38-3.2 ;
             352          (c) shows evidence of good moral character;
             353          (d) submits to an interview by the board, if requested, for the purpose of examining the
             354      applicant's competence and qualifications for licensure; and
             355          (e) (i) (A) shows evidence of having passed the qualifying examinations; and
             356          (B) (I) meets the requirements for licensure which were applicable in this state at the time
             357      of the issuance of the applicant's license by the jurisdiction from which the original licensure by
             358      satisfactorily passing the AICPA Uniform CPA Examination was issued; or
             359          (II) had five years of professional experience after passing the AICPA Uniform CPA
             360      Examination upon which the original license was based, within the ten years immediately
             361      preceding the application for licensure by endorsement; or
             362          (ii) shows evidence that the applicant's education, examination record, and experience are
             363      substantially equivalent to the requirements of Subsection (1), as provided by rule.
             364          (3) (a) Each applicant for registration as a Certified Public Accountant firm shall:
             365          (i) submit an application in a form prescribed by the division;
             366          (ii) pay a fee determined by the department under Section 63-38-3.2 ;
             367          (iii) shall have a CPA license under this chapter held by:
             368          (A) its proprietor, in the case of a sole proprietorship;


             369          (B) one of its general partners, managers, or members, in the case of a partnership or
             370      limited liability company;
             371          (C) one of its officers or shareholders, in the case of a corporation; or
             372          (D) one of its owners, in the case of any other type of qualified business entity;
             373          (iv) designate a CPA licensee who is responsible for on site supervision of operations of
             374      the CPA firm; and
             375          (v) meet any other requirements established by rule by the division in collaboration with
             376      the board in accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act;
             377          (b) Each separate location of a qualified business entity within the state seeking
             378      registration as a Certified Public Accountant firm shall register separately.
             379          (c) A Certified Public Accountant firm may include owners who are not licensed under
             380      this chapter provided that:
             381          (i) more than 50% of the ownership of the Certified Public Accountant firm, including
             382      financial interest and voting rights in the firm, is held by individuals who are Certified Public
             383      Accountants, licensed under this chapter or another jurisdiction of the United States; and
             384          (ii) all nonlicensed owners are active individual participants in the CPA firm.
             385          (4) An individual shall have until July 1, 2004, to obtain three years of qualifying
             386      experience for licensure without being required to complete the education requirement if that
             387      individual:
             388          (a) was approved to take the qualifying examinations prior to July 1, 1994, under prior law
             389      without completion of the education requirement; and
             390          (b) (i) passed the AICPA Uniform CPA Examination prior to July 1, 1994; or
             391          (ii) received conditional credits on the AICPA Uniform CPA Examination prior to July
             392      1, 1994, and subsequently passed all parts of the AICPA Uniform CPA Examination within six
             393      immediately successive examination administrations.
             394          Section 12. Section 58-26a-303 is enacted to read:
             395          58-26a-303. Term of license and registration -- Expiration -- Renewal.
             396          (1) The division shall issue each license and registration under this chapter in accordance
             397      with a two-year renewal cycle established by rule. The division may by rule extend or shorten a
             398      renewal cycle by as much as one year to stagger the renewal cycles it administers.
             399          (2) At the time of renewal a licensee shall show satisfactory evidence of each of the


             400      following renewal requirements:
             401          (a) completion of qualified continuing education as required under Section 58-26a-304 ;
             402      and
             403          (b) successful completion of a peer review meeting the requirements established by rule
             404      by the division in collaboration with the board.
             405          (3) Each license or registration automatically expires on the date shown on the license or
             406      registration unless it is renewed in accordance with Section 58-1-308 .
             407          Section 13. Section 58-26a-304 is enacted to read:
             408          58-26a-304. Continuing education.
             409          (1) As a condition precedent for a license renewal, each licensee shall, during each
             410      two-year licensure cycle or other cycle defined by rule, complete 80 hours of qualified continuing
             411      professional education in accordance with standards defined by rule.
             412          (2) If a renewal cycle is extended or shortened under Section 58-26a-303 , the continuing
             413      education hours required for license renewal under this section shall be increased or decreased
             414      proportionally.
             415          Section 14. Section 58-26a-305 is enacted to read:
             416          58-26a-305. Exemptions from licensure.
             417          In addition to the exemptions from licensure in Section 58-1-307 , the following may
             418      engage in acts included within the definition of the practice of public accountancy, subject to the
             419      stated circumstances and limitations, without being licensed under this chapter:
             420          (1) a person licensed by any other state, district, or territory of the United States or any
             421      foreign country as a certified public accountant or its equivalent under any other title while
             422      temporarily practicing in this state if:
             423          (a) the practice is incidental to that person's regular practice outside of this state; and
             424          (b) if that person's temporary practice within this state is in conformity with this chapter
             425      and rules established under this chapter;
             426          (2) an officer, member, partner, or employee of any entity or organization who signs any
             427      statement or report in reference to the financial affairs of the entity or organization with a
             428      designation of that person's position within the entity or organization;
             429          (3) a public official or employee while performing his official duties;
             430          (4) a person using accounting or auditing skills, including the preparation of tax returns,


             431      management advisory services, and the preparation of financial statements without the issuance
             432      of reports; and
             433          (5) an employee of a CPA firm registered under this chapter or an assistant to a person
             434      licensed under this chapter, working under the supervision of a licensee, if:
             435          (a) neither the employee or assistant nor the licensed employer or registered CPA firm
             436      represents that the unlicensed person is a certified public accountant; and
             437          (b) no accounting or financial statements are issued over the unlicensed person's name.
             438          Section 15. Section 58-26a-306 is enacted to read:
             439          58-26a-306. Examination requirements.
             440          (1) Before taking the qualifying examinations, an applicant shall:
             441          (a) submit an application in a form approved by the division;
             442          (b) pay a fee determined by the department under Section 63-38-3.2 ;
             443          (c) demonstrate completion of the education requirement in Subsection (1)(d); and
             444          (d) be approved by the board to take the qualifying examinations.
             445          (2) (a) A person must sit for all parts of the AICPA Uniform CPA Examination upon that
             446      person's first sitting, and all subsequent sittings, for the examination, unless that person has
             447      currently valid conditional credits under Subsection (2)(b).
             448          (b) An examinee who successfully passes two or more parts and receives a score of at least
             449      50% in each part not passed, on the AICPA Uniform CPA Examination, shall receive conditional
             450      credits for those parts passed which may be applied to subsequent examinations. At any of the
             451      next six examinations, the examinee is required to take only those parts of the examination for
             452      which the examinee has not received conditional credits and shall receive additional conditional
             453      credits for any other parts passed. If conditional credits in all remaining parts are not received
             454      within six successive examinations after the original conditional credits were received, all credits
             455      terminate and a new application for the entire examination must be submitted. Passing the ethics
             456      section of the examination does not qualify as a part of the examination which will qualify the
             457      examinee for conditional credit.
             458          Section 16. Section 58-26a-307 is enacted to read:
             459          58-26a-307. CPA emeritus status -- renewal of license.
             460          (1) A person currently licensed as a certified public accountant may, on any renewal date
             461      of that license, apply for and obtain a transfer of that license to a status of CPA emeritus


             462      registration if:
             463          (a) (i) the licensee is at least 60 years of age as of the date of renewal;
             464          (ii) the licensee is disabled; or
             465          (iii) the board finds other good cause for believing that the licensee will not return to the
             466      practice of public accountancy;
             467          (b) the licensee makes an application for transfer of status and registration and pays a
             468      registration fee determined by the department under Section 63-38-3.2 ;
             469          (c) the licensee, on application for transfer, certifies that he will not engage in the practice
             470      of public accountancy while in the status of CPA emeritus registration; and
             471          (d) the licensee is in good standing as a CPA and not subject to any order of revocation,
             472      suspension, or probation.
             473          (2) Each CPA emeritus registration shall be issued in accordance with a two-year renewal
             474      cycle established by rule.
             475          (3) CPA emeritus registrants may not engage in the practice of public accountancy.
             476          (4) CPA emeritus registrants are not required to fulfill the continuing professional
             477      education or peer review provisions of this chapter.
             478          (5) Each CPA emeritus registrant is responsible for renewing his registration, according
             479      to procedures that the division establishes by rule in collaboration with the board in accordance
             480      with Section 58-1-308 .
             481          (6) A CPA emeritus registrant may reinstate his CPA license by:
             482          (a) submitting an application in a form prescribed by the division;
             483          (b) paying a fee determined by the department under Section 63-38-3.2 ; and
             484          (c) showing evidence of having completed the continuing professional education
             485      requirement established by rule.
             486          Section 17. Section 58-26a-401 is enacted to read:
             487     
Part 4. License Denial and Discipline

             488          58-26a-401. Grounds for denial of license -- Disciplinary proceedings.
             489          Grounds for refusing to issue a license to an applicant, for refusing to renew the license of
             490      a licensee, for revoking, suspending, restricting, or placing on probation the license of a licensee,
             491      for issuing a public or private reprimand to a licensee, and for issuing a cease and desist order shall
             492      be in accordance with Section 58-1-401 .


             493          Section 18. Section 58-26a-501 is enacted to read:
             494     
Part 5. Unlawful and Unprofessional Conduct

             495          58-26a-501. Unlawful conduct.
             496          "Unlawful conduct" includes:
             497          (1) using "certified public accountant," "public accountant," "CPA," or any other title,
             498      designation, words, letters, abbreviation, sign, card, or device tending to indicate that the person
             499      is a certified public accountant, unless that person has:
             500          (a) a current license as a certified public accountant issued under this chapter; or
             501          (b) (i) a current license or certificate as a certified public accountant issued by any
             502      jurisdiction of the United States; and
             503          (ii) (A) the use in this state is incidental to primary services being lawfully performed
             504      outside of this state; or
             505          (B) the division has entered into a reciprocal agreement with that jurisdiction to recognize
             506      the license issued by that jurisdiction;
             507          (2) a firm assuming or using "certified public accountant," "CPA," or any other title,
             508      designation, words, letters, abbreviation, sign, card, or device tending to indicate that the firm is
             509      composed of certified public accountants unless each office of the firm in this state:
             510          (a) is registered with the division; and
             511          (b) meets the requirements of Subsections 58-26a-302 (3)(a)(iii), (iv), and (v);
             512          (3) signing or affixing to any accounting or financial statement the person's name or any
             513      trade or assumed name used in that person's profession or business, with any wording indicating
             514      that the person is an auditor, or with any wording indicating that the person has expert knowledge
             515      in accounting or auditing, unless that person is licensed under this chapter and all of the person's
             516      offices in this state for the practice of public accountancy are maintained and registered as
             517      provided in this chapter; and
             518          (4) except as provided in Section 58-26a-305 , engaging in the following conduct if not
             519      licensed under this chapter to practice public accountancy:
             520          (a) issuing a report on financial statements of any other person, firm, organization, or
             521      governmental unit; or
             522          (b) issuing a report using any form of language substantially similar to conventional
             523      language used by licensees respecting:


             524          (i) a review of financial statements; or
             525          (ii) a compilation of financial statements.
             526          Section 19. Section 58-26a-502 is enacted to read:
             527          58-26a-502. Unprofessional conduct.
             528          (1) "Unprofessional conduct" includes:
             529          (a) undertaking an engagement when the licensee knows or should know that the licensee
             530      could not reasonably expect to complete it with professional competence;
             531          (b) making unauthorized disclosures of confidential information obtained in the practice
             532      of public accountancy;
             533          (c) engaging in any business or activity that creates a conflict of interest with a licensee's
             534      practice in the profession when the licensee knows or should know that it is a conflict of interest
             535      and the licensee does not fully disclose the conflict of interest in writing to all affected parties;
             536          (d) failing to meet the requirements for continuing professional education or peer review
             537      required under this chapter;
             538          (e) issuing a report on financial statements of a client, other than a report in which a lack
             539      of independence is disclosed, or performing an attest engagement subject to the attestation
             540      standards of the American Institute of Certified Public Accountants when the licensee is not
             541      independent, in fact and appearance, to the client; or
             542          (f) receiving compensation, including a commission, for referring or selling services or
             543      products of others to a client during the period:
             544          (i) that the licensee or CPA firm is engaged by the client for purposes of:
             545          (A) an audit or review of a financial statement;
             546          (B) a compilation of a financial statement when the licensee or his firm expects, or
             547      reasonably might expect, that a third party will use the financial statement and the compilation
             548      report and the report does not describe a lack of independence; or
             549          (C) an examination of prospective financial information; or
             550          (ii) covered by any historical financial statements involved with any of the services listed
             551      in Subsection (1)(f)(i).
             552          (2) (a) Notwithstanding the provisions of Subsection (1)(f), a licensee or CPA firm that
             553      is not prohibited by Subsection (1)(f) from receiving other compensation, including a commission,
             554      may receive or agree to receive that other compensation for referral or sale of services or products


             555      of others to another person if he discloses in writing the nature, source, and amount of all other
             556      compensation prior to making the referral or sale by the licensee or CPA firm.
             557          (b) Subsection (1)(f) does not apply to payments received from the sale of an accounting
             558      practice or to retirement payments to persons formerly engaged in the practice of public
             559      accountancy.
             560          Section 20. Section 58-26a-601 is enacted to read:
             561     
Part 6. Regulatory and Operating Standards

             562          58-26a-601. Ownership of statements, records, schedules, working papers, and
             563      memoranda made by licensee.
             564          (1) All statements, records, schedules, working papers, and memoranda made by a licensee
             565      under this chapter, incident to or in the course of professional service to a client, are the property
             566      of the licensee, in the absence of any express agreement between the licensee and the client to the
             567      contrary.
             568          (2) A licensee may not sell, trade, or bequeath statements, records, schedules, working
             569      papers, or memoranda without the consent of the client or the client's personal representative or
             570      assignee to anyone other than another licensee or one or more surviving partners or shareholders
             571      or new partners or shareholders of the licensee or any combined or merged CPA firm or
             572      successors-in-interest to the CPA firm.
             573          Section 21. Section 58-26a-602 is enacted to read:
             574          58-26a-602. Privity.
             575          A licensee, a CPA firm registered under this chapter, and any employee, partner, member,
             576      officer, or shareholder of a licensee or CPA firm are not liable to persons with whom they are not
             577      in privity of contract for civil damages resulting from acts, omissions, decisions, or other conduct
             578      in connection with professional services performed by that person, except for:
             579          (1) acts, omissions, decisions, or conduct that constitute fraud or intentional
             580      misrepresentations; or
             581          (2) other acts, omissions, decisions, or conduct, if the person performing the professional
             582      services:
             583          (a) knew that a primary intent of the client was for the professional services to benefit or
             584      influence the particular person seeking to establish liability; and
             585          (b) did not identify in writing to the client that the professional services performed by the


             586      client were not intended to be relied upon by the particular person seeking to establish liability.
             587          Section 22. Repealer.
             588          This act repeals:
             589          Section 58-26-1, Short title.
             590          Section 58-26-2, Definitions.
             591          Section 58-26-3, Utah Board of Accountancy.
             592          Section 58-26-4, Requirements for licensure.
             593          Section 58-26-5, Requirements for examination -- Conditioning on the examination.
             594          Section 58-26-6, Licensure by endorsement.
             595          Section 58-26-7, Conditions for issuance and renewal of licenses -- Quality review --
             596      Continuing professional education.
             597          Section 58-26-8, Reinstatement of license or certificate suspended for failure to renew
             598      or nonpayment of fees.
             599          Section 58-26-9, Exemptions from licensure.
             600          Section 58-26-10, Exemption from educational and examination requirements.
             601          Section 58-26-11, CPA emeritus status and registration.
             602          Section 58-26-12, Privity.
             603          Section 58-26-13, Certificates or licenses held on April 23, 1990 -- Expiration of
             604      certificates.
             605          Section 58-26-14, Registration and requirements for firms.
             606          Section 58-26-15, Grounds for denial of license -- Disciplinary proceedings.
             607          Section 58-26-18, Ownership of statements, records, schedules, working papers, and
             608      memoranda made by licensee.




Legislative Review Note
    as of 2-11-00 12:39 PM


A limited legal review of this legislation raises no obvious constitutional or statutory concerns.

Office of Legislative Research and General Counsel


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