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S.B. 163

This document includes Senate 2nd Reading Floor Amendments incorporated into the bill on Thu, Feb 7, 2008 at 11:20 AM by rday. -->              1     

CERTIFIED PUBLIC ACCOUNTANT

             2     
LICENSING ACT AMENDMENTS

             3     
2008 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: Curtis S. Bramble

             6     
House Sponsor: Ron Bigelow

             7     

             8      LONG TITLE
             9      General Description:
             10          This bill modifies provisions of the Certified Public Accountant Licensing Act related
             11      to exemptions from licensure to practice public accountancy in this state.
             12      Highlighted Provisions:
             13          This bill:
             14          .    modifies the licensure by endorsement provisions for a certified public accountant
             15      by limiting its application to only those persons seeking to obtain a license issued by
             16      the state;
             17          .    provides a mobility provision for licensed certified public accountants by creating
             18      an exemption from licensure for a person licensed as a certified public accountant
             19      by any other state, district, or territory of the United States whose principal place of
             20      business is not in Utah, and:
             21              .    who is licensed from a state which the National Association of State Boards of
             22      Accountancy National Qualification Appraisal Service has verified to be
             23      substantially equivalent to the CPA licensure requirements of the Uniform
             24      Accountancy Act; or
             25              .    is from a state not verified by the National Qualification Appraisal Service, but         
             26      the person is able to obtain that verification from the service and meet other         
             27      requirements as a condition for receiving the exemption;



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             28
         .    modifies certified public accountancy unlawful conduct and unprofessional conduct
             29      provisions;
             30          .    eliminates obsolete transition provisions for education and licensure and updates
             31      professional and technical definitions; and
             32          .    makes certain technical changes.
             33      Monies Appropriated in this Bill:
             34          None
             35      Other Special Clauses:
             36          None
             37      Utah Code Sections Affected:
             38      AMENDS:
             39          58-26a-102, as enacted by Laws of Utah 2000, Chapter 261
             40          58-26a-302, as enacted by Laws of Utah 2000, Chapter 261
             41          58-26a-304, as enacted by Laws of Utah 2000, Chapter 261
             42          58-26a-305, as enacted by Laws of Utah 2000, Chapter 261
             43          58-26a-501, as enacted by Laws of Utah 2000, Chapter 261
             44          58-26a-502, as enacted by Laws of Utah 2000, Chapter 261
             45     

             46      Be it enacted by the Legislature of the state of Utah:
             47          Section 1. Section 58-26a-102 is amended to read:
             48           58-26a-102. Definitions.
             49          In addition to the definitions in Section 58-1-102 , as used in this chapter:
             50          (1) "Accounting experience" means applying accounting and auditing skills and
             51      principles that are taught as a part of the professional education qualifying a person for
             52      licensure under this chapter and generally accepted by the profession, under the supervision of
             53      a licensed certified public accountant.
             54          (2) "AICPA" means the American Institute of Certified Public Accountants.
             55          (3) (a) "Attest and attestation engagement" means providing any or all of the following
             56      financial statement services:
             57          (i) an audit or other engagement to be performed in accordance with the Statements on
             58      Auditing Standards (SAS);



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             59
         (ii) a review of a financial statement to be performed in accordance with the Statements
             60      on Standards for Accounting and Review Services (SSARS);
             61          (iii) an examination of prospective financial information to be performed in accordance
             62      with the Statements on Standards for Attestation Engagements (SSAE); or
             63          (iv) an engagement to be performed in accordance with the standards of the PCAOB.
             64          (b) The standards specified in this definition shall be adopted by reference by the
             65      division under its rulemaking authority in accordance with Title 63, Chapter 46a, Utah
             66      Administrative Rulemaking Act, and shall be those developed for general application by
             67      recognized national accountancy organizations such as the AICPA and the PCAOB.
             68          [(2)] (4) "Board" means the Utah Board of Accountancy created in Section 58-26a-201 .
             69          [(3)] (5) "Certified Public Accountant" or "CPA" means an individual currently
             70      licensed by this state or any other state, district, or territory of the United States of America to
             71      practice public accountancy or who has been granted a [certificate] license as a certified public
             72      accountant under prior law or this chapter.
             73          [(4)] (6) "Certified Public Accountant firm" or "CPA firm" means a qualified business
             74      entity holding a valid registration as a Certified Public Accountant firm under this chapter.
             75          [(5)] (7) "Client" means the person who retains a licensee for the performance of one or
             76      more of the services included in the definition of the practice of public accountancy. "Client"
             77      does not include a CPA's employer when the licensee works in a salaried or hourly rate
             78      position.
             79          [(6)] (8) "Compilation [of financial statements]" means [the presentation in the form of
             80      financial statements of information that is the representation of management or owners
             81      accompanied by a report stating the compilation has been performed in accordance with
             82      standards established by the American Institute of Certified Public Accountants] providing a
             83      service to be performed in accordance with Statements on Standards for Accounting and
             84      Review Services (SSARS) that is presenting in the form of financial statements, information
             85      that is the representation of management or owners, without undertaking to express any
             86      assurance on the statements.
             87          [(7)] (9) "Experience" means:
             88          (a) accounting experience; or
             89          (b) professional experience[; or].



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             90
         [(c) qualifying experience.]
             91          [(8)] (10) "Licensee" means the holder of a current valid license issued under this
             92      chapter.
             93          (11) "NASBA" means the National Association of State Boards of Accountancy.
             94          (12) "PCAOB" means the Public Company Accounting Oversight Board.
             95          [(9)] (13) "Practice of public accounting" means the offer to perform or the
             96      performance by a person holding himself out as a certified public accountant of one or more
             97      kinds of services involving the use of auditing or accounting skills including the issuance of
             98      reports or opinions on financial statements, performing attestation engagements, the
             99      performance of one or more kinds of advisory or consulting services, or the preparation of tax
             100      returns or the furnishing of advice on tax matters for a client.
             101          [(10)] (14) "Peer review" means a study, appraisal, or review of one or more aspects of
             102      the professional work of a person or qualified business entity in the practice of public
             103      accountancy, by a licensee or any other qualified person in accordance with rules adopted
             104      pursuant to this chapter and who is not affiliated with the person or qualified business entity
             105      being reviewed.
             106          (15) "Principal place of business" means the office location designated by the licensee
             107      for purposes of substantial equivalency and licensure by endorsement.
             108          [(11)] (16) "Professional experience" means experience lawfully obtained while
             109      licensed as a certified public accountant in another jurisdiction, recognized by rule, in the
             110      practice of public accountancy performed for a client, which includes expression of assurance
             111      or opinion[, for at least 300 hours collectively in the following areas:].
             112          [(a) applying Generally Accepted Auditing Standards (GAAS) to the usual and
             113      customary financial transactions recorded in the accounting records;]
             114          [(b) preparing audit working papers in accordance with GAAS covering the
             115      examination of the accounts usually found in accounting records;]
             116          [(c) planning the audit scope in accordance with GAAS, including the audit program to
             117      be followed;]
             118          [(d) preparing written explanations and comments on the findings of the examination
             119      and on the content of the accounting records; and]
             120          [(e) preparing and analyzing financial statements in accordance with GAAS.]



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         [(12)] (17) "Qualified business entity" means a sole proprietorship, corporation, limited
             122      liability company, or partnership engaged in the practice of public accountancy.
             123          [(13)] (18) "Qualified continuing professional education" means a formal program of
             124      education that contributes directly to the professional competence of a certified public
             125      accountant.
             126          [(14)] (19) "Qualifying examinations" means:
             127          (a) the AICPA Uniform CPA Examination;
             128          (b) the AICPA Examination of Professional Ethics for CPAs;
             129          (c) the Utah Laws and Rules Examination; and
             130          (d) any other examination approved by the board and adopted by the division by rule in
             131      accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act.
             132          [(15) "Qualifying experience" means experience in the practice of public accountancy
             133      under the direction and supervision of a licensed certified public accountant performed for a
             134      client, which includes expression of assurance or opinion, for at least 300 hours collectively in
             135      the following areas:]
             136          [(a) applying Generally Accepted Auditing Standards (GAAS) to the usual and
             137      customary financial transactions recorded in the accounting records;]
             138          [(b) preparing audit working papers in accordance with GAAS covering the
             139      examination of the accounts usually found in accounting records;]
             140          [(c) planning the audit scope in accordance with GAAS, including the audit program to
             141      be followed;]
             142          [(d) preparing written explanations and comments on the findings of the examination
             143      and on the content of the accounting records; and]
             144          [(e) preparing and analyzing financial statements in accordance with GAAS.]
             145          [(16)] (20) (a) "Report" means:
             146          (i) when used with reference to financial statements, an opinion, report or other form of
             147      language that:
             148          (A) states or implies assurance as to the reliability of any financial statements; or
             149          (B) implies that the person or firm issuing it has special knowledge or competence in
             150      accounting or auditing and specifically includes compilations and reviews; such an implication
             151      of special knowledge or competence may arise from use by the issuer of the report of names or



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             152
     titles indicating that the person or firm is a public accountant or auditor, or from the language
             153      of the report itself; or
             154          (ii) any disclaimer of opinion when it is conventionally understood to imply any
             155      positive assurance as to the reliability of the financial statements referred to or language
             156      suggesting special competence on the part of the person or firm issuing such language; and it
             157      includes any other form of language that is conventionally understood to imply such assurance
             158      or such special knowledge or competence.
             159          (b) "Report" does not include a financial statement prepared by an unlicensed person if:
             160          (i) that financial statement has a cover page which includes essentially the following
             161      language: "I (we) have prepared the accompanying financial statements of (name of entity) as
             162      of (time period) for the (period) then ended. This presentation is limited to preparing, in the
             163      form of financial statements, information that is the representation of management (owners). I
             164      (we) have not audited or reviewed the accompanying financial statements and accordingly do
             165      not express an opinion or any other form of assurance on them."; and
             166          (ii) the cover page and any related footnotes do not use the terms "compilation,"
             167      "review," "audit," "generally accepted auditing standards," "generally accepted accounting
             168      principles," or other similar terms.
             169          [(17)] (21) "Review of financial statements" means performing inquiry and analytical
             170      procedures which provide a reasonable basis for expressing limited assurance that there are no
             171      material modifications that should be made to the statements in order for them to be in
             172      conformity with generally accepted accounting principles or, if applicable, with another
             173      comprehensive basis of accounting; and, the issuance of a report on the financial statements
             174      stating that a review was performed in accordance with the standards established by the
             175      American Institute of Certified Public Accountants.
             176          [(18)] (22) (a) "Substantial equivalency" means [that the education, examination, and
             177      experience required by another jurisdiction are comparable to or exceed the education,
             178      examination, and experience requirements of this chapter, or that an individual's education,
             179      examination, and experience qualifications are comparable to or exceed the education,
             180      examination, and experience requirements of this chapter.] a determination by the division in
             181      collaboration with the board or its designee that:
             182          (i) the education, examination, and experience requirements set forth in the statutes and



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             183
     administrative rules of another jurisdiction are comparable to or exceed the education,
             184      examination, and experience requirements set forth in the Uniform Accountancy Act; or
             185          (ii) an individual CPA's education, examination, and experience qualifications are
             186      comparable to or exceed the education, examination, and experience requirements set forth in
             187      the Uniform Accountancy Act.
             188          (b) In ascertaining whether an individual's qualifications are substantially equivalent as
             189      used in this chapter, the division in collaboration with the board shall take into account the
             190      qualifications without regard to the sequence in which the education, examination, and
             191      experience requirements were attained.
             192          [(b) "Substantial equivalency" is determined by the board in accordance with rules
             193      made by the division in collaboration with the board.]
             194          (23) "Uniform Accountancy Act" means the model public accountancy legislation
             195      developed and promulgated by national accounting and regulatory associations that contains
             196      standardized definitions and regulations for the practice of public accounting as recognized by
             197      the division in collaboration with the board.
             198          [(19)] (24) "Unlawful conduct" is as defined in Sections 58-1-501 and 58-26a-501 .
             199          [(20)] (25) "Unprofessional conduct" is as defined in Sections 58-1-501 and
             200      58-26a-502 and as may be further defined by rule.
             201          [(21)] (26) "Year of experience" means 2,000 hours of cumulative experience.
             202          Section 2. Section 58-26a-302 is amended to read:
             203           58-26a-302. Qualifications for licensure and registration -- Licensure by
             204      endorsement -- Transitional provisions.
             205          (1) Each applicant for licensure under this chapter as a certified public accountant
             206      shall:
             207          (a) submit an application in a form prescribed by the division;
             208          (b) pay a fee determined by the department under Section 63-38-3.2 ;
             209          (c) show evidence of good moral character;
             210          (d) submit a certified transcript of credits from an accredited institution acceptable to
             211      the board showing:
             212          (i) successful completion of a total of 150 semester hours or 225 quarter hours of
             213      collegiate level education with a concentration in accounting, auditing, and business;



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         (ii) a baccalaureate degree or its equivalent at a college or university approved by the
             215      board; and
             216          (iii) compliance with any other education requirements established by rule by the
             217      division in collaboration with the board in accordance with Title 63, Chapter 46a, Utah
             218      Administrative Rulemaking Act;
             219          (e) submit evidence of one year of accounting experience in a form prescribed by the
             220      division;
             221          (f) submit evidence of having successfully completed the qualifying examinations in
             222      accordance with Section 58-26a-306 ; and
             223          (g) submit to an interview by the board, if requested, for the purpose of examining the
             224      applicant's competence and qualifications for licensure.
             225          (2) (a) The division may issue a license under this chapter to a person who holds a
             226      license as a certified public accountant issued by any other jurisdiction of the United States of
             227      America if the applicant for licensure by endorsement:
             228          [(a)] (i) submits an application in a form prescribed by the division;
             229          [(b)] (ii) pays a fee determined by the department under Section 63-38-3.2 ;
             230          [(c)] (iii) shows evidence of good moral character;
             231          [(d)] (iv) submits to an interview by the board, if requested, for the purpose of
             232      examining the applicant's competence and qualifications for licensure; and
             233          [(e) (i) (A)] (v) (A) (I) shows evidence of having passed the qualifying examinations;
             234      and
             235          [(B) (I)] (II) (Aa) meets the requirements for licensure which were applicable in this
             236      state at the time of the issuance of the applicant's license by the jurisdiction from which the
             237      original licensure by satisfactorily passing the AICPA Uniform CPA Examination was issued;
             238      or
             239          [(II)] (Bb) had [five] four years of professional experience after passing the AICPA
             240      Uniform CPA Examination upon which the original license was based, within the ten years
             241      immediately preceding the application for licensure by endorsement; or
             242          [(ii)] (B) shows evidence that the applicant's education, examination record, and
             243      experience are substantially equivalent to the requirements of Subsection (1), as provided by
             244      rule.



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             245
         (b) This Subsection (2) applies only to a person seeking to obtain a license issued by
             246      this state and does not apply to a person practicing as a certified public accountant in the state
             247      under Subsection 58-26a-305 (1).
             248          (3) (a) Each applicant for registration as a Certified Public Accountant firm shall:
             249          (i) submit an application in a form prescribed by the division;
             250          (ii) pay a fee determined by the department under Section 63-38-3.2 ;
             251          [(iii) have a CPA license under this chapter held by:]
             252          [(A) its proprietor, in the case of a sole proprietorship;]
             253          [(B) one of its general partners, managers, or members, in the case of a partnership or
             254      limited liability company;]
             255          [(C) one of its officers or shareholders, in the case of a corporation; or]
             256          [(D) one of its owners, in the case of any other type of qualified business entity;]
             257          [(iv) designate a CPA licensee who is responsible for on site supervision of operations
             258      of the CPA firm; and]
             259          (iii) have, notwithstanding any other provision of law, a simple majority of the
             260      ownership of the Certified Public Accountant firm, in terms of financial interests and voting
             261      rights of all partners, officers, shareholders, members, or managers, held by individuals who
             262      are certified public accountants, licensed under this chapter or another jurisdiction of the
             263      United States of America, and the partners, officers, shareholders, members, or managers,
             264      whose principal place of business is in this state, and who perform professional services in this
             265      state hold a valid license issued under Subsection 58-26a-301 (2) or the corresponding
             266      provisions of prior law; and
             267          [(v)] (iv) meet any other requirements established by rule by the division in
             268      collaboration with the board in accordance with Title 63, Chapter 46a, Utah Administrative
             269      Rulemaking Act[;].
             270          (b) Each separate location of a qualified business entity within the state seeking
             271      registration as a Certified Public Accountant firm shall register separately.
             272          (c) A Certified Public Accountant firm may include owners who are not licensed under
             273      this chapter as outlined in Subsection (3)(a)(iii), provided that:
             274          [(i) more than 50% of the ownership of the Certified Public Accountant firm, including
             275      financial interest and voting rights in the firm, is held by individuals who are Certified Public



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             276
     Accountants, licensed under this chapter or another jurisdiction of the United States; and]
             277          (i) the firm designates a licensee of this state who is responsible for the proper
             278      registration of the Certified Public Accountant firm and identifies that individual to the
             279      division; and
             280          (ii) all nonlicensed owners are active individual participants in the CPA firm.
             281          [(4) An individual shall have until July 1, 2004, to obtain three years of qualifying
             282      experience for licensure without being required to complete the education requirement if that
             283      individual:]
             284          [(a) was approved to take the qualifying examinations prior to July 1, 1994, under prior
             285      law without completion of the education requirement; and]
             286          [(b) (i) passed the AICPA Uniform CPA Examination prior to July 1, 1994; or]
             287          [(ii) received conditional credits on the AICPA Uniform CPA Examination prior to
             288      July 1, 1994, and subsequently passed all parts of the AICPA Uniform CPA Examination
             289      within six immediately successive examination administrations.]
             290          Section 3. Section 58-26a-304 is amended to read:
             291           58-26a-304. Continuing education.
             292          (1) As a condition precedent for a license renewal, each licensee shall, during each
             293      two-year licensure cycle or other cycle defined by rule, complete 80 hours of qualified
             294      continuing professional education in accordance with standards defined by rule.
             295          (2) If a renewal cycle is extended or shortened under Section 58-26a-303 , the
             296      continuing education hours required for license renewal under this section shall be increased or
             297      decreased proportionally.
             298          (3) (a) A licensee may request a waiver of the requirements of Subsection (1) for a
             299      period not exceeding three years by:
             300          (i) submitting an application for waiver in a form approved by the division; and
             301          (ii) demonstrating that the licensee will be engaged in activities or be subject to
             302      circumstances which prevent the licensee from meeting the requirements of Subsection (1)
             303      during the period of the waiver.
             304          (b) An application for waiver shall be granted upon a showing of good cause.
             305          (c) A licensee who is granted a waiver under this section shall complete 30 hours of
             306      continuing professional education within the six months immediately following the expiration



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Senate 2nd Reading Amendments 2-7-2008 rd/jlw
             307
     of the waiver S. [ than ] that .S includes at least 16 hours of continuing professional education
             307a      focusing on
             308      auditing and accounting.
             309          Section 4. Section 58-26a-305 is amended to read:
             310           58-26a-305. Exemptions from licensure.
             311          (1) In addition to the exemptions from licensure in Section 58-1-307 , the following
             312      may engage in acts included within the definition of the practice of public accountancy, subject
             313      to the stated circumstances and limitations, without being licensed under this chapter:
             314          [(1)] (a) a person licensed by any other state, district, or territory of the United States
             315      [or any foreign country] as a certified public accountant or its equivalent under any other title
             316      while [temporarily] practicing in this state if:
             317          [(a) the practice is incidental to that person's regular practice outside of this state; and]
             318          [(b) if that person's temporary practice within this state is in conformity with this
             319      chapter and rules established under this chapter;]
             320          (i) the person's principal place of business is not in this state; and
             321          (A) the person's license as a certified public accountant is from any state which the
             322      National Association of State Boards of Accountancy (NASBA) National Qualification
             323      Appraisal Service has verified to be substantially equivalent to the CPA licensure requirements
             324      of the Uniform Accountancy Act; or
             325          (B) the person's license as a certified public accountant is from a state which the
             326      NASBA National Qualification Appraisal Service has not verified to be substantially
             327      equivalent to the CPA licensure requirements of the Uniform Accountancy Act and the person
             328      obtains from the NASBA National Qualification Appraisal Service verification that the
             329      person's CPA qualifications are substantially equivalent to the CPA licensure requirements of
             330      the Uniform Accountancy Act and Subsection 58-26a-302 (1)(d)(i); and
             331          (ii) the person consents, as a condition of the grant of this privilege:
             332          (A) to personal and subject matter jurisdiction and disciplinary authority of the
             333      division;
             334          (B) to comply with this chapter and the rules made under this chapter;
             335          (C) that in the event the license from the state of the person's principal place of
             336      business becomes invalid, the person shall cease offering or rendering professional services in
             337      this state both individually and on behalf of the firm; and



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         (D) to the appointment of the state board which issued the person's license as the
             339      person's agent upon whom process may be served in an action or proceeding brought by the
             340      division against the licensee;
             341          (b) through December 31, 2012, a person licensed by any other state, district, or
             342      territory of the United States as a certified public accountant or its equivalent under another
             343      title while practicing in this state if:
             344          (i) the person does not qualify for a practice privilege under Subsection (1)(a);
             345          (ii) the practice is incidental to the person's regular practice outside of this state; and
             346          (iii) the person's temporary practice within the state is in conformity with this chapter
             347      and the rules established under this chapter;
             348          [(2)] (c) an officer, member, partner, or employee of any entity or organization who
             349      signs any statement or report in reference to the financial affairs of the entity or organization
             350      with a designation of that person's position within the entity or organization;
             351          [(3)] (d) a public official or employee while performing his official duties;
             352          [(4)] (e) a person using accounting or auditing skills, including the preparation of tax
             353      returns, management advisory services, and the preparation of financial statements without the
             354      issuance of reports; or
             355          [(5)] (f) an employee of a CPA firm registered under this chapter or an assistant to a
             356      person licensed under this chapter, working under the supervision of a licensee, if:
             357          [(a)] (i) neither the employee or assistant nor the licensed employer or registered CPA
             358      firm represents that the unlicensed person is a certified public accountant; and
             359          [(b)] (ii) no accounting or financial statements are issued over the unlicensed person's
             360      name[; and].
             361          [(6) a person licensed as a public accountant for a period of not less than 20 years as of
             362      July 1, 1981, if that person's license was current as of April 23, 1990.]
             363          (2) (a) Notwithstanding any other provision of law, a person who qualifies under
             364      Subsection (1)(a) has all the privileges of a licensee of this state and may engage in acts
             365      included within the definition of the practice of public accountancy, whether in person or by
             366      mail, telephone, or electronic means, based on a practice privilege in this state, and no notice,
             367      fee, or other submission shall be provided by that person.
             368          (b) The division may revoke, suspend, or restrict an exemption granted under



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             369
     Subsection (1)(a) or (b), or place on probation or issue a public or private reprimand to a
             370      person exempted under those subsections for the reasons set forth in Subsection 58-1-401 (2).
             371          Section 5. Section 58-26a-501 is amended to read:
             372           58-26a-501. Unlawful conduct.
             373          "Unlawful conduct" includes:
             374          (1) using "certified public accountant," "public accountant," "CPA," or any other title,
             375      designation, words, letters, abbreviation, sign, card, or device tending to indicate that the
             376      person is a certified public accountant, unless that person [has]:
             377          (a) has a current license as a certified public accountant issued under this chapter; or
             378          [(b) (i) a current license or certificate as a certified public accountant issued by any
             379      jurisdiction of the United States; and]
             380          [(ii) (A) the use in this state is incidental to primary services being lawfully performed
             381      outside of this state; or]
             382          [(B) the division has entered into a reciprocal agreement with that jurisdiction to
             383      recognize the license issued by that jurisdiction;]
             384          (b) qualifies for a practice privilege as provided for in Subsection 58-26a-305 (1);
             385          (2) a firm assuming or using "certified public accountant," "CPA," or any other title,
             386      designation, words, letters, abbreviation, sign, card, or device tending to indicate that the firm
             387      is composed of certified public accountants unless each office of the firm in this state:
             388          (a) is registered with the division; and
             389          (b) meets the requirements of Subsections 58-26a-302 (3)(a)(iii)[, (iv),] and [(v)] (iv);
             390          (3) signing or affixing to any accounting or financial statement the person's name or
             391      any trade or assumed name used in that person's profession or business, with any wording
             392      indicating that the person is an auditor, or with any wording indicating that the person has
             393      expert knowledge in accounting or auditing, unless that person is licensed under this chapter
             394      and all of the person's offices in this state for the practice of public accountancy are maintained
             395      and registered as provided in this chapter; and
             396          (4) except as provided in Section 58-26a-305 , engaging in the following conduct if not
             397      licensed under this chapter to practice public accountancy:
             398          (a) issuing a report on financial statements of any other person, firm, organization, or
             399      governmental unit; or



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             400
         (b) issuing a report using any form of language substantially similar to conventional
             401      language used by licensees respecting:
             402          (i) a review of financial statements; or
             403          (ii) a compilation of financial statements.
             404          Section 6. Section 58-26a-502 is amended to read:
             405           58-26a-502. Unprofessional conduct.
             406          (1) "Unprofessional conduct" includes:
             407          (a) undertaking an engagement when the licensee knows or should know that the
             408      licensee could not reasonably expect to complete it with professional competence;
             409          (b) making unauthorized disclosures of confidential information obtained in the
             410      practice of public accountancy;
             411          (c) engaging in any business or activity that creates a conflict of interest with a
             412      licensee's practice in the profession when the licensee knows or should know that it is a conflict
             413      of interest and the licensee does not fully disclose the conflict of interest in writing to all
             414      affected parties;
             415          (d) failing to meet the requirements for continuing professional education or peer
             416      review required under this chapter; or
             417          (e) issuing a report on financial statements of a client, other than a report in which a
             418      lack of independence is disclosed, or performing an attest engagement subject to the attestation
             419      standards of the American Institute of Certified Public Accountants when the licensee is not
             420      independent, in fact and appearance, to the client[; or].
             421          [(f) receiving compensation, including a commission, for referring or selling services
             422      or products of others to a client during the period:]
             423          [(i) that the licensee or CPA firm is engaged by the client for purposes of:]
             424          [(A) an audit or review of a financial statement;]
             425          [(B) a compilation of a financial statement when the licensee or his firm expects, or
             426      reasonably might expect, that a third party will use the financial statement and the compilation
             427      report and the report does not describe a lack of independence; or]
             428          [(C) an examination of prospective financial information; or]
             429          [(ii) covered by any historical financial statements involved with any of the services
             430      listed in Subsection (1)(f)(i).]



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             431
         [(2) (a) Notwithstanding the provisions of Subsection (1)(f), a licensee or CPA firm
             432      that is not prohibited by Subsection (1)(f) from receiving other compensation, including a
             433      commission, may receive or agree to receive that other compensation for referral or sale of
             434      services or products of others to another person if:]
             435          [(i) he discloses in writing the nature, source, and amount of all other compensation
             436      prior to making the referral or sale by the licensee or CPA firm; and]
             437          [(ii) the receipt of the compensation complies with all of the other requirements of this
             438      section.]
             439          [(b) Subsection (1)(f) does not apply to payments received from the sale of an
             440      accounting practice or to retirement payments to persons formerly engaged in the practice of
             441      public accountancy.]
             442          (2) (a) A licensee may not, for a commission, recommend or refer to a client a product
             443      or service, or for a commission recommend or refer a product or service to be supplied by a
             444      client, or receive a commission, when the licensee also performs for that client:
             445          (i) an audit or review of a financial statement;
             446          (ii) a compilation of a financial statement when the licensee expects, or reasonably
             447      might expect, that a third party will use the financial statement and the licensee's compilation
             448      report does not disclose a lack of independence; or
             449          (iii) an examination of prospective financial information.
             450          (b) The prohibition under Subsection (2)(a) applies during:
             451          (i) the period in which the licensee is engaged to perform any of the services listed in
             452      Subsection (2)(a); and
             453          (ii) the period covered by any historical financial statements involved in any such listed
             454      services.
             455          (c) A licensee who is not prohibited under Subsection (2)(a) from performing services
             456      or receiving a commission and who is paid or expects to be paid a commission shall disclose
             457      that fact to any person or entity to whom the licensee recommends or refers a product or service
             458      to which the commission relates.
             459          (d) A licensee who accepts a referral fee for recommending or referring a service of a
             460      licensee to a person or entity or who pays a referral fee to obtain a client shall disclose the
             461      acceptance or payment to the client.



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             462
         (3) (a) A licensee may not:
             463          (i) perform for a contingent fee a professional service for, or receive a contingent fee
             464      from a client for whom the licensee or the licensee's firm performs:
             465          (A) an audit or review of a financial statement;
             466          (B) a compilation of a financial statement when the licensee expects, or reasonably
             467      might expect, that a third party will use the financial statement and the licensee's compilation
             468      report does not disclose a lack of independence; or
             469          (C) an examination of prospective financial information; or
             470          (ii) prepare an original or amended tax return or claim for a tax refund for a contingent
             471      fee for a client.
             472          (b) The prohibition in Subsection (3)(a) applies during:
             473          (i) the period in which the licensee is engaged to perform any of the services listed in
             474      Subsection (3)(a); and
             475          (ii) the period covered by any historical financial statements involved in the listed
             476      services.
             477          (c) Except as stated in Subsections (3)(d) and (e), a contingent fee is a fee established
             478      for the performance of a service pursuant to an arrangement in which no fee will be charged
             479      unless a specified finding or result is attained, or in which the amount of the fee is otherwise
             480      dependent upon the finding or result of the service.
             481          (d) Solely for the purposes of this Subsection (3), fees are not regarded as being
             482      contingent if fixed by courts or other public authorities, or in tax matters, if determined based
             483      on the results of judicial proceedings or the findings of a governmental agency.
             484          (e) A licensee's fee may vary depending, for example, on the complexity of service
             485      rendered.





Legislative Review Note
    as of 1-24-08 3:23 PM


Office of Legislative Research and General Counsel


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