HOUSE BILL No. 5236

 

 

November 9, 2017, Introduced by Reps. Iden, Afendoulis, Howrylak, Moss, Whiteford, Lasinski and Theis and referred to the Committee on Regulatory Reform.

 

     A bill to amend 1980 PA 299, entitled

 

"Occupational code,"

 

by amending sections 720, 721, 724, 727a, 728, 729, and 734a (MCL

 

339.720, 339.721, 339.724, 339.727a, 339.728, 339.729, and

 

339.734a), sections 720 and 728 as amended by 2016 PA 76, section

 

721 as amended by 2012 PA 566, section 724 as amended and sections

 

727a and 734a as added by 2008 PA 161, and section 729 as amended

 

by 2010 PA 215.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 720. (1) As used in this article:

 

     (a) "Attest" means providing any of the following services,

 

but does not include providing a compilation:

 

     (i) An audit or other engagement to be performed in accordance


with the statements on auditing standards.

 

     (ii) A review of a financial statement to be performed in

 

accordance with the statements on standards for accounting and

 

review services.

 

     (iii) An examination of prospective financial information to

 

be performed in accordance with the statements on standards for

 

attestation engagements.

 

     (iv) An engagement to be performed in accordance with the

 

public company accounting oversight board auditing standards.

 

     (v) An examination, review, or agreed-upon procedures

 

engagement to be performed in accordance with the statements on

 

standards for attestation engagements, other than an examination

 

described in subparagraph (iii).

 

     (b) "Certified public accountant" means an individual who is

 

either of the following:

 

     (i) Qualified by education, examination, and experience to

 

engage or offer to engage in the practice of public accounting as

 

evidenced by the issuance of a certificate as a certified public

 

accountant under section 725 or 726 and a license or registration

 

issued under section 727.

 

     (ii) An individual whose principal place of business is not in

 

this state and who satisfies the requirements set forth in section

 

727a.

 

     (c) "Client" means an individual or entity that engages a

 

licensee or licensee's employer to receive any service in the

 

practice of public accounting.

 

     (d) "Compilation" means providing a service to be performed in


accordance with statements on standards for accounting and review

 

services that are presenting, in the form of financial statements,

 

information that is the representation of management or owners

 

without undertaking to express any assurance on the statements.

 

     (e) "Firm" means a corporation, partnership, limited liability

 

company, unincorporated association, sole proprietorship operating

 

under an assumed name, or other legal entity.

 

     (f) "Home office" means the location specified by the client

 

as the address to which a service described in subdivision (a) or

 

(d) is directed.

 

     (f) "License cycle" means the term of a license issued under

 

this article.

 

     (g) "Nonresident licensee" means an individual licensee whose

 

principal place of business is not located in this state.

 

     (h) (g) Subject to subsection (2), "practice of public

 

accounting" means rendering or offering to render an opinion on or

 

attesting to or offering to attest to the reliability of a

 

representation or estimate, including, but not limited to, the

 

giving of an opinion in substance that 1 or more of the following

 

types of information concerning the entity that is the subject of

 

the opinion present fairly the condition of the entity:

 

     (i) Financial or other information about which the opinion is

 

given.

 

     (ii) Facts respecting the entity's compliance with conditions

 

established by law or contract, including, but not limited to, a

 

statute, ordinance, regulation, grant, loan, or appropriation.

 

     (iii) The scope of the accounting procedures rendered in


connection with the presentation of the entity's financial

 

statement.

 

     (i) (h) "Principal place of business" means the office

 

location designated by the licensee for the purposes of substantial

 

equivalency and reciprocity.

 

     (j) (i) "Report", when used with reference to an attest or

 

compilation service, means an opinion, report, or other form of

 

language that states or implies assurance as to the reliability of

 

attested information or compiled financial statements and that also

 

includes, or is accompanied by, any statement or implication that

 

the individual or firm issuing it has special knowledge or

 

competence in accounting or auditing. Such a statement or

 

implication of special knowledge or competence may arise from use

 

by the issuer of the report of names or titles indicating that the

 

individual or firm is an accountant or auditor or from the language

 

of the report itself. Report includes any form of language that

 

disclaims an opinion when that form of language is conventionally

 

understood to imply any positive assurance as to the reliability of

 

the attested information or compiled financial statements referred

 

to or special competence on the part of the individual or firm

 

issuing that language, or both, and includes any other form of

 

language that is conventionally understood to imply that assurance

 

or special knowledge and competence, or both.

 

     (k) "Uniform CPA exam" means the Uniform CPA Examination

 

developed and scored by the American Institute of Certified Public

 

Accountants.

 

     (2) In addition to the definition set forth in subsection


(1)(g), (1)(h), practice of public accounting includes 1 or more of

 

the following activities when performed or offered to be performed

 

by an individual who is holding himself or herself out as a

 

certified public accountant for a client or a potential client:

 

     (a) The issuance of reports in connection with any attest or

 

compilation services.

 

     (b) One or more kinds of management advisory, financial

 

advisory, or consulting services, including, but not limited to,

 

business valuation, forensic accounting, and fraud examination

 

services.

 

     (c) The preparation of tax returns.

 

     (d) The furnishing of advice on tax matters.

 

     Sec. 721. (1) The state board of accountancy is created.

 

     (2) Subject to subsection (3), the board shall consist of 9

 

members as follows:

 

     (a) Six members who are certified public accountants who hold

 

a certificate as a certified public accountant, who are licensed

 

under section 727, and who have practiced in this state as

 

certified public accountants for not less than 5 years.

 

     (b) Three members who represent the general public, 1 of whom

 

shall be an attorney who is a member in good standing in the bar of

 

this state.

 

     (3) One of the 9 members of the board shall be a full-time

 

instructor of accounting above the elementary level at an

 

accredited college or university.

 

     (4) The director may promulgate the following rules:

 

     (a) Rules of professional conduct for establishing and


maintaining high standards of competence and integrity in the

 

practice of public accounting.

 

     (b) Rules governing corporations practicing public accounting,

 

consistent with former 1962 PA 192 or chapter 2A of the business

 

corporation act, 1972 PA 284, MCL 450.1281 to 450.1289, as

 

applicable.

 

     (c) Rules governing educational requirements that qualify an

 

applicant to sit for the uniform CPA exam.

 

     (d) (c) Rules governing educational and experience

 

requirements for the issuance of a certificate as a certified

 

public accountant.

 

     (e) (d) Rules of procedure governing the conduct of matters

 

before the board.

 

     (f) (e) Rules governing the recognition of educational

 

institutions by the board.

 

     (g) (f) Rules governing continuing education required under

 

section 729.

 

     (h) (g) Any other rules considered necessary by the director

 

to implement and enforce this article.

 

     Sec. 724. This article does not prohibit the following:

 

     (a) An individual who is not a certified public accountant

 

from serving as an employee of, or an assistant to, a certified

 

public accountant or firm composed of certified public accountants

 

who are licensed to practice under this article if the individual

 

does not issue an accounting or financial statement over his or her

 

name.

 

     (b) A licensed certified public accountant of another


licensing jurisdiction who does not meet the requirements of

 

section 727a, or an accountant who is licensed in a foreign country

 

for the practice of public accounting in that country, from

 

temporarily and periodically engaging in the practice of public

 

accounting in this state if all of the following requirements are

 

met:

 

     (i) The individual is conducting a regular practice of public

 

accounting in another licensing jurisdiction or foreign country.

 

     (ii) The temporary practice is conducted in conformity with

 

section 736 and applicable rules promulgated by the director, if

 

any.

 

     (iii) The individual secures a temporary permit from the

 

department to conduct the practice in this state.

 

     (c) A practicing attorney from preparing reports or presenting

 

records customarily prepared by an attorney in connection with the

 

attorney's professional work.

 

     (d) A person from preparing a financial report or tax return,

 

not requiring the expression of an opinion on the report or return,

 

for filing with a federal, state, or local governmental unit.

 

     (e) An officer, employee, partner, or principal of an

 

organization from signing a statement or report in reference to the

 

financial affairs of the organization with wording designating the

 

position, title, or office which the officer, employee, partner, or

 

principal of an organization holds in that organization.

 

     (f) An act of a public official or public employee in the

 

performance of that individual's official duties.

 

     (g) An individual who may be employed by more than 1 person


individual or firm from keeping books, making trial balances or

 

statements, and preparing audits or reports, if the audits or

 

reports are not used or issued by the employer as having been

 

prepared by a certified public accountant.

 

     (h) A firm that does not hold a valid license under section

 

728 and that does not have an office in this state from providing

 

its professional services in this state in the practice of public

 

accountancy and from using the certified public accountant

 

designation so long as it complies with the requirements of section

 

728(5) or (6), 728(4) or (5), whichever is applicable.

 

     Sec. 727a. (1) An individual whose principal place of business

 

is not in this state shall be is considered to have qualifications

 

substantially equivalent to this state's requirements, shall have

 

has all the privileges of licensees of this state, and may practice

 

public accountancy without the need to obtain a certificate,

 

license, or temporary practice permit under this article, if the

 

individual meets either or both of the following:

 

     (a) Holds a valid license as a certified public accountant

 

from another licensing jurisdiction that requires, as a condition

 

of licensure, that the individual meets all of the following:

 

     (i) Has at least 150 semester hours of college education

 

including a baccalaureate or higher degree conferred by a college

 

or university.

 

     (ii) Achieves a passing grade on the uniform certified public

 

accountant examination.CPA exam.

 

     (iii) Possesses at least 1 year of experience including

 

providing any type of service or advice involving the use of


accounting, attest, compilation, management advisory, financial

 

advisory, tax, or consulting skills, all of which may be obtained

 

through government, industry, academic, or public practice as

 

verified by a licensee.

 

     (b) Holds a valid license as a certified public accountant

 

from another licensing jurisdiction that does not meet the

 

requirements of subdivision (a), but such individual's has

 

certified public accountant qualifications that are substantially

 

equivalent to those requirements. Any individual who passed the

 

uniform certified public accountant examination CPA exam and holds

 

a valid license issued by another licensing jurisdiction prior to

 

before January 1, 2012 is exempt from the education requirement in

 

subdivision (a)(i) for purposes of this subdivision.

 

     (2) Notwithstanding any other provision of law, an individual

 

who offers or renders professional services, whether in person or

 

by mail, telephone, or electronic means under this section shall be

 

granted practice privileges in this state, and no notice, fee, or

 

other submission shall be is required of any such that individual.

 

Such an An individual described in this subsection is subject to

 

the requirements of section 734a.

 

     Sec. 728. (1) A firm shall that establishes or maintains an

 

office in this state must apply for and obtain a Michigan license

 

under this article in order to engage in the practice of public

 

accounting in this state. if either of the following apply:

 

     (a) The firm establishes or maintains an office in this state.

 

     (b) An individual who represents the firm performs any

 

engagement described in section 720(1)(a)(i), (iii), or (iv) for


any client that has its home office in this state.

 

     (2) A report produced pursuant to an engagement described in

 

subsection (1)(b) may be supervised or signed, or the report's

 

signature may be authorized for the firm, by an individual who is

 

practicing public accounting in Michigan under section 727a.

 

     (2) (3) A firm that is applying for licensure under this

 

article shall meet both of the following requirements:

 

     (a) At least a simple majority of the equity and voting rights

 

of the firm are held directly or beneficially by individuals who

 

are licensed in good standing as certified public accountants of

 

this state or another state or the equivalent in another licensing

 

jurisdiction acceptable to the board. Owners who are not Each owner

 

who is not a certified public accountants accountant must be of

 

good moral character and an active individual participants

 

participant in the firm or 1 or more of its affiliated entities. An

 

individual with practice privileges under section 727a who performs

 

services for which a firm license is required under this section is

 

not required to obtain a certificate under section 726 or a

 

registration or license under section 727.

 

     (b) All attest and compilation services provided by the firm

 

in this state are performed under the supervision of an individual

 

who is licensed and in good standing as a certified public

 

accountant in this state or another state or the equivalent in

 

holds an equivalent authorization to practice public accounting

 

from another licensing jurisdiction acceptable to the board.

 

     (3) (4) A firm shall notify the department of any change in

 

address within 30 days of the change.


     (4) (5) A firm that is not required to obtain a Michigan

 

license under subsection (1) may perform a review engagement in

 

accordance with the statements on standards for accounting and

 

review services, perform an examination, other than an engagement

 

described in section 720(1)(a)(iii), a review, or agreed-upon

 

procedures engagement in accordance with the statements on

 

standards for attestation engagements, or perform a compilation for

 

a client that has its home office in this state, may use the title

 

"CPA" or "CPA firm", and may practice public accountancy as

 

authorized in this section without a license issued under

 

subsection (1) in this state, only if it meets both each of the

 

following conditions:

 

     (a) It has met the requirements in subsection (3)(a) (2)(a)

 

and (b) and section 729(2).

 

     (b) It performs those services through an individual who has

 

practice privileges under section 727a.

 

     (c) It is authorized or permitted to perform those services in

 

the licensing jurisdiction where the individual described in

 

subdivision (b) has his or her principal place of business.

 

     (5) (6) A firm that is not required to obtain a Michigan

 

license under subsection (1) and that is not seeking to practice

 

under subsection (5) (4) may perform attest services, or any other

 

professional services within the practice of public accountancy,

 

while using the title "CPA" or "CPA firm" in this state without a

 

license issued under subsection (1) only if it meets both all of

 

the following conditions:

 

     (a) It performs those services through an individual with


practice privileges under section 727a.

 

     (b) It can lawfully do so is authorized or permitted to

 

perform those services in the licensing jurisdiction where those

 

individuals with practice privilege have their the individual

 

described in subdivision (a) has his or her principal place of

 

business.

 

     (c) It meets the requirements in subsection (2)(a) and (b) and

 

section 729(2).

 

     Sec. 729. (1) As a condition of license renewal, an individual

 

licensee shall must successfully complete at least 40 hours of

 

continuing education for each year since the issuance of the

 

original license or the last renewal. Of the 40 hours of continuing

 

education credits, the board shall not require more than 8 of those

 

hours to be in the areas of auditing and accounting. The board may

 

make exceptions from the continuing education requirements of this

 

subsection for reasons of health, military service, or other good

 

cause.of a license cycle. All of the following apply to the

 

continuing education requirement described in this subsection:

 

     (a) A licensee is not required to meet the continuing

 

education requirements for the period from the date of his or her

 

original license to the first June 30 after the date of that

 

original license.

 

     (b) At least 8 of the 40 hours of continuing education for

 

each year of a license cycle must be in the areas of auditing and

 

accounting. However, the board shall not require completion of more

 

than 8 hours of education in the areas of auditing and accounting

 

in 1 year of a license cycle.


     (c) Subject to subdivision (d), at least 2 of the 40 hours of

 

continuing education for each year of a license cycle must be in

 

the area of professional ethics. However, the board shall not

 

require completion of more than 2 hours of education in the area of

 

professional ethics in 1 year of a license cycle.

 

     (d) The content of 1 hour of the 4 hours of continuing

 

education in professional ethics required in a 2-year license cycle

 

must be the statutes and administrative rules of this state

 

applicable to public accountancy. A statewide professional

 

association of certified public accountants approved by the

 

department shall create the content for this 1 hour of professional

 

ethics education.

 

     (e) A licensee who earns more than the required 40 hours of

 

continuing education in a year may carry over those excess hours to

 

the next year, but not to any subsequent year, subject to all of

 

the following:

 

     (i) The maximum number of excess hours a licensee may carry

 

over into the next year is 40 hours.

 

     (ii) A licensee may not carry over more than 8 hours to meet

 

the minimum accounting and auditing education requirements

 

described in subdivision (b) for the next year.

 

     (iii) A licensee may not carry over more than 2 hours to meet

 

the minimum professional ethics requirement described in

 

subdivision (c) for the next year.

 

     (iv) A licensee may not carry over more than 1 hour of

 

education in public accountancy described in subdivision (d) to

 

meet the minimum ethics requirements for the next license cycle.


     (f) Except as provided in subdivision (g), a nonresident

 

licensee must certify in his or her renewal application that he or

 

she has met the continuing education requirements under this

 

subsection.

 

     (g) A nonresident licensee who is applying for renewal of his

 

or her license is considered to have met the continuing education

 

requirements under this subsection if he or she meets the

 

continuing education requirements for renewal of an individual

 

license in the state in which his or her principal place of

 

business is located. If the state in which a nonresident licensee's

 

principal place of business is located does not have continuing

 

education requirements for renewal of a license, the nonresident

 

licensee must comply with all continuing education requirements for

 

renewal of a license under this subsection.

 

     (2) Each licensed firm and sole practitioner that performs any

 

of the following services shall participate in a peer review

 

program established by rule of the department and approved by the

 

board:

 

     (a) Audit.

 

     (b) Review.

 

     (c) Compilations that are relied upon by third parties.

 

     (3) An applicant for renewal shall submit to the department,

 

on a form prescribed by the department and at the time of renewal,

 

proof of peer review obtained within the 3 years immediately

 

preceding the application.

 

     (4) A firm or sole practitioner required to participate in a

 

peer review program under this subsection shall notify the


department within 30 days after receipt of a fail rating or second

 

consecutive pass with deficiencies rating. Verbal testimony or

 

documents, or both, pertaining to a peer review shall be considered

 

confidential and shall be exempt from disclosure to the department,

 

except in the case of a fail or second consecutive pass with

 

deficiencies rating.

 

     (5) The peer review requirements under subsection (2) for

 

licensees become effective as follows:

 

     (a) For licensed firms and sole practitioners whose attest

 

services include audits, beginning March 1, 2008.

 

     (b) For licensed firms and sole practitioners whose attest

 

services include compilation with disclosures relied upon by third

 

parties, or review, or both compilation with disclosures and

 

review, but not audits under subdivision (a), beginning March 1,

 

2009.

 

     (c) For licensed firms and sole practitioners whose attest

 

services include compilation without disclosures relied upon by

 

third parties, but not audits under subdivision (a) or any

 

compilation with disclosures relied upon by third parties, or

 

review, or both compilation with disclosures and review under

 

subdivision (b), beginning March 1, 2010.

 

     Sec. 734a. (1) An individual , having met who meets the

 

requirements of, and is exercising the practice privilege granted

 

by, section 727a, and the firm employing that employs that

 

individual, simultaneously consent each agree to all of the

 

following as a condition of the exercise of that privilege:

 

     (a) To the personal and subject matter jurisdiction and


disciplinary authority of the board and the department.

 

     (b) To comply with this act and the applicable rules.

 

     (c) In the event If the license from the licensing

 

jurisdiction of the individual's principal place of business is no

 

longer valid, that the individual will cease offering or rendering

 

professional services in this state individually and on behalf of a

 

firm.

 

     (d) To the appointment of the state board or other licensing

 

authority issuing that issued his or her license as the agent upon

 

whom on which process may be served in any action or proceeding by

 

this board against the individual or the firm employing that

 

employs that individual.

 

     (2) An individual having met the requirements as described by

 

section 727a may perform an engagement described in section

 

720(1)(a)(i), (iii), or (iv) for an entity with its home office in

 

this state only through a firm that has obtained a license under

 

section 728.

 

     (2) (3) A licensee of this state offering or rendering under

 

this article who offers or renders public accounting services or

 

using uses the certified public accountant title in another

 

licensing jurisdiction or before a state or federal agency is

 

subject to the disciplinary action in this state under this article

 

for an act committed in another licensing jurisdiction or before a

 

state or federal agency for which the licensee would be subject to

 

discipline for an act committed in another licensing jurisdiction

 

or before a state or federal agency. The department is required to

 

examine any complaint made by the a state licensing board or other


licensing jurisdictional authority and may accept, as prima facie

 

evidence of a violation of this act, the a final order of violation

 

issued by another state licensing board or other licensing

 

jurisdictional authority.

 

     Enacting section 1. This amendatory act takes effect 90 days

 

after the date it is enacted into law.