Title 49--PROFESSIONAL AND VOCATIONAL STANDARDS STATE BOARD OF ACCOUNTANCY [49 PA. CODE CH. 11] Revision and Deletion of Existing Regulations [37 Pa.B. 4055]
[Saturday, July 28, 2007]The State Board of Accountancy (Board) amends Chapter 11 to read as set forth in Annex A.
The final-form rulemaking is a general updating of the Board's regulations that aims to provide consistency with the current provisions of the CPA Law (act) (63 P. S. §§ 9.1--9.16b), clarify certain practice issues and improve organization and comprehension. The final-form rulemaking amends regulations that predate the act of December 4, 1996 (P. L. 851, No. 140) (Act 140), which constituted the last major revision of the act. The Board implemented statutorily mandated regulations under Act 140 in a previous rulemaking.
Statutory Authority
The final-form rulemaking is authorized by section 3(a)(11) and (12) of the act (63 P. S. § 9.3(a)(11) and (12)), which empowers the Board to promulgate, respectively, regulations regarding professional conduct and other matters necessary to carry out the provisions of the act.
Summary of Comments and Responses to Proposed Rulemaking
The Board published a proposed rulemaking at 35 Pa.B. 1573 (March 5, 2005), with a 30-day public comment period. The Board received comments from the Pennsylvania Institute of Certified Public Accountants (PICPA).
The Board received comments from the Independent Regulatory Review Commission (IRRC) and the House Professional Licensure Committee (HPLC) as part of their review of the proposed rulemaking under the Regulatory Review Act (71 P. S. §§ 745.1--745.15). The Board did not receive comments from the Senate Consumer Protection and Professional Licensure Committee (SCP/PLC) as part of its review of the proposed rulemaking under the Regulatory Review Act.
Deletion of Redundant Regulations
The proposed rulemaking deleted several regulations and parts of regulations that the Board considered unnecessary because they were obsolete, redundant of language in the act or relocated elsewhere in Chapter 11. The HPLC recommended that the Board retain, and update as necessary, regulations that contain language from the act. The HPLC commented that attorneys, licensees and those who engage the services of licensees are likely to consult Chapter 11 for information about requirements regarding the practice of public accounting, and that they would benefit from regulations that reflect current statutory requirements. IRRC endorsed the views of the HPLC.
As more specifically discussed as follows, the final-form rulemaking retains, with updated content and references to statutory language as appropriate, regulations that were proposed for deletion as being redundant of the act.
§ 11.1. Definitions.
The proposed rulemaking deleted the definitions of ''Board,'' ''firm,'' ''licensee'' and ''practice of public accounting'' because updated definitions of those terms appear in section 2 of the act (63 P. S. § 9.2). The proposed rulemaking also deleted: the definition of ''contingent fee'' because it was being relocated to § 11.25 (relating to contingent fees), the only regulation in Chapter 11 that uses the term; the definition of ''attest function'' because the term had been replaced elsewhere in Chapter 11 with the term ''attest activity,'' which is already defined in section 2 of the act; and the definition of ''inactive status'' because the term is not used in Chapter 11.
The HPLC and IRRC recommended that current versions of the definitions of ''attest activity,'' ''Board,'' ''firm,'' ''licensee'' and ''public accounting,'' as set forth in the act, be retained in § 11.1. The HPLC also recommended that the definition of ''contingent fee'' be retained in § 11.1 in the event the Board should reference the term in another regulation. The HPLC also recommended that the definition of ''inactive status'' be retained because the term is a better choice of language than ''inactive license roll'' in § 11.9 (relating to use of the designation ''certified public accountant'' and the abbreviation ''CPA'' solely as mark of achievement by individual without current license). The final-form rulemaking incorporates these recommendations. The definitions are based on section 2 of the act, except the definition of ''inactive status,'' which is based on sections 8.2(a.1) and 9.2(d) of the act (63 P. S. §§ 9.8b(a.1) and 9.9b(d)).
The HPLC also recommended that the definition of ''qualified association'' from section 2 of the act be added to § 11.1, noting that the term is part of the current definition of ''firm'' and could be referenced in § 11.5 (relating to temporary practice in this Commonwealth). The final-form rulemaking incorporates this recommendation.
The HPLC, IRRC and PICPA recommended that the abbreviation of the Public Company Accounting Oversight Board (PCAOB) be added to § 11.1 because the PCAOB is an important recognized standard-setting body that should be referenced in the regulations that identify other recognized standard-setting bodies. PICPA also recommended that the abbreviation of the Statement on Standards for Attestation Engagements (SSAE) be added to § 11.1 because the SSAE should be referenced in § 11.55(b) (relating to experience requirements for CPA certification), which sets forth categories of qualifying attest experience for certified public accountant (CPA) certification. The final-form rulemaking incorporates these recommendations.
The final-form rulemaking also adds the abbreviation of the Securities and Exchange Commission (SEC) to § 11.1 because the SEC is referenced in certain regulations that identify recognized standard-setting bodies.
§ 11.3. Applicability of general rules.
The proposed rulemaking deleted § 11.3, which provides that the Board's formal proceedings are governed by 1 Pa. Code Part II (relating to General Rules of Administrative Practice and Procedure), on the ground that it is redundant of language in section 9(a) of the act (63 P. S. § 9.9(a)).
Upon the recommendation of the HPLC and IRRC, the final-form rulemaking retains § 11.3.
§ 11.5. Temporary practice in this Commonwealth.
Section 11.5(a) listed the requirements for the temporary practice of public accounting in this Commonwealth. The proposed rulemaking amended § 11.5(a) to provide that a CPA currently licensed to practice in another state or an association of CPAs currently licensed to practice in another state could seek permission to obtain a temporary permit to practice public accounting in this Commonwealth.
Noting that § 11.5(a) referenced not only licensees ''of another state'' but also licensees of any ''other jurisdiction of the United States,'' the HPLC and IRRC commented that the proposed rulemaking could be interpreted as denying temporary practice privileges to licensees of the District of Columbia and asked the Board to provide its rationale for this exclusion. The temporary practice language in section 13(b) of the act (63 P. S. § 9.13(b)), which was enacted as part of Act 140, refers only to licensees ''of another state.'' The prior version of section 13(b) of the act referred to licensees of ''another state or Federal district, territory or insular possession of the United States.'' The Board notes, however, that under 1 Pa.C.S. § 1991 (relating to definitions), the definition of ''state,'' in the context of referring to different parts of the United States, ''includes the District of Columbia and the several territories of the United States.'' Therefore, a current licensee of the District of Columbia would be eligible to apply for a temporary practice permit under amended § 11.5(a).
The HPLC recommended that the reference in § 11.5(a) to ''an association of certified public accountants'' be changed to ''a qualified association of CPAs.'' Although section 13(b) of the act refers only to an association of CPAs, the Board believes a qualified association of CPAs is more appropriate terminology because a ''qualified association,'' as defined in section 2 of the act, includes an association that is formed under the laws of another state that affords the association's owners no greater immunity than is available to shareholders of a professional corporation incorporated in this Commonwealth. The Board considers it appropriate that an out-of-State firm practicing public accounting in this Commonwealth should not enjoy greater immunity from civil liability than that accorded a public accounting firm from this Commonwealth. Accordingly, the final-form rulemaking incorporates the recommendation of the HPLC.
Section 11.5(a) provided that an applicant for a temporary practice permit may not maintain an office in this Commonwealth. The proposed rulemaking amended § 11.5(a) to provide that an applicant may not ''personally'' maintain an office in this Commonwealth. The HPLC questioned the legal significance of adding the word ''personally'' to the requirement. The Board's intent was to make it clear that an out-of-State employee of a Pennsylvania-licensed National or regional public accounting firm is not precluded from obtaining a temporary practice permit merely because his employer maintains an office in this Commonwealth.
The Board reconsidered the need to retain any prohibition on the right of a temporary practice permitholder to maintain an office in this Commonwealth. The rationale for the prohibition is to prevent a temporary practitioner in this Commonwealth from establishing a permanent practice without the requirement of licensure. However, § 11.5(b) authorizes the issuance of a renewable 1-year permit for up to 500 hours of work or a nonrenewable 1-year permit for an unlimited number of hours on a single, nonrecurring engagement. These provisions contemplate that a temporary practice permitholder may practice regularly in this Commonwealth for periods of relatively short duration or practice episodically in this Commonwealth for periods of relatively long duration. In either case, allowing a temporary practice permitholder to maintain an office in this Commonwealth affords greater convenience to clients in this Commonwealth. Accordingly, the final-form rulemaking deletes the prohibition in § 11.5(a) against a temporary practice permitholder's maintaining an office in this Commonwealth.
Section 11.5(c) provided that an out-of-State licensee that does not meet the requirements for a temporary practice permit must satisfy the license requirements in the act to practice public accounting in this Commonwealth. Section 11.5(d) identified the types of activities that do not require possession of a temporary practice permit. The proposed rulemaking deleted § 11.5(c) and (d) as unnecessary because the act adequately addresses the subject matter of these subsections.
Upon the recommendation of the HPLC and IRRC, the final-form rulemaking retains § 11.5(c) and (d) in an amended form. Revised § 11.5(c) contains references to the current provisions of the act that set forth requirements regarding the certification and licensure of individuals by reciprocity and to the licensure of public accounting firms. Revised § 11.5(d) reflects the current content of section 13(c) of the act, which addresses the scope of permissible activities not requiring a license or temporary practice permit.
§ 11.7. Use of the designation ''public accountant'' and the abbreviation ''PA.''
§ 11.8. Use of the designation ''certified public accountant'' and the abbreviation ''CPA'' in the practice of public accounting.
Sections 11.7(a) and 11.8(a) identified the categories of individuals and entities that may use the designations and abbreviations. Sections 11.7(b) and 11.8(b) proscribed unlawful use of the designations and abbreviations by individuals and entities that are not currently licensed to practice public accounting. Sections 11.7(c) and 11.8(c) gave examples of unlawful use. Sections 11.7(d) and 11.8(d) set forth the disciplinary provisions of the act that are implicated by unlawful use. The proposed rulemaking deleted §§ 11.7 and 11.8 as unnecessary because various provisions of the act already cover the subject matter of these regulations.
Upon the recommendation of the HPLC and IRRC, the final-form rulemaking retains §§ 11.7 and 11.8 with amendments for clarity and comprehension, including amended examples of unlawful use and deletion of references to repealed sections of the act. Amended §§ 11.7 and 11.8 are consistent with the current versions of section 12(a), (c), (j) and (q) of the act (63 P. S. § 9.12(a), (c), (j) and (q)).
§ 11.9. Use of the designation ''certified public accountant'' and the abbreviation ''CPA'' solely as mark of achievement by individual without current license.
Section 11.9(a) set forth conditions under which the holder of a CPA certificate who does not possess a current license to practice public accounting may use the designation ''certified public accountant'' and the abbreviation ''CPA'' solely as a mark of achievement on business cards and stationery. The conditions stipulate that the certificateholder may not be under suspension or revocation; notify the Board in writing that he desires to be placed on the inactive roll; be employed in private industry, government or academia; refrain from practicing public accounting or offering to practice public accounting; refrain from holding out as a CPA when offering accounting-related services; refrain from advertising as a CPA and from publicly displaying a CPA certificate in a manner to suggest he is engaged in the practice of public accounting; and identify his employer and job title on the stationery and business cards that bear the designation ''certified public accountant'' or the abbreviation ''CPA.'' Section 11.9(b) gave examples of unlawful use, while § 11.9(c) identified the disciplinary provisions of the act that are implicated by unlawful use.
The proposed rulemaking amended § 11.9(a), consistent with section 12(a) of the act, to provide that an individual who has received written notification from the Board that he is qualified to receive a CPA certificate may also use the designation ''certified public accountant'' and the abbreviation ''CPA'' subject to the same conditions as an actual certificateholder. The proposed rulemaking also amended § 11.9(a) to broaden the scope of permissible use to include an individual's resumé or curriculum vitae, when accompanied by language reflecting that the individual's license is inactive, and a self-employed individual's business cards, letterhead and other stationery, when accompanied by wording describing the nature of the individual's business. The proposed rulemaking further amended § 11.9(a) by restating the conditions regarding permissible use in fewer paragraphs and without redundancy of content. The proposed rulemaking deleted § 11.9(b) and (c) as duplicative of information contained in § 11.9(a) or in the act.
The HPLC and IRRC expressed concern that allowing an individual without a current license to use the designation ''certified public accountant'' and the abbreviation ''CPA'' as a mark of achievement may mislead the public into believing the individual is authorized to practice public accounting. The HPLC asked the Board to reevaluate the legal basis for § 11.9 under the current the act.
Section 12(a) of the act makes it unlawful, in part, for an individual to use the designation ''certified public accountant'' or ''CPA'' unless he has either received a CPA certificate from the Board or has been notified in writing of his eligibility to receive a CPA certificate from the Board. Section 12(q) of the act makes it unlawful for an individual to practice public accounting without a license from the Board. Section 2 of the act defines ''public accounting,'' in part, as performing, or offering to perform, professional services involving the use of accounting skills (such as management advisory or consulting services, financial planning or preparation of tax returns) while holding out as a CPA. ''Holding out,'' in turn, is defined in section 2 of the act as written or oral communication by an individual that he is a CPA while performing or offering to perform services to the public. Taken together, section 12(a) and (q) of the act permit the holder of a CPA certificate, or an individual eligible to receive a certificate, to use the designation ''certified public accountant'' and the abbreviation ''CPA'' without a current license from the Board so long as the use does not implicate the practice of public accounting. The conditions in § 11.9(a) are aimed at ensuring that an unlicensed individual who is permitted to use the designation ''certified public accountant'' or ''CPA'' under section 12(a) of the act does so without violating section 12(q) of the act. Accordingly, the Board does not see an inconsistency between § 11.9 and the current provisions of the act.
The HPLC recommended retaining the conditions in § 11.9(a), proposed for deletion, that proscribe an unlicensed individual's use of the designation ''certified public accountant'' and the abbreviation ''CPA'' in advertising and his holding himself out as being engaged in the practice of public accounting when offering accounting-related services. The final-form rulemaking restores these conditions with amendments.
The HPLC and IRRC recommended that § 11.9(a) be modified to require an unlicensed individual to disclose his ''inactive'' status on a resumé or curriculum vitae in addition to business cards, letterhead and other stationery. The final-form rulemaking includes this amendment. The final-form rulemaking also mends § 11.9(a) to eliminate a usage issue raised by the HPLC.
Upon the recommendation of the HPLC and IRRC, the final-form rulemaking retains § 11.9(b) and (c) with amendments and updated references to the act.
The HPLC asked whether an individual on inactive status who uses the designation ''certified public accountant'' or ''CPA'' as a mark of achievement is required to complete 80 hours of continuing professional education (CPE) every 2 years. The CPE requirement in the act applies only to an individual who wishes to maintain a current license. Section 9.2(d)(1) of the act provides that an individual applying to reinstate an inactive license must have completed 80 hours of CPE within the 2-year period preceding the date of application.
§ 11.21. Independence.
Section 11.21 provided that a licensee may not issue an opinion on the financial statements of an enterprise as an independent public accountant if the licensee's independence with respect to the enterprise is impaired. Section 11.21 also set forth the circumstances under which a licensee's independence is considered impaired, which are based on the interpretations of Professional Standards Rule 101 of the American Institute of Certified Public Accountants (AICPA). The proposed rulemaking amended § 11.21 to provide that a licensee's independence is considered impaired if the licensee failed to comply with the independence rules and requirements of a recognized public or private standard-setting body that are applicable to the attest engagement. The proposed rulemaking identified standard-setting bodies as including, among others, the AICPA, the SEC, General Accounting Office and Department of Labor. The purposed rulemaking reflected the fact that the AICPA's independence rule may not include the requirements of other regulatory bodies with jurisdiction over the attest activities of the Board's licensees.
The HPLC, IRRC and PICPA recommended that the PCAOB be added to the list of recognized standard-setting bodies in § 11.21. The PCAOB is a private-sector, nonprofit organization that was formed under the Sarbanes-Oxley Act of 2002 (Pub. L. No. 107-204, 116 Stat. 75), after the Board had initiated the proposed rulemaking process. The PCAOB's mission is ''to oversee the auditors of publicly-traded companies in order to protect the interests of investors and further the public interest in the preparation of informative, fair and independent audit reports.'' The final-form rulemaking adds the PCAOB to the list of examples of recognized standard-setting bodies in § 11.21. At the recommendation of the HPLC, the final-form rulemaking also amends § 11.21 to use the term ''attest activity'' for consistency with the act and makes amendments as to how the examples of standard-setting bodies are referenced.
§ 11.25. Contingent fees.
As defined in § 11.1, a contingent fee is ''[a] fee established for the performance of a service under an arrangement in which no fee will be charged unless a specified finding or result is attained, or in which the amount of the fee is otherwise dependent on the finding or result of the service.'' Section 11.25(a) prohibited a licensee from collecting, or seeking to collect, a contingent fee for performing a professional service during a period in which the licensee has also been engaged to perform an attest function for the client, or for preparing an original or amended tax return or a claim for a tax refund. Section 11.25(b) provided that documents generated during an engagement in which the licensee is collecting a contingent fee must contain a statement that no attest function is being performed.
The proposed rulemaking replaced the term ''attest function'' with ''attest activity'' in § 11.25(a) and (b) and added subsection (c) for the purpose of relocating the definition of ''contingent fee'' from § 11.1 (relating to definitions). The current definition of ''contingent fee'' is derived from AICPA Professional Standards Rule 302. The proposed rulemaking amended the definition of ''contingent fee,'' consistent with the language in AICPA Professional Standards Rule 302, to provide that ''[a] fee is not contingent if it is fixed by courts or other public authorities or, in tax matters, if it is determined based on the results of judicial proceedings or the findings of government agencies.'' Under the AICPA's interpretation of the previously-quoted language, a fee is considered determined in tax matters based on the findings of a government agency if the licensee ''can demonstrate a reasonable expectation, at the time of a fee arrangement, of substantive consideration'' by the government agency with regard to the licensee's client. The AICPA's interpretation does not consider an expectation such as this reasonable in the case of the preparation of an original tax return.
The HPLC and IRRC commented that the PCAOB and the SEC raised concerns about the AICPA's interpretation of the additional contingent fee language referenced in the Board's proposed rulemaking and asked the Board to reconsider amending the definition of ''contingent fee.'' The HPLC further asked the Board to evaluate whether the amended definition of ''contingent fee'' is in conflict with section 3(a)(11) of the act, which requires the Board to promulgate regulations that ''establish and maintain a high standard of integrity, objectivity and dignity by certified public accountants, public accountants and firms.''
The PCAOB and the SEC share regulatory authority for establishing independence and other ethical standards for licensees that perform audit services for publicly traded companies. The PCAOB's and the SEC's rules consider a licensee's independence to be impaired if the licensee provides any service to an audit client for a contingent fee during the audit and professional engagement period. While the definition of ''contingent fee'' in the SEC's rules is identical to the AICPA's definition, the SEC does not agree with the AICPA's interpretation that the language creating an exception, in tax matters, for a fee that is determined based on the results of a judicial proceeding or the findings of a government agency means that a fee is determined when a licensee can demonstrate a reasonable expectation, at the time of the fee arrangement with a client, that a government agency will give substantive consideration to the client's position. The SEC's Chief Accountant, in a May 2004 letter to the AICPA, stated that the SEC regards the exception in tax matters as applying only when the determination of the fee is taken out of the hands of the licensee and his client and is made by a court or government agency acting in the public interest. The PCAOB's own definition of ''contingent fee,'' adopted in July 2005, does not include the SEC's exception for fees in tax matters. In its discussion of the definition, the PCAOB, referencing the letter of the SEC's Chief Accountant to the AICPA, noted that the tax matter exception ''may have been misinterpreted in the past'' and further noted that it is ''largely redundant of the exception for fees fixed by courts or other public authorities.''
Considering the differing views of the AICPA, the SEC and the PCAOB on the meaning of contingent fees, the Board believes that the current definition of contingent fee should not be amended and that § 11.25 should be recast in broader language to take into account the differing requirements of recognized standard-setting bodies. Accordingly, the final-form rulemaking retains the current definition of contingent fee in § 11.1 and revises § 11.25 to provide that a licensee who seeks to collect a contingent fee shall comply with the rules of the AICPA, the PCAOB, the SEC or other recognized public or private standard-setting bodies as applicable to the professional services being performed. The amendments to § 11.25 obviate the need for the Board to consider its legal authority under section 3(a)(11) of the act to promulgate the definition of ''contingent fee'' originally proposed, although it appears unlikely that a court would regard the Board's adoption of a definition used by recognized public and private standard-setting bodies as being outside the scope of the Board's rulemaking power.
§ 11.27. Auditing standards and other technical standards.
The proposed rulemaking amended § 11.27, which requires a licensee who performs an audit of financial statements as an independent public accountant to comply with Generally Accepted Auditing Standards (GAAS), as well as with other technical standards adopted by the AICPA and other recognized standard-setting bodies, and to provide justification for departures from the standards.
The HPLC and IRRC recommended that § 11.27 be amended to add a reference to the PCAOB as a recognized standard-setting body for technical standards relating to audits. The final-form rulemaking incorporates this recommendation.
§ 11.30. Confidential client information.
The proposed rulemaking rescinded § 11.30, which provides that a licensee may not disclose a client's confidential information without the client's consent except as authorized by section 11.1 of the act (63 P. S. § 9.11a) on the ground that it is redundant of information in the act.
Upon the recommendation of the HPLC and IRRC, the final-form rulemaking retains § 11.30 with amendments.
§ 11.31. Records.
The proposed rulemaking amended § 11.31 to delete language regarding production of records that appears in section 11 of the act (63 P. S. § 9.11) while retaining the statutory citation for the reader's reference. The proposed rulemaking also amended § 11.31 to add a provision requiring a licensee ''who is requested by a client or former client to furnish a document to which the client is entitled'' under section 11 of the act to comply with the request within ''a reasonable period of time.''
At the suggestion of the HPLC, the final-form rulemaking further amends § 11.31, for sake of clarity, to include the term ''or former client'' immediately after the second reference to the word ''client.''
IRRC observed that the proposed rulemaking, as published by the Legislative Reference Bureau (LRB) in the Pennsylvania Bulletin, did not reflect the full text of § 11.31 as submitted by the Board to IRRC, the HPLC and the SCP/PLC. The Board will advise the LRB to ensure that the final-form rulemaking is published with the complete text of § 11.31.
§ 11.35. Form of practice.
Section 11.35 provided that a licensee may practice public accounting only in a sole proprietorship, a partnership or a professional corporation or association. The proposed rulemaking rescinded § 11.35 as inconsistent with the current act, which permits a ''qualified association'' to become licensed as a ''firm.'' As broadly defined in section 2 of the act, a qualified association may include not only partnerships, professional corporations and professional associations, but also limited liability companies and limited liability partnerships.
Upon the recommendation of the HPLC and IRRC, the final-form rulemaking retains § 11.35 with updated language. Amended § 11.35 provides that a licensee may practice public accounting as a sole practitioner or firm, or as an employee of a sole practitioner or as a member or employee of a firm, subject to the requirements of the act. As previously noted, definitions of ''firm'' and ''qualified association'' have been added to § 11.1 as part of the final-form rulemaking.
§ 11.36. Form of business name; disclosure.
The proposed rulemaking added § 11.36 as a complementary regulation to section 12(l.3) of the act, which prohibits a licensee from using a business name that is misleading as to any matter, including the identity of members and employees. Section 11.36(a) provides that a firm or sole practitioner may use a fictitious name as a business name, while § 11.36(b) prohibits a sole practitioner from using a business name with the phrases ''and Company'' or ''and Associates'' unless he employs at least one other individual who is currently licensed as a CPA or public accountant, who has sat for the CPA examination or who has the educational qualifications to sit for the CPA examination.
Section 11.36(a) was added to clarify the permissibility of a fictitious name, the use of which was restricted under the act prior to the Act 140 amendments. Section 11.36(b) was added based on the Board's belief that because the phrases ''and Company'' and ''and Associates'' imply at least the existence of a multi-individual practice (if not a formal entity such as a partnership or professional corporation), a sole practitioner's use of either term could be construed as misleading under section 12(l.3) of the act if he is the only professional-level individual in the practice. Prior to the Act 140 amendments, the act contained an explicit prohibition against a sole practitioner's using the phrase ''and Company'' or similar designation in his business name unless the name had been in use prior to November 1, 1961.
The HPLC recommended that the Board delete the prohibition in § 11.36(b) in favor of a requirement that a sole practitioner orally disclose his status as a sole practitioner to clients and prospective clients.
The Board believes that an adequate disclosure is acceptable as a less restrictive means of regulating potentially misleading business names than outright prohibition. The Board further believes that for a disclosure to be adequate, it must be made timely and in writing.
The final-form rulemaking amends § 11.36(b) to provide that a sole practitioner who uses a business name that includes a variation of the phrase ''and Company'' or ''and Associates'' must disclose in writing to a potential client that he is a sole practitioner before entering into an engagement agreement with the potential client and must disclose in writing to a current client that he is a sole practitioner before renewing an engagement agreement with the current client.
§ 11.55. Experience requirements for CPA certification.
The proposed rulemaking amended § 11.55, incorporating §§ 11.53 and 11.54, so that it would serve as a complementary regulation to section 4.1 of the act (63 P. S. § 9.4a), which sets forth the experience requirements for CPA certification.
Amended § 11.55(a) provides that a candidate who qualified to sit for the CPA examination with a bachelor's degree and 24 semester credits in accounting-related subjects must acquire 3,200 hours of qualifying experience, including 800 hours of attest activity ''over at least a 24-month period.'' Amended § 11.55(a) further provides that a candidate who qualified to sit for the CPA examination with a master's degree and 24 semester credits in accounting-related subjects, or a bachelor's degree and 150 semester credits overall including 36 semester credits in accounting-related subjects, must acquire 1,600 hours of qualifying experience, including 400 hours of attest activity ''over at least a 12-month period.'' A candidate may not receive credit for more than 1,600 hours of qualifying experience in a 12-month period.
The HPLC commented that the phrases ''over at least a 24-month period'' and ''over at least a 12-month period'' are confusing and may lead some candidates to conclude that they must acquire more than the 1 or 2 years of experience as set forth in section 4.1 of the act. The final-form rulemaking clarifies § 11.55(a) by providing that a candidate for CPA certification must acquire the required 1,600 hours or 3,200 hours of qualifying experience, as the case may be, during a period of not less than 12 months or during a period of not less than 24 months, respectively.
The HPLC and IRRC recommended that § 11.55(a) be further amended to include language from section 4.1(c) of the act providing that a candidate for CPA certification who first sat for the CPA examination after January 1, 2000, must acquire qualifying experience within 120 months preceding the date of application for CPA certification, while a candidate for CPA certification who first sat for the CPA examination prior to January 1, 2000, is not required to acquire qualifying experience within a particular period of time. The final-form rulemaking adds this language to § 11.55(a).
The proposed rulemaking amended § 11.55(b) and (c) to set forth the types of attest and nonattest activities, respectively, that will serve as qualifying experience depending on whether the candidate is employed in public accounting, private industry or government. The proposed rulemaking deleted ''training sessions on the attest function'' as an acceptable category of attest experience, because qualifying attest experience should be based on a candidate's actual participation in an attest activity.
The HPLC and IRRC commented that elimination of training sessions on the attest function could adversely affect candidates for CPA certification who have already completed such training sessions with the expectation that they will accepted by the Board as qualifying attest experience. The HPLC recommended that the Board amend § 11.55(b) to establish a date in the future after which training sessions on the attest function will not be counted. IRRC recommended that a similar clarification be made to preserve the training experience already obtained by prospective candidates. The final-form rulemaking amends § 11.55(b) to provide that training sessions on the attest function that are completed prior to January 1, 2008, will be accepted as qualifying attest experience. The Board will notify CPA candidates of the deadline by amending the CPA application form and instructions and by posting a notice on the Board's website.
PICPA recommended amendments to the categories of qualifying attest experience in § 11.55(b) that may be acquired by a candidate who is employed in public accounting. Upon the recommendation of PICPA, the final-form rulemaking expands the category of audits of financial statements performed in accordance with GAAS or Generally Accepted Government Auditing Standards to include audits of financial statements performed in accordance with requirements of the PCAOB, and adds a new category that comprises attestation engagements performed in accordance with SSAE, which are promulgated by the AICPA's Auditing Standards Board. PICPA also recommended that § 11.55(b) should include language referencing ''[o]ther auditing in accordance with accepted standards that leads to the expression of a written opinion.'' The proposed rulemaking retained this language and cited as examples reviews regarding internal controls, operational audits, compliance audits and opinions regarding financial forecasts and projections. The final-form rulemaking deletes the reference to financial forecasts and projections because this work is classified in § 11.55(c) as nonattest activity.
The proposed rulemaking added § 11.55(d), which lists types of unacceptable experience. The final-form rulemaking amends § 11.55(d) to address a usage issue raised by the HPLC.
§ 11.56. Supervision of experience; verification.
The proposed rulemaking amended § 11.56, which relates to the supervision of experience acquired by a candidate for CPA certification. One of a supervisor's duties is to verify a candidate's experience on a Board-provided form, giving details as to the dates of supervision and the types and hours of experience acquired by the candidate. The proposed rulemaking deleted language referencing a supervisor's responsibility for the accuracy of the verified statement of experience and providing that a supervisor's failure to properly verify a candidate's experience may result in disciplinary action. In place of the deleted language, the proposed rulemaking added a provision stating that a supervisor may not knowingly submit a false or inaccurate verified statement or willfully refuse to submit a verified statement when qualified experience has been acquired.
The HPLC recommended that the Board retain the language in § 11.56 that refers to a supervisor's responsibility for the accuracy of the information he provides to the Board about a candidate's experience and to the supervisor's disciplinary liability for failing to discharge that responsibility. IRRC's comments echoed the HPLC's concerns.
The final-form rulemaking amends § 11.56 to provide that a supervisor is responsible for the accuracy of the verified statement of a candidate's experience, and that a supervisor who knowingly submits a false or inaccurate verified statement, or who refuses to submit a verified statement when qualifying experience has been acquired, will be subject to disciplinary action under the act.
§ 11.73. Interpretation of chapter.
The proposed rulemaking deleted § 11.73, which provides that the Board's regulations are not to be construed to be in violation of or inconsistent with the act, on the ground that this requirement is unnecessary, because the Board's obligation to construe its regulations in harmony with the act is inherent in the primacy of a statute over the regulations promulgated under authority of the statute.
Upon the recommendation of the HPLC and IRRC, the final-form rulemaking retains § 11.73, with amendments.
Compliance with PCAOB
The HPLC asked the Board to review the entirety of its rulemaking to determine whether additional changes are needed to comply with the requirements of the PCAOB. The Board does not believe additional changes are required.
Additional Rulemaking
The proposed rulemaking referenced the Board's intention to submit additional rulemaking. The HPLC asked what was the anticipated delivery date of additional rulemaking.
The Board anticipated that delivery of proposed rulemaking regarding CPE requirements would occur in Spring 2007. The Board also anticipated that proposed rulemaking regarding an increase in biennial renewal fees, based on a recent analysis conducted by the Department of State's Bureau of Finance and Operations, would likewise occur in Spring 2007.
Fiscal Impact and Paperwork Requirements
The final-form rulemaking will not have a fiscal impact on, or create additional paperwork for, the regulated community, the general public or the Commonwealth and its political subdivisions. The final-form rulemaking will require the Board to modify its application forms and instructions.
Effective Date
The final-form rulemaking will be effective upon publication in the Pennsylvania Bulletin.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on February 23, 2005, the Board submitted a copy of the notice of proposed rulemaking, published at 35 Pa.B. 1573, to IRRC and the Chairpersons of the HPLC and the SCP/PLC for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC, the HPLC and the SCP/PLC were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Board has considered all comments from IRRC, the HPLC, the SCP/PLC and the public.
Under sections 5.1(e) and (j.2) of the Regulatory Review Act (71 P. S. §§ 745.5a(e) and (j.2)), on April 18, 2007, the final-form rulemaking was approved by the HPLC. On May 2, 2007, the final-form rulemaking was deemed approved by the SCP/PLC. Under section 5.1(e) of the Regulatory Review Act, IRRC met on May 3, 2007, and approved the final-form rulemaking.
Additional Information
Persons who requite additional information about the final-form rulemaking should submit inquiries to Kristopher J. Adams, Administrator, State Board of Accountancy, P. O. Box 2649, Harrisburg, PA 17105-2649, (717) 783-1404, ST-ACCOUNTANCY@state.pa.us.
Findings
The Board finds that:
(1) Public notice of proposed rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations promulgated thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) A public comment period was provided as required by law and all comments were considered.
(3) The amendments to the final-form rulemaking do not enlarge the original purpose of the proposed rulemaking published at 35 Pa.B. 1573.
(4) The final-form rulemaking adopted by this order is necessary and appropriate for the administration of the act.
Order
The Board, acting under authority of the act, orders that:
(a) The regulations of the Board, 49 Pa. Code, Chapter 11, are amended by adding § 11.36, deleting §§ 11.6, 11.41, 11.53 and 11.54, and amending §§ 11.1, 11.5, 11.7--11.9, 11.21, 11.25, 11.27, 11.28, 11.30, 11.31, 11.35, 11.55, 11.56 and 11.73 to read as set forth in Annex A.
(Editor's Note: The proposal to rescind § 11.3, included in the proposed rulemaking published at 35 Pa.B. 1573, has been withdrawn by the Board.)
(b) The Board shall submit this order and Annex A to the Office of Attorney General and the Office of General Counsel for approval as required by law.
(c) The Board shall certify this order and Annex A and deposit them with the LRB as required by law.
(d) The final-form rulemaking shall take effect upon publication in the Pennsylvania Bulletin.
WILLIAM J. PARK, CPA,
Chairperson(Editor's Note: For the text of the order of the Independent Regulatory Review Commission, relating to this document, see 37 Pa.B. 2355 (May 19, 2007).)
Fiscal Note: Fiscal Note 16A-559 remains valid for the final adoption of the subject regulations.
Annex A TITLE 49. PROFESSIONAL AND VOCATIONAL STANDARDS PART I. DEPARTMENT OF STATE Subpart A. PROFESSIONAL AND OCCUPATIONAL AFFAIRS CHAPTER 11. STATE BOARD OF ACCOUNTANCY GENERAL PROVISIONS § 11.1. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
AICPA--American Institute of Certified Public Accountants.
Act--The CPA Law (63 P. S. §§ 9.1--9.16b).
Attest activity--An examination, audit, review, compilation or other agreed-upon procedure with respect to financial information, together with the issuance of a report expressing or disclaiming an opinion or other assurance on the information.
Board--The State Board of Accountancy of the Commonwealth.
CPA--Certified public accountant.
Candidate--A person sitting for an examination.
Certificate of completion--A document prepared by the program sponsor which indicates that a licensee completed a continuing education program, the credit hours earned and the date and name of the program.
Client--The person or entity which retains a licensee for the performance of professional services.
Contingent fee--A fee established for the performance of a service under an arrangement in which no fee will be charged unless a specified finding or result is attained, or in which the amount of the fee is otherwise dependent upon the finding or result of the service.
Continuing education program--A group, self-study or correspondence program for which continuing education credit is given.
Credit hour--A unit of continuing education representing 50 minutes of participation.
Engagement--An undertaking by a licensee embodied in an agreement between the licensee and the client which defines the scope and terms of the services.
Enterprise--A person or entity, whether organized for profit or not, with respect to which a licensee performs professional services.
Financial statement--
(i) A statement and footnotes related to the statement that purport to show financial position which relates to a point in time or changes in financial position which relate to a period of time.
(ii) The term includes statements which use a cash or other incomplete basis of accounting.
(iii) The term also includes balance sheets, statements of income, statements of retained earnings, statements of changes in financial position and statements of changes in owner's equity.
(iv) The term does not include incidental financial data included in management advisory services reports to support recommendations to a client, tax returns or supporting schedules.
Firm--A qualified association that is a licensee.
GAAP--Generally Accepted Accounting Principles.
GAAS--Generally Accepted Auditing Standards.
GAGAS--Generally Accepted Government Auditing Standards.
Group program--An educational process designed to permit a participant to learn a given subject through interaction with an instructor and other participants.
Inactive status--
(i) Status of a CPA or public accountant who has returned his license to practice public accounting to the Board and who has requested in writing that the Board place his name on the inactive roll.
(ii) The term does not apply to the status of a CPA or public accountant whose license to practice public accounting has expired for failure to comply with requirements for biennial renewal of licensure.
Instructional design--A teaching plan that considers the organization and interaction of program materials as well as the method of presentation such as lecture, seminar, workshop or program instruction.
Interactive individual study program--A continuing education program designed to use interactive learning methodologies that simulate a classroom learning process by employing software, other courseware or administrative systems that provide significant ongoing interactive feedback to the learner regarding the learning process which issues a certificate of completion.
Licensee--
(i) An individual who is certified by or registered with the Board and holds a current license to practice under section 8.2 of the act (63 P. S. § 9.8b) or a qualified association that holds a current license to practice under section 8.8 of the act (63 P. S. § 9.8h).
(ii) The term does not include an individual who is on inactive status under section 8.2(a.1) of the act or who does not otherwise hold a current license.
New candidate--A candidate who is taking the examination in this Commonwealth for the first time.
Noninteractive individual study program--A continuing education program designed to permit a participant to learn a given subject without interaction with an instructor or interactive learning methodologies which issues a certificate of completion upon the participant's achieving a 70% minimum grade on a written examination or workbook.
PCAOB--Public Company Accounting Oversight Board.
Professional service--A service performed or offered to be performed by a licensee for a client in the course of the practice of public accounting.
Professor--An instructor who teaches courses in continuing education subject areas at an accredited university or college.
Program sponsor--A party who has assumed the responsibility for presenting continuing education programs.
Public accounting--Offering to perform or performing for a client or potential client:
(i) Attest activity.
(ii) Other professional services involving the use of accounting skills, including, but not limited to, management advisory or consulting services, business valuations, financial planning, preparation of tax returns or furnishing of advice on tax matters by a person holding out as a CPA, public accountant or firm.
Public communication--A communication made in identical form to multiple persons as to the world at large, such as by television, radio, motion picture, newspaper, pamphlet, mass mailing, letterhead, business card or directory.
Qualified association--An association as defined in 15 Pa.C.S. § 102 (relating to definitions) that is incorporated or organized under the laws of the Commonwealth or any other state or foreign jurisdiction if the organic law under which the association is incorporated or organized does not afford the shareholders, partners, members or other owners of equity interest in the association or the officers, employees or agents of the association greater immunity than is available to the shareholders, officers, employees or agents of a professional corporation under 15 Pa.C.S. § 2925 (relating to professional relationship retained).
SEC--Securities and Exchange Commission.
SSAE--Statement on Standards for Attestation Engagements.
SSARS--Statement of Standards on Accounting and Review Services.
§ 11.5. Temporary practice in this Commonwealth.
(a) Requirements for temporary practice. A CPA, or qualified association composed of CPAs, of another state may temporarily practice public accounting in this Commonwealth, if the CPA or qualified association:
(1) Holds a current license or registration to practice public accounting in the other state.
(2) Concurrently practices public accounting in the other state.
(3) Obtains from the Board a temporary practice permit prior to performing the temporary work.
(b) Temporary practice permit. The temporary practice permit:
(1) Allows the permitholder to work for not more than 500 hours in this Commonwealth during a 12-month period, except that this 500 hour limitation does not apply if the permitholder is working only on a single, nonrecurring engagement.
(2) Is valid for not more than 12 months.
(3) Is renewable if the permit was not granted for a single, nonrecurring engagement in excess of 500 hours.
(c) Failure to meet requirements for temporary practice. A CPA or qualified association of CPAs of another state that desires to practice public accounting in this Commonwealth but does not qualify for a temporary practice permit shall comply, as appropriate, with sections 5, 8.2 and 8.8 of the act (63 P. S. §§ 9.5, 9.8b and 9.8h).
(d) Exemption from requirement of temporary practice permit. Subsection (a) does not apply to a CPA or qualified association of CPAs of another state that, while not holding out as a CPA, public accountant or licensee, offers and renders in this Commonwealth bookkeeping and similar technical services or other services involving the use of accounting skills, including the preparation of tax returns and the preparation of financial information without issuing a report or other communication that expresses an opinion or assurance on the statements.
§ 11.6. (Reserved).
§ 11.7. Use of the designation ''public accountant'' and the abbreviation ''PA.''
(a) Only the following individuals and entities may use the designation ''public accountant,'' the abbreviation ''PA,'' or any other title, designation, words, letters or abbreviation tending to indicate that the user is a public accountant or is composed of public accountants:
(1) An individual who holds a public accountant registration and a current license from the Board.
(2) An individual who holds a certificate of certified public accountant from the Board or who has received written notification from the Board that he is qualified to receive a certificate of certified public accountant.
(3) A qualified association that holds a current license from the Board.
(b) An individual or qualified association engaged in the practice of public accounting may not use the designation ''public accountant,'' the abbreviation ''PA'' or any other title, designation, words, letters or abbreviation tending to indicate that the user is a public accountant or composed of public accountants unless the user holds a current license from the Board.
(c) The following are examples of unlawful use under this section:
(1) An individual who is registered by the Board as a public accountant but who does not hold a current license uses a business card bearing the designation ''public accountant.'' Explanation: The individual shall obtain a current license to use the designation ''public accountant.''
(2) An individual who is certified by the Board as a CPA but who does not hold a current license signs tax returns that he prepares for clients as ''John Doe, PA.'' Explanation: The individual shall obtain a current license to use the abbreviation ''PA'' because the preparation of tax returns while using such an abbreviation constitutes the practice of public accounting.
(d) An individual or entity that violates this section shall be subject to disciplinary action, as appropriate, under sections 9.1, 12, 14 and 16 of the act.
§ 11.8. Use of the designation ''certified public accountant'' and the abbreviation ''CPA'' in the practice of public accounting.
(a) Only the following individuals and entities may use the designation ''certified public accountant,'' the abbreviation ''CPA'' or any other designation, title, words, letters or abbreviation tending to indicate that the user is a CPA or composed of CPAs, while engaged in the practice of public accounting:
(1) An individual who holds a certificate of certified public accountant and current license from the Board.
(2) An individual who holds a public accountant registration and current license from the Board and who has received written notification from the Board that he is qualified to receive a certificate of certified public accountant.
(3) A qualified association that holds a current license from the Board.
(b) An individual or qualified association engaged in the practice of public accounting may not use the designation ''certified public accountant,'' the abbreviation ''CPA'' or any other title, designation, words, letters or abbreviation tending to indicate that the user is a CPA or composed of CPAs unless the user holds a current license from the Board.
(c) The following are examples of unlawful use under this section:
(1) An individual who is certified by the Board as a CPA but who does not hold a current license offers to establish a bookkeeping system for a potential client and tells the potential client that he is a ''certified public accountant.'' Explanation: The individual shall obtain a current license to use the designation ''certified public accountant'' because offering to perform a service related to accounting while using the designation constitutes the practice of public accounting.
(2) An unlicensed partnership comprised of two individuals--''Smith'' and ''Brown''--who possess certificates of certified public accountant and current licenses from the Board offers to perform tax preparation services for clients under the business name ''Smith & Brown, CPAs.'' Explanation: The partnership, being a qualified association, shall obtain a current license to use the designation ''CPAs'' because offering to prepare tax returns while using the designation constitutes the practice of public accounting.
(d) An individual or entity that violates this section shall be subject to disciplinary action, as appropriate, under sections 9.1, 12, 14 and 16 of the act.
§ 11.9. Use of the designation ''certified public accountant'' and the abbreviation ''CPA'' solely as mark of achievement by individual without current license.
(a) An individual who holds a certificate of certified public accountant but does not maintain a current license to practice public accounting, or an individual who has received notification from the Board that he is qualified to receive a certificate of certified public accountant, may use the designation ''certified public accountant'' and the abbreviation ''CPA'' solely as a mark of achievement subject to the following conditions:
(1) The certificate of certified public accountant has not been suspended or revoked.
(2) The individual has notified the Board in writing that he wishes to be placed on inactive status.
(3) The individual does not practice or offer to practice public accounting and is not a member or employee of a public accounting firm.
(4) The individual does not hold himself out to be in the practice of public accounting when performing or offering to perform accounting, bookkeeping, tax or accounting-related matters.
(5) The individual does not use the designation ''certified public accountant'' or the abbreviation ''CPA'' in advertising, including listings and advertisements in phone directories, newspapers, magazines, electronic media and indoor and outdoor signs.
(6) The individual does not display the certificate of certified public accountant in a manner that suggests he is authorized to practice public accounting.
(7) The individual's use of the designation ''certified public accountant'' and the abbreviation ''CPA'' under this section is limited to business cards, letterhead or other stationery, and resumes or curriculum vitae, subject to the following conditions:
(i) The word ''inactive'' must appear immediately adjacent to the designation or abbreviation.
(ii) Business cards, letterhead and other stationery must include the name of the individual's employer and the individual's job title or, if the individual is self-employed, the nature of the individual's business.
(b) The following are examples of unlawful use under this section:
(1) The holder of a certificate of certified public accountant whose license is on inactive status has a sign in the window of his home that bears his name and the abbreviation ''CPA.'' Explanation: The sign is an offer to practice public accounting, which requires possession of a current license.
(2) The holder of a certificate of certified public accountant whose license is on inactive status and who is employed in private industry uses a business card that bears his name, the abbreviation ''CPA,'' his employer's name and his job title. The individual shows the business card to an acquaintance and offers to set up an accounting procedure. Explanation: The offer is an offer to practice public accounting, which requires possession of a current license.
(c) An individual or entity that violates this section shall be subject to disciplinary action, as appropriate, under sections 9.1, 12, 14 and 16 of the act.
RELATIONS WITH CLIENTS AND THE PUBLIC § 11.21. Independence.
A licensee may not perform an attest activity for an enterprise in a manner to imply that he is acting as an independent public accountant with respect thereto unless he is independent with respect to the enterprise. Independence will be considered impaired when the licensee has not complied with the independence rules and requirements of a recognized public or private standard-setting body as applicable under the circumstances. Examples of standard-setting bodies include the AICPA, PCAOB, SEC, General Accounting Office and Department of Labor.
§ 11.25. Contingent fees.
A licensee who seeks to collect a contingent fee shall comply with the rules of the AICPA, PCAOB, SEC and other recognized public or private standard-setting bodies as applicable to the professional services being performed.
§ 11.27. Auditing standards and other technical standards.
(a) Auditing standards. A licensee may not permit his name to be associated with financial statements to imply that he is acting as an independent public accountant with respect to the financial statements unless he has complied with applicable GAAS. Statements on auditing standards issued by the AICPA or other pronouncements having similar generally recognized authority are considered to be interpretations of GAAS. A licensee shall justify any departures from the standards.
(b) Other technical standards. A licensee shall comply with other technical standards promulgated by bodies of the AICPA, PCAOB or other recognized authorities designated to establish the standards. A licensee shall justify any departures from the standards.
§ 11.28. Accounting principles.
A licensee may not express an opinion that financial statements are presented in conformity with GAAP if the financial statements contain any departure from GAAP that has a material effect on the financial statements taken as a whole, unless the licensee can demonstrate that by reason of unusual circumstances the financial statements would otherwise be misleading. In that case, the report of the licensee must describe the departure, the approximate effects thereof if practicable, and the reasons why compliance with the principle would result in a misleading statement. For purposes of this section, GAAP are considered to be defined by pronouncements issued by the Financial Accounting Standards Board and its predecessor entities and similar pronouncements issued by other entities having similar generally recognized authority.
§ 11.30. Confidential client information.
Except to the extent provided by section 11.1 of the act (63 P. S. § 9.11a), a licensee may not disclose confidential information pertaining to a client obtained in the course of performing professional services unless the client consents to the disclosure.
§ 11.31. Records.
A licensee who is requested by a client or former client to furnish a document to which the client or former client is entitled under section 11 of the act (63 P. S. § 9.11) shall comply with the request within a reasonable period of time.
§ 11.35. Form of practice.
A licensee may practice public accounting as a sole practitioner or firm, or as an employee of a sole practitioner or a member or employee of a firm, subject to the requirements of the act.
§ 11.36. Form of business name; disclosure.
(a) A licensee that is a firm or sole practitioner may use a fictitious name as a business name.
(b) A sole practitioner who uses a business name bearing the words ''and company,'' ''and associates'' or a variation of those words shall disclose in writing to a client that he is a sole practitioner before renewing an engagement agreement with the client and shall disclose in writing to a potential client that he is a sole practitioner before entering into an engagement agreement with the potential client.
§ 11.41. (Reserved).
EXPERIENCE § 11.53. (Reserved).
§ 11.54. (Reserved).
§ 11.55. Experience requirements for CPA certification.
(a) General requirements.
(1) A candidate for CPA certification who qualified for the CPA examination based on possession of a bachelor's degree and completion of 24 semester credits in relevant subjects shall have acquired 3,200 hours of qualifying experience, including a minimum of 800 hours of attest activity, over a period of not less than 24 months.
(2) A candidate for CPA certification who qualified for the CPA examination based on possession of a master's degree or other postgraduate degree and completion of 24 semester credits in relevant subjects shall have acquired 1,600 hours of qualifying experience, including a minimum 400 hours of attest activity, over a period of not less than 12 months.
(3) A candidate for CPA certification who qualified for the CPA examination based on possession of a bachelor's degree or higher degree and completion of 150 semester credits of postsecondary education including 36 semester credits in relevant subjects shall have acquired 1,600 hours of qualifying experience, including a minimum 400 hours of attest activity, over a period of not less than 12 months.
(4) A candidate who initially sat for the CPA examination after January 1, 2000, shall have acquired the qualifying experience required under paragraphs (1)--(3) within 120 months preceding the date of application for CPA certification. A candidate who initially sat for the CPA examination before January 1, 2000, is not subject to any time limitation regarding the acquisition of qualifying experience.
(5) A candidate may not receive credit for more than 1,600 hours of qualifying experience in a 12-month period. A candidate may acquire all hours of qualifying experience in attest activity.
(b) Attest activity. A candidate's attest activity must be in one or more of the following areas:
(1) Candidates employed in public accounting:
(i) Audits of financial statements in accordance with GAAS, GAGAS or PCAOB.
(ii) Reviews of financial statements in accordance with SSARS.
(iii) Compilations of financial statements with complete disclosure in accordance with SSARS.
(iv) Attestation engagements in accordance with SSAE.
(v) Other auditing in accordance with accepted standards that leads to an expression of a written opinion including:
(A) Reviews regarding internal control.
(B) Operational audits.
(C) Compliance audits.
(D) Expressing an opinion on financial forecasts and projections.
(vi) Training sessions on the attest function completed before January 1, 2008.
(2) Candidates employed in private industry:
(i) Performance of an independent internal audit function.
(ii) Compliance audits of government contracts performed on behalf of a government agency that result in the issuance of an opinion or report.
(iii) Training sessions on the attest function completed before January 1, 2008.
(3) Candidates employed in Federal, State or local government:
(i) Performance of an independent internal audit function.
(ii) Audits performed on behalf a government audit agency that results in the issuance of an opinion or report.
(iii) Training sessions on the attest function completed before January 1, 2008.
(c) Nonattest activity. A candidate's nonattest activity must be in one or more of the following areas:
(1) Preparation of income and nonprofit tax returns.
(2) Tax research that is properly documented.
(3) Representation before a government agency on a tax matter.
(4) Financial forecasts, analyses and projections.
(5) Management advisory services that meet AICPA standards.
(6) Management and supervision of accounting functions and preparing financial statements for profit or not-for-profit entities.
(7) Professional accounting-related work in a public accounting firm.
(d) Nonqualifying experience. A candidate will not receive credit for the following types of experience:
(1) Experience that was supervised by an individual who did not meet the requirements of § 11.56 (relating to supervision of experience; verification) at the time the experience was obtained.
(2) Experience acquired while self-employed.
(3) Experience acquired as a partner in a partnership.
(4) Experience comprising nonprofessional work, including recruiting, industrial engineering, administration, bookkeeping and appraisals.
(5) Paraprofessional work that does not comply with subsection (c)(7).
§ 11.56. Supervision of experience; verification.
(a) To receive credit for experience under § 11.55 (relating to experience requirements for CPA certification), a candidate for CPA certification shall acquire the experience under the supervision of an individual who meets the following conditions at the time the experience is acquired:
(1) Holds a current license to practice as a CPA or public accountant in this Commonwealth or another jurisdiction.
(2) Either employs the candidate or is employed by the same employer as the candidate. The supervisor may not be a member of a public accounting firm that is independent of the entity that employs the candidate.
(3) Is responsible for and personally evaluates the candidate's work.
(b) A supervisor shall submit a verified statement regarding the candidate's experience on a form provided by the Board, specifying the dates of supervision and the types and hours of experience acquired.
(c) A supervisor who submits a verified statement shall be responsible for its accuracy. A supervisor who knowingly submits a false or inaccurate verified statement or who refuses to submit a verified statement when qualified experience has been acquired shall be subject to disciplinary action under section 9.1 of the act (63 P. S. § 9.9a).
INTERPRETATION § 11.73. Interpretation of chapter.
This chapter may not be construed in a manner that would be in violation of or inconsistent with the act.
[Pa.B. Doc. No. 07-1343. Filed for public inspection July 27, 2007, 9:00 a.m.]
