Amends chapter on public accountants to include among other thing, continuing education requirement, peer review, peer review oversight body confidential client communications. Describes action on licensing application, criminal conviction, denial of license.

A BILL FOR AN ACT

SECTION 1. Chapter 466, Hawaii Revised Statutes, is amended by adding eight new sections to be appropriately designated and to read as follows:

"§466-A Renewal of license or permit; continuing professional education. (a) Licenses and permits issued under this chapter shall be renewed biennially on or before December 31 of every odd numbered year.

(b) Every licensee and permit holder shall complete and file an application provided by the board, and furnish any additional information bearing upon the renewal of the license or permit as the board shall require. Each application shall be accompanied with the appropriate fees.

(c) Every firm that performs, holds itself out to perform, or offers to perform for the public one or more kinds of services involving the use of accounting or auditing skills, including issuance of reports on financial statements or of one or more kinds of management advisory, financial advisory or consulting services, or the preparation of tax returns or the furnishing of advice on tax matters shall attest to having licensees affiliated with the entity who hold active licenses and have complied with the continuing professional education requirements of the board.

(d) In the case of a corporation, partnership, limited liability partnership, limited liability company, or any other form of business entity, the application shall be signed by the active licensee located in this State who is responsible for the permit application of the firm.

(e) Effective with the December 31, 2003 renewal, every firm that has performed an attest or compilation engagement within the previous three years of the renewal date, shall submit to the board an acceptance letter from an administering entity of a peer review conducted within the last three years of the renewal date, provided that in the absence of an acceptance letter, a firm shall indicate to the board the name of the administering entity with which it is enrolled to undergo a peer review and the expected date of completion of the peer review.

(f) A firm that is awaiting the results of a peer review or attempting to comply with any recommendations of a peer review shall provide an explanation to the board explaining the reasons for noncompliance and the expected date of any remedial or corrective action.

(g) The board may renew the permit on a provisional status as provided in its rules.

(h) A firm that did not perform any attest or compilation engagement but intends to do so shall inform the board, and shall undergo a peer review within eighteen months of the date of the report of the firm on its initial attest or compilation engagement.

(i) An individual licensee who performed compilation services for the public through a noncertified public accounting or nonpublic accounting firm shall undergo a peer review and comply with subsections (e), (f), and (h).

(j) An individual licensee desiring to renew licensure on an active status shall meet the continuing professional education requirements provided in the rules of the board and shall attest to the completion of at least eighty continuing professional education hours for the biennium immediately preceding the renewal date.

(k) The board may conduct random audits of documents supporting the completion of the continuing professional education hours.

(l) An individual licensee who fails to submit the required continuing professional education hours may renew the individual's license on an inactive status; provided that the licensee shall not hold the licensee's self out to perform or offer to engage in the practice of public accountancy, and shall place the word "inactive" adjacent to the individual's "CPA" or "PA" title on any business card, letterhead, or any other document or device, with the exception of the certified public accounting certificate or public accounting license on which the individual's certified public accounting or public accounting title appears.

(m) Every applicant shall disclose on the application whether the applicant, or a partner, officer, shareholder, manager, member, or nonlicensed owner of the applicant, has been convicted of any crime that reflects unfavorably upon the fitness of the applicant to engage in the accountancy profession.

(n) A licensee applying for renewal shall disclose any revocation, suspension, or other disciplinary action of a license imposed upon a licensee within the two years immediately preceding the renewal date.

(o) Failure to submit the required fees and peer review acceptance letter, or comply with the other requirements for renewal, or the dishonoring of any check upon first deposit may result in the automatic forfeiture of the license or permit.

(p) Continued performance of the practice of public accountancy without an active license or permit shall constitute an unlicensed activity, and both the individual or firm shall be subject to discipline under this chapter and chapter 436B.

(q) A completed application sent by United States mail shall be considered timely filed if the envelope bears a postmark on or before the required renewal date.

(r) A forfeited license may be restored upon the payment of appropriate renewal and restoration fees, complying with continuing professional education requirements for the biennium preceding the application date for restoration, and complying with the other requirements provided in the rules of the board; provided that restoration shall not be retroactive.

(s) Failure to timely restore the license or permit shall result in the automatic termination of the license or permit. An individual or firm with a terminated license or permit shall be required to reapply as a new applicant.

§466-B Peer review. (a) The purpose of the peer review program is to improve the quality of financial reporting and to ensure that the public can rely on the accuracy of the financial information on which licensees issue reports. Appropriate educational programs or rehabilitation procedures will ordinarily be recommended or required where professional services do not comply with applicable professional standards; however, when a licensee is unwilling or unable to comply with the professional standards or the requirements of this section, disciplinary action may be taken as the appropriate means of protecting the public interest.

(b) The board adopts the guidelines in the "Standards for Performing and Reporting on Peer Review" and the "SECPS peer review standards" developed by the American Institute of Certified Public Accountings, as they are currently established and as they may be subsequently amended, as applicable professional standards.

(c) Every firm that performs or has performed attest or compilation services for the public and every individual who performs or has performed compilation services for the public through a noncertified public accounting or nonpublic accounting firm shall undergo a peer review at least once every three years.

(d) Each firm or individual is responsible for having the peer reviews or any remedial requirements imposed under the peer review performed at its own cost, and shall submit the acceptance letter issued by an administering entity to the board, provided that in the absence of the acceptance letter, a firm or individual shall indicate to the board the name of the administering entity with which it is enrolled to undergo a peer review and the expected date of completion of the peer review.

(e) For purposes of this chapter, the board accepts the American Institute of Certified Public Accounting, and state certified public accounting societies fully involved in the administration of the American Institute of Certified Public Accounting peer review program to be administering entities. Other administering entities desiring to perform peer review programs within the scope of this chapter must be approved by the oversight body.

§466-C Peer review oversight body. (a) The board shall establish a peer review oversight body, which shall review and evaluate peer review programs to determine whether a program meets or exceeds the guidelines in the "Standards for Performing and Reporting on Peer Review" and the "SECPS peer review standards" developed by the American Institute of Certified Public Accounting, as they are currently established and as they may be subsequently amended, and make recommendations to accept or reject the program to the board.

(b) The oversight body shall consist of five certified public accountings who hold current certificates and who possess at least five years of experience in supervising attest or compilation work.

(c) The board shall appoint members for three year

(d) Each member of the oversight body shall be granted twenty hours of continuing professional education credits for each full year, or the part-time equivalent, the individual serves on the oversight body.

(e) A member of the oversight body shall be reimbursed for necessary expenses incurred in the performance of the member's duties and responsibilities under this chapter, including reasonable travel expenses.

(f) Notwithstanding any other law to the contrary, every member of the oversight body shall be immune from or indemnified for civil liability as provided in section 26-35.5.

§466-D Substantial equivalency. (a) An individual whose principal place of business is not in this State, and who holds an active license or certificate as a certified public accountant from:

(c) In the event the individual establishes the individual's principal place of business in this State, the individual shall be required to obtain a certificate of certified public accountant and comply with the requirements of this chapter.

(d) A licensee of this State offering or rendering professional services, or using the licensee's certified public accounting or public accounting title in another state shall be subject to disciplinary action in this State for an act committed in the other state. The board shall investigate any complaint made by the board of accountancy of another state.

§466-E Action on applications. (a) The board shall take the following actions within one year after the filing of an application for licensure:

(b) An application shall be considered to be abandoned if it is not completed and the required documents and other information are not submitted to the board within two years from the last date documents or information were requested; provided that the board may grant extensions upon reasonable request. The board shall not be required to act on any abandoned application, and the application may be destroyed by the board or its delegate.

§466-F Confidential communications by a client. (a) A licensee, certified public accounting firm, or public accounting firm shall not voluntarily disclose to a third party information communicated to the licensee, certified public accounting firm, or public accounting firm by a client relating to and in connection with services rendered to the client by the licensee, certified public accounting firm, or public accounting firm without the consent of the client or the client's heirs, successors, or personal representatives.

(b) The information communicated by a client shall be deemed confidential; provided that nothing in this section shall prohibit the disclosure of information required to be disclosed by the standards of the public accounting profession in reporting on the examination of financial statements, in court proceedings, in investigations or proceedings to enforce this chapter, or in the course of peer reviews, or to other persons active in the firm who perform services for that client or need this information for the sole purpose of assuring quality control of the firm.

§466-G Criminal conviction. When an applicant has been convicted of a penal crime directly related to the accounting profession, and it is determined that the conviction may be considered under section 831-3.1, the department, executive officer, or the board's designee may request the following documents from the applicant:

§466-H Suspension or denial of license for noncompliance with child support order. In addition to any other acts or conditions provided by law, the board shall refuse to renew, reinstate, or restore, or shall deny or suspend any license if the board has received certification from the child support enforcement agency pursuant to the terms of section 576D-13 that the licensee or applicant is not in compliance with an order of support or has failed to comply with a subpoena or warrant relating to a paternity or child support proceeding. Unless otherwise provided by law, the board shall renew, reinstate, restore, or grant the license only upon receipt of an authorization from the child support enforcement agency, the office of child support hearings, or the family court. Sections 92-17, 436B-20, 436B-21, 436B-24, and 436B-25 shall not apply to a license suspension or denial pursuant to this section."

SECTION 2. Section 466-2, Hawaii Revised Statutes, is amended to read as follows:

"§466-2 Short title. This chapter may be cited as the Public Accountancy Law [of 1973]."

SECTION 3. Section 466-3, Hawaii Revised Statutes, is amended as follows:

1. By adding eleven new definitions to be appropriately inserted and to read:

""Acceptance letter" means a document issued by the administering entity indicating the type of peer review report (unmodified, modified, or adverse), when all peer review documents, and all remedial or corrective actions, if applicable, have been completed.

"Administering entity" means an entity that has met, and continues to meet the standards established by the American Institute of Certified Public Accounting or other entity approved by the board to administer the peer review program.

"Affiliated with" means being an employee, partner, manager, member, or independent contractor of a certified public accounting firm or a public accounting firm.

"Attest" means providing the following financial statement services:

The statements on standards specified in this definition shall be adopted by the board and shall be those developed for general application by recognized national accountancy organizations such as the American Institute of Certified Public Accounting.

"Compilation" means providing a service to be performed in accordance with Statements on Standards for Accounting and Review Services that is presenting, in the form of financial statements, information that is the representation of management (owners) without undertaking to express any assurance on the statements.

"Manager" means a manager of a limited liability company.

"Member" means a member of a limited liability company.

"National Association of State Boards of Accountancy National Qualification Appraisal Service" means the service established by the National Association of State Boards of Accountancy to provide review and evaluation services of states and individuals to determine substantial equivalency of qualifications for licensure.

"Peer review" means a study, appraisal, or review of one or more aspects of the professional work of a firm that performs attest or compilation services or a licensee employed by a noncertified public accounting or nonpublic accounting firm who performs compilation services, by a person or persons who hold certificates and who are not affiliated with the firm or licensee being reviewed.

"Substantial equivalency" means a determination by the National Association of State Boards of Accountancy National Qualification Appraisal Service, or any other organization approved by the board, that the education, examination, and experience requirements contained in the statutes and administrative rules of another state are comparable to or exceed the education, examination, and experience requirements contained in the Uniform Accountancy Act, or that an individual certified public accounting's education, examination, and experience qualifications are comparable to or exceed the education, examination, and experience requirements contained in the Uniform Accountancy Act.

"Uniform Accountancy Act" means the Act adopted by National Association of State Boards of Accountancy and the American Institute of Certified Public Accounting."

2. By amending the definition of "certified public accountant" to read:

""Certified public accountant" means the designation given to a person licensed under [section 466-5] this chapter or the law of any other state or foreign country."

3. By amending the definitions of "firm" and "license" to read:

""Firm" means a sole proprietorship, [a] corporation, [or a] partnership[.], or any other form of business entity.

"License" means the document issued by the board to a person designated as a certified public accountant [under section 466-5], or a person licensed as a public accountant under section 466-6, or a valid comparable certificate, registration, or license of certified public accountant or public accountant issued after examination under the law of any other state or foreign country, or [of] firm a permit issued under [section 466-7.] this chapter."

4. By amending the definition of "permit" to read:

""Permit" means a permit to actively practice public accountancy issued to firms under [section 466-7.] this chapter."

5. By amending the definition of "public accountant" to read:

""Public accountant" means the designation given to a person licensed under [section 466-6,] prior laws of this State, or the law of any other state or foreign country. Public accountants who hold licenses under the prior laws of this State shall:

6. By deleting the definition of "quality review".

[""Quality review" means a study, appraisal, or review of one or more aspects of the professional work of a firm in the practice of public accountancy by a person or persons who hold certificates and who are not affiliated with the firm being reviewed."]

7. By amending the definition of "report" to read:

""Report", when used with reference to financial statements, means an opinion, report, or other form of language, that states or implies the measure of assurance as to the reliability of any financial statements, and that also includes, or is accompanied by, any statement or implication that the firm issuing it has special knowledge or competence in accounting or auditing. The 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 person or firm is licensed, or from the language of the report itself. The term "report" includes any form of language which disclaims an opinion when the form of language is conventionally understood to imply any positive assurance as to the reliability of the financial statements referred to, or special competence on the part of the person or firm issuing such language, or both; and it includes any other form of language that is conventionally understood to imply such assurance or such special knowledge or competence, or both."

SECTION 4. Section 466-4, Hawaii Revised Statutes, is amended to read as follows:

"§466-4 Board of public accountancy. (a) There shall be a board of public accountancy to be known as the state board of public accountancy, which shall consist of nine members. All members of the board shall be citizens of the United States and residents of this State. Seven members thereof shall hold current licenses issued under this chapter, of which at least six of the seven members shall be affiliated with firms that hold current permits to practice public accountancy and shall be in active practice; and two shall be public members.

(b) The governor shall remove or suspend any member of the board for cause, in accordance with section 26-34, including any member thereof:

(c) The director shall employ clerks, proctors, examiners, and other personnel under chapters 76 and 77 to assist the board in the performance of its duties.

(d) In addition to any other powers and duties authorized by law, the board[,] shall have all the powers necessary and convenient to effectuate the purpose of this chapter in accordance with chapter 91. The board shall:

(e) The board shall delegate to the department the authority to receive, arbitrate, investigate, and prosecute any complaint against a licensee.

(f) The board may delegate to the executive officer or other designee, any of its powers or duties as it deems reasonable and proper; provided that the board may not delegate its discretionary powers resulting in a final decision, including, but not limited to:

SECTION 5. Section 466-5, Hawaii Revised Statutes, is amended to read as follows:

"§466-5 [License] Certificate of certified public accountant. (a) [A license and a permit are required to practice public accountancy. The board may license and grant the designation of "certified public accountant" to any person who has met the following:

(b) The educational requirement for a license shall include a baccalaureate degree conferred by a college or university recognized by the board and:

(b) The education requirement for a certificate shall be at least one hundred fifty semester hours of college education including a baccalaureate or higher degree conferred by a college or university acceptable to the board, and an accounting concentration or its equivalent as specified in the rules of the board; provided that:

(1) If the applicant obtained the degree from a college or

(2) An applicant who passed the examination prescribed in

[(c) A person shall be exempt from the requirements in subsection (b) or section 466-5.5 if that person:

(d)] (c) Each applicant shall present satisfactory evidence in the form of a [certified] signed statement from present or former employer(s) that the applicant has [met one of the following experience requirements for license:

[(e)] (d) The examination required to be passed [shall be in writing,] as a condition for the granting of a certificate shall be held at least twice a year, and shall test the applicant's knowledge of the subjects of accounting [theory, accounting practice,] and auditing, and other related subjects as the board may specify by rule[.], including but not limited to business law and taxation. The time for holding the examination shall be [fixed] determined by the board and may be changed from time to time. The board shall prescribe the methods of applying for and conducting the examination, including methods for grading [papers] and determining a passing grade required [by] of an applicant for a [license;] certificates; provided that the board shall, to the extent possible, see to it that the examination, the grading of the examination, and the passing grades are uniform with those applicable in all other states. The board may use all or any part of the Uniform Certified Public Accountant Examination and Advisory Grading Service of the American Institute of Certified Public Accountants, or other comparable examination approved by the board, and may contract with third parties to perform the administrative services with respect to the examination as the board deems appropriate to assist it in performing its duties herein.

[(f)] (e) The board may allow an applicant to sit for the [Uniform Certified Public Accountant Examination,] examination prescribed in this chapter, if the applicant has met at least one of the following:

[(g)] (f) The board shall prescribe the terms and conditions under which an applicant who has taken the examination prescribed in [subsection (e),] this chapter, but who has not satisfactorily completed the examination, may be given conditional credit for any part thereof that the applicant has satisfactorily completed. The board may also provide a specific length of time for an applicant to apply for reexamination.

[(h)] (g) A person who passed the Uniform Certified Public Accountant Examination under the laws of another state may be exempted from taking the examination required [pursuant to subsections (a)(5) and (e).] under this chapter. The board shall prescribe the methods and requirements for exemption from the examination requirements. The board shall prescribe the methods and requirements for exemption for the holder of a valid comparable certificate, registration, or license and a degree from a foreign country.

[(i) A person who, on January 1, 1974, holds a license of certified public accountant issued under the laws of this State theretofore existing shall not be required to obtain an additional license of certified public accountant under this chapter, but shall otherwise be subject to all the provisions of this chapter; and the license theretofore issued shall, for all purposes, be considered a license issued under this chapter and subject to the provisions herein.

(j) Licenses shall be effective for a period not exceeding two years and shall be renewable biennially on or before December 31 of every odd-numbered year upon application to the board.

(k) The board may renew the license of a certified public accountant who completes a renewal application and fulfills the following requirements:

(l) Failure to renew a license on or before December 31 of every odd-numbered year, shall constitute a forfeiture of license. Continued practice in public accountancy without renewing or restoring a license and permit shall constitute unlicensed activity. Any person engaged in unlicensed activity shall be subject to sections 466-9, 466-11, 487-13, and 26-9.

(m) The board shall specify the method and requirements of application for restoration of a forfeited license. The date of restoration of the license shall be the date of board approval of the restoration. Restorations shall not be retrospective.]

(h) A licensee of another state who establishes a place of business in this State shall apply for a certificate of certified public accountant from the board and comply with the requirements of this chapter prior to practicing in this State, and shall, if applicable, apply for a firm permit to practice.

(i) The board may permit a certified public accounting who does not meet the substantial equivalency provisions of this chapter or a public accounting to practice in this State for a temporary period not to exceed ninety days within a twelve month period provided that the certified public accounting or public accounting holds a current permit to practice or is affiliated with a firm which holds a current permit to practice issued by another state, and files an application which specifies the nature and extent of the temporary practice. The board may grant an extension to the ninety days within a twelve month period as provided in its rules.

(j) The board may deny an application for a certificate for failure to meet the education, examination, and experience requirements or for failing to possess a history of competence, trustworthiness, and fair dealing, and shall inform the applicant of a right to a hearing under chapter 91."

SECTION 6. Section 466-7, Hawaii Revised Statutes, is amended to read as follows:

"§466-7 [Permits] Firm permits to practice. (a) A license and permit are required to actively engage in the practice of public accountancy. [The board may grant or renew a permit to actively engage in the practice of public accountancy. Permits shall be initially issued and renewed for periods of two years but in any event shall expire on December 31 of every odd-numbered year. The board shall prescribe the methods and requirements for application.

(b) An applicant for the initial issuance or renewal of a permit shall have:

(c) The board may grant a temporary permit to actively engage in the practice of public accountancy to any person who:

(d) All firms shall obtain a permit to practice. The board may issue or renew a permit to actively engage in the practice of public accountancy to any firm which submits a completed application and demonstrates qualifications as prescribed by the board.

(e) Failure to submit the required fees, continuing education hours, or other requirements for renewal as specified in this section by December 31 of every odd-numbered year, shall constitute forfeiture of the permit. Continued performance in the practice of public accountancy without a permit shall constitute unlicensed activity and the individual or firm shall be subject to sections 466-9, 466-11, 487-13, and 26-9.

(f) The board may restore forfeited permits to the individual or firm which satisfies the following:

(b) Every firm applying for an issuance of a permit to engage in the practice of public accountancy in this State shall file a completed application, submit the appropriate fees, and provide the following:

(3) The name of the active licensee located in this State

who shall be responsible for the permit application of

(4) A statement that any licensee who is responsible for

(5) A statement that the nonlicensed owners of the firm

(c) Every firm that holds itself out to perform or offers to perform attest or compilation engagements in this State shall submit an acceptance letter issued by an administering entity as a result of a peer review, and issued within three years prior to the application date; provided that in the absence of an acceptance letter, a firm shall indicate to the board the name of the administering entity with which it is enrolled to undergo a peer review and the expected date of completion of the peer review. In cases where two or more firms are merged, sold, or combined, the surviving firm shall apply for a permit and if applicable, submit the acceptance letter of the surviving firm. In cases where a firm is divided, the firms shall apply for a permit to practice, and if applicable, submit the acceptance letter of the firm that was divided. However, each firm shall submit an acceptance letter resulting from a peer review within eighteen months of the date of the report of the firm on its initial attest or compilation engagement; provided that in the absence of an acceptance letter, a firm shall indicate to the board the name of the administering entity with which it is enrolled to undergo a peer review and the expected date of completion of the peer review.

(d) If the firm does not intend to perform any attest or

(e) Any change in the status or identities of partners, officers, shareholders, managers, members, and nonlicensed owners whose principal place of business is in this State, the licensee responsible for the permit application of the firm, or in firm ownership shall be reported to the board within forty-five calendar days of the change. Firms which fall out of compliance with this section due to changes in the above shall take corrective action to bring the firm into compliance with this section within an additional sixty calendar days after the due date of notification. The board may grant an extension of time for a firm to complete the corrective action. Failure to bring the firm back into compliance shall result in the automatic forfeiture of the firm's permit.

(f) The board may deny an application for a permit to practice for failure to meet all of the applicable requirements of this chapter and the rules of the board, for any past disciplinary action taken in another state or under section 466-9, or for engaging in any prohibited acts under section 466-10."

SECTION 7. Section 466-8, Hawaii Revised Statutes, is amended to read as follows:

"§466-8 Fees. (a) [An] Every application for admission to the examination [described in section 466-5(e)] shall be accompanied by the [application and] appropriate examination fees. The board may prescribe by rule the terms and conditions upon which an applicant who is unable to attend the examination may receive a credit in the amount of the fee paid toward a subsequent examination.

(b) [An] Every application for the issuance or renewal of a license [of certified public accountant under section 466-5(a) or a license of public accountant under section 466-6(a)] shall be accompanied by [a license fee.] the appropriate fees.

(c) [An applicant for the renewal of a current license of certified public accountant under section 466-5 or for the renewal of a license of public accountant under section 466-6 shall pay a fee biennially in each odd-numbered year on or before December 31.] An applicant for the restoration of a forfeited license [of certified public accountant or public accountant] shall submit with the application for restoration of the forfeited license the renewal fee, a penalty fee equal to the amount of the renewal fee, and a recordkeeping fee for each biennium the license was on forfeited status.

[(d) An application for the issuance of a biennial permit to practice for an individual or firm under section 466-7(a) and (d) shall be accompanied by the application and permit to practice fees.

(e) An application for the issuance of a temporary permit to practice under section 466-7(c) shall be accompanied by the application and temporary permit to practice fees.

(f)] (d) Any person requesting the board to proctor the certified public accountant examination for another state shall pay a proctoring fee.

[(g)] (e) All fees shall be established and adopted by the director in accordance with chapter 91 and shall be deposited into the compliance resolution fund established pursuant to section 26-9(o)."

SECTION 8. Section 466-9, Hawaii Revised Statutes, is amended to read as follows:

"§466-9 Disciplinary action. (a) In addition to any other actions authorized by law, in accordance with chapter 91, the board may take the following action:

(b) In addition to any other grounds for disciplinary action authorized by law, any one or more of the following shall constitute grounds for disciplinary action:

(c) Upon application of any person against whom disciplinary action has been taken under subsection (a), the board, in accordance with chapter 91, may reinstate the person's license or permit to practice which was affected by the disciplinary action.

SECTION 9. Section 466-10, Hawaii Revised Statutes, is amended to read as follows:

"§466-10 Prohibited acts. (a) [Use of title "certified public accountant":

(b) Use of title "public accountant":

(c) Representation of special knowledge:

(d) Nothing contained in this chapter shall prohibit any person:

(7) Who is an attorney at law from engaging in practice as such.] Only an active licensee may issue a report on financial statements of any person, firm, organization, or governmental unit, or offer to render or render any attest or compilation service as defined herein; provided that this restriction shall not prohibit any act of a public official or public employee in the performance of that person's official duties as such, or prohibit the performance by any nonlicensee of other services involving the use of accounting skills, including the preparation of tax returns, management advisory services, and the preparation of financial statements without the issuance of reports thereon. A nonlicensee may prepare financial statements and issue nonattest transmittals or information thereon which do not purport to be in compliance with the Statements on Standards for Accounting and Review Services and other similar standards recognized by the board in its rules.

(b) A licensee performing attest or compilation services must provide those services in accordance with the professional standards adopted by the board under this chapter.

(c) No person not holding a valid certificate shall use or assume the title "certified public accountant", or "public accountant", or the abbreviation "CPA" or "PA", or any other title, designation, words, letters, or abbreviation on any sign, card, or device which indicates or tends to indicate that such person is a certified public accountant or a public accountant.

(d) No firm shall provide attest or compilation services, or assume or use the title "certified public accountants", or "public accountants", or the abbreviations "CPAs," or "PAs", or any other title, designation, words, letters, or abbreviation on any sign, card, or device which indicates or tends to indicate that such firm is a certified public accounting firm or public accounting firm unless:

(e) This section shall not prohibit any officer, partner, member, manager or employee of any firm or organization from affixing that person's own signature to any statement in reference to the financial affairs of such firm or organization with any wording designating the position, title, or office that the person holds therein, nor prohibit any act of a public official or employee in the performance of the person's official duties as such.

(f) A nonlicensee may not use language in any statement relating to the financial affairs of a person or business entity which is conventionally used by licensees in reports on financial statements. A nonlicensee may use the following disclaimer language in connection with such financial information:

"I (we) have prepared the accompanying (financial

(h) None of the foregoing provisions of this section shall apply to a person or firm holding a certification, designation, degree, or license granted in a foreign country entitling the holder thereof to engage in the practice of public accountancy or its equivalent in that country whose activities in this State are limited to the provision of professional services to persons or firms who are residents of, governments of, or business entities of the country in which the person holds such entitlement; who performs no attest or compilation services as defined in this chapter and issues no reports with respect to the financial statements of any other persons, firms, or governmental units in this State; and who does not use in this State any title or designation other than the one under which the person practices in that country, followed by a translation of the title or designation into the English language if it is in a different language, and by the name of the country.

(i) No licensee shall perform attest or compilation services through a firm that does not hold a current permit issued under this chapter.

(j) No individual licensee shall issue a report in standard form upon a compilation of financial information through any noncertified public accounting or nonpublic accounting firm unless the report discloses the name of the business through which the individual is issuing the report, and the individual:

(2) Meets the competency requirements provided in

(3) Undergoes no less frequently than once every

(k) Nothing in this section shall prohibit a practicing attorney or firm of attorneys from preparing or presenting records of documents customarily prepared by an attorney or firm of attorneys in connection with the attorney's professional work in the practice of law.

(l) A licensee shall not receive a commission for recommending or referring any product or service to a client, or recommending or referring any product or service to be supplied by a client, when the licensee also performs for that client an audit or review of a financial statement; a compilation of a financial statement when the licensee expects, or reasonably might expect, that a third party will use the financial statement and the licensee's compilation report does not disclose a lack of independence; or an examination of prospective financial information.

(n) A licensee shall not receive a contingent fee for providing professional services, including without limitation preparing an original or amended tax return or claim for a tax refund, to a client for whom the licensee or the licensee's firm performs an audit or review of a financial statement; a compilation of a financial statement when the licensee expects, or reasonably might expect, that a third party will use the financial statement and the licensee's compilation report does not disclose a lack of independence; or an examination of prospective financial information.

SECTION 10. Section 466-11, Hawaii Revised Statutes, is amended to read as follows:

"§466-11 Injunctions against prohibited acts. (a) Whenever, as a result of an investigation under [section 466-13 or otherwise,] this chapter, the board has reason to believe that any person or firm has engaged, or is about to engage, in any act, or acts, or practices that constitute or will constitute a violation of [section 466-10,] this chapter, the board may certify the facts underlying the belief to the attorney general of this State, who shall make application to the appropriate court for an order enjoining the act, or acts, or practices, and, upon a showing by the board that the person or firm has engaged, or is about to engage, in any act, or acts, or practices, an injunction, restraining order, or other order as may be appropriate shall be granted by the court without bond.

[(b) A violation of section 466-10 is a misdemeanor. Whenever the board has reason to believe that any person is liable to punishment under this section it may certify the facts underlying the belief to the county attorney or prosecuting attorney of the county in which the violation occurred who shall cause appropriate proceedings to be brought.

(c)] (b) Any person or firm who violates this chapter may be fined not more than [$1,000] $5,000 for each violation.

[(d)] (c) The display or uttering by a person or firm of a card, sign, advertisement, or other printed, engraved, or written instrument or device bearing a person's or firm's name in conjunction with the words "certified public accountant" or any abbreviation thereof, of the words "public accountant" or any abbreviation thereof, shall be prima facie evidence in any action brought under subsection (a) [or (b)] of this section that the person or firm whose name is so displayed, caused or procured the display or uttering of the card, sign, advertisement, or other printed, engraved, or written instrument or device and that the person or firm is holding itself out to be a certified public accountant firm or public accountant firm holding a current permit to practice issued under [section 466-7.] this chapter.

[(e)] (d) Unless otherwise expressly provided, the remedies or penalties provided by this chapter are cumulative to each other and to the remedies or penalties available under all other laws of this State."

SECTION 11. Section 466-12, Hawaii Revised Statutes, is amended to read as follows:

"§466-12 [Ownership of accountant's] Licensees' working papers[.]; client's records. [All] Except as otherwise provided in section 466-F(a), all statements, records, schedules, working papers, and memoranda made by [the] a licensee, or a partner, shareholder, officer, director, member, manager, or employee [incidental] of a licensee, incident to[,] or in the course of rendering services to a client [in the practice of public accountancy,] while a licensee, except the reports submitted by the licensee to the client and except for records that are part of the client's records, shall be and remain the property of the licensee in the absence of an express agreement between the licensee and the client to the contrary.

(b) A licensee shall furnish to a client or former client, upon request and reasonable notice:

(c) Nothing in this section shall require a licensee to keep any working paper beyond the period prescribed in any other applicable statute or rule."

SECTION 12. Section 466-5.5, Hawaii Revised Statutes, is repealed.

["[§466-5.5 Educational requirements for examination and licensure effective December 31, 2000. (a) Effective December 31, 2000, an applicant for the Uniform Certified Public Accountant Examination shall have at least one-hundred-fifty semester hours of college education. Within the one-hundred- fifty semester hours, the applicant shall have:

(b) Effective December 31, 2000, an applicant shall meet the educational requirements of subsection (a) to obtain a certified public accountant license, except that applicants for licensure who have successfully completed the Uniform Certified Public Accountant Examination before December 31, 2000, or held conditional credit before December 31, 2000, and subsequently completed the examination before the conditional credit expired, may continue to meet the educational requirements of section 466-5(b)."]

SECTION 13. Section 466-6, Hawaii Revised Statutes, is repealed.

["§466-6 License of public accountant. (a) A license and a permit are required to actively practice public accountancy. A person:

(b) Licenses shall be effective for a period not exceeding two years and shall be renewable biennially on or before December 31 of every odd-numbered year upon application to the board.

(c) A person who, on January 1, 1974, holds a license of public accountant under the laws of this State theretofore existing, shall not be required to obtain an additional license under this chapter, but shall otherwise be subject to all the provisions of this chapter; and such previous license shall, for all purposes, be considered a license under this chapter and subject to the provisions herein."]

SECTION 14. Section 466-13, Hawaii Revised Statutes, is repealed.

["§466-13 Quality review committee. The board may appoint a quality review committee to review the publicly available professional work of firms on a random basis, without any requirement of a formal complaint or suspicion of impropriety on the part of any particular firm. The identity of the person for whom the professional work is done shall be preserved in confidence. In the event the review discloses information that a firm has not met the appropriate professional standards, the board may require further investigation of the firm.

Neither the proceedings nor the records of the quality review committees shall be subject to discovery. Except as hereinafter provided, no person in attendance at a meeting of the committee shall be required to testify as to what transpired at the meeting; provided that the statements made by any person in attendance at the meeting who is a party to an action or proceeding the subject matter of which was reviewed at the meeting, shall be subject to discovery."]

SECTION 15. In codifying the new sections added by section 1 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 16. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 17. This Act shall take effect on July 1, 2001.