THE SENATE

S.B. NO.

2501

TWENTY-FIFTH LEGISLATURE, 2010

S.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO PUBLIC ACCOUNTANCY.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  The purpose of this Act is to:

     (1)  Provide a mechanism for firms engaged in the practice of public accounting to undergo peer review on a regular basis; and

     (2)  Grant the state board of public accountancy appropriate power to regulate the peer review process.

     SECTION 2.  Section 466-3, Hawaii Revised Statutes, is amended as follows:

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

     ""Attest" means providing the following financial statement services:

     (1)  Any audit or other engagement to be performed in accordance with the statements on auditing standards of the American Institute of Certified Public Accountants;

     (2)  Any compilation or review of a financial statement to be performed in accordance with the statements on standards for accounting and review services of the American Institute of Certified Public Accountants; 

     (3)  Any examination of prospective financial information to be performed in accordance with the statements on standards for attestation engagements of the American Institute of Certified Public Accountants;

     (4)  Any engagement to be performed in accordance with the government auditing standards, also known as the Yellow Book, issued by the United States General Accounting Office; and

     (5)  Any engagement to be performed in accordance with the standards of the Public Company Accounting Oversight Board.

     "Peer review" means a study, appraisal, or review of one or more aspects of the professional work of a firm that issues attest reports by a person or persons who hold permits to practice public accountancy under section 466-7 and who are not affiliated with the firm being reviewed."

     2.  By amending the definition of "firm" to read:

     ""Firm" means a sole proprietorship, a corporation, [or] a partnership[.], a limited liability corporation, or a limited liability partnership."

3.  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."]

SECTION 3.  Section 466-13, Hawaii Revised Statutes, is amended to read as follows:

     "§466-13  [Quality] Peer review [committee]. 

     (a)  Every firm, including the Hawaii offices and Hawaii engagements of foreign or multistate firms, required to obtain a firm permit to practice pursuant to section 466-7 shall undergo peer review on the firm's attest work at the time of the renewal of the firm's permit to practice under section 466-7.

     (b)  The board [may appoint a quality review committee] shall establish a peer review process to review [the publicly available professional] attest 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.] at the time of the renewal of a firm's permit to practice under section 466-7.  The identity of the person for whom the professional work is done shall be preserved in confidence.  [In the event] If the review discloses information that a firm has not met the appropriate professional standards, the board may require further investigation of the firm.  The peer review process required by this section shall be for educational or remedial and not punitive purposes. 

     (c)  The board may contract with a third party entity to provide the peer review required under subsection (a); provided that the contracted entity shall not require firms to become members of the entity in order to participate in peer review and shall charge the same rate for peer review services to both members and nonmembers.  If the board chooses to contract with a third party to provide peer reviews, the third party shall be held to the highest standards of professionalism, quality, and ethics.

     (d)  The board shall adopt rules pursuant to chapter 91 to establish requirements and procedures for the qualification of organizations to conduct peer reviews and for the performance of peer reviews by these organizations.  The rules shall include:

     (1)  A process for the conduct of peer review to be followed by the board and by a third party contracted entity;

     (2)  Definitions, standards, and requirements for an acceptable peer review;

     (3)  Standards for certification and qualification of peer reviewers;

     (4)  A process for a firm to appeal the findings or conclusions of any peer review process that results in the denial, termination, or nonrenewal of a firm permit pursuant to section 466-9; provided that the appeal process shall include the postponement of any adverse action during the pendency of the appeal; and

     (5)  Provisions for the grant of an extension of time to a firm for compliance with the peer review requirement based on a showing of hardship including for reasons of health, military service, or other good cause as determined by the board.  

     (e)  Neither the proceedings nor the records of the [quality] peer review [committees] process 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 4.  This Act does not affect rights and duties that were matured, penalties that were incurred, and proceedings that were begun, before its effective date.

     SECTION 5.  The board of public accountancy shall report the adoption of rules required by section 466-13(c), Hawaii Revised Statutes, to the legislature immediately upon the adoption of those rules by means of written notice to the speaker of the house of representatives and the president of the senate. 

     SECTION 6.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 7.  This Act shall take effect upon its approval; provided that the peer review process created by section 3 of this Act shall become mandatory for permit renewal one year after the board of public accountancy reports the adoption of rules pursuant to section 466-13(d), Hawaii Revised Statutes.

 

 

 

Report Title:

Peer Review for Public Accountancy

 

Description:

Requires peer reviews at the time of renewal of certified public accountancy permits to practice.  (SD1)

 

 

 

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