HB2218 - 521R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Section 32-701, Arizona Revised Statutes, is amended to read:

START_STATUTE32-701. Definitions

In this chapter, unless the context otherwise requires:

1. "Accounting services" means services that are commonly and historically performed by accountants, including recording or summarizing financial transactions, bookkeeping, analyzing or verifying financial information, auditing, reviewing or compiling financial statements, reporting financial results, financial planning, providing attestation or tax or consulting services.

2. "Accredited institution" means any public or private regionally or nationally accredited college or university that is accredited by an organization recognized by the council for higher education accreditation or its successor agency.

3. "Attest services" means the following services that are rendered by the holder of a certificate issued by the board:

(a) Audits or other engagements to be performed in accordance with the statements on auditing standards adopted by the American institute of certified public accountants.

(b) Reviews of financial statements to be performed in accordance with the statements on standards for accounting and review services adopted by the American institute of certified public accountants.

(c) Any examination of prospective financial information to be performed in accordance with the statements on standards for attestation engagements adopted by the American institute of certified public accountants.

(d) Any engagement to be performed in accordance with the standards of the public company accounting oversight board or its successor.

(e) Any examination, review or agreed on procedure engagement to be performed in accordance with the statements on standards for attestation engagements adopted by the American institute of certified public accountants, other than an examination described in subdivision (c) of this paragraph.

4. "Attestation" or "attest function" means the issuance by a registrant of a written communication that expresses a conclusion about the reliability of a written assertion that is the responsibility of another party.

5. "Board" means the Arizona state board of accountancy established by section 32‑702.

6. "Certified public accountant" means an individual who has been issued a certificate of authority by the board to practice as a certified public accountant or who meets the limited reciprocity privilege requirements pursuant to section 32‑725.

7. "Client" means a person or entity, other than one's employer, for whom accounting services are provided.

8. "Consulting services" includes management advisory services, litigation support services, valuation services and other services that require the use of technical skills, education, observation, experience and knowledge to develop an analytical approach to process and to present findings, conclusions or recommendations.

9. "Conviction" means a judgment of conviction by any state or federal court of competent jurisdiction in a criminal cause, regardless of whether an appeal is pending or could be taken, and includes any judgment or order based on a plea of no contest.

10. "Disciplinary action" means any other regulatory sanctions imposed by the board in combination with, or as an alternative to, revocation or suspension of a certificate or registration, including the imposition of:

(a) An administrative penalty in an amount not to exceed two thousand dollars for each violation of this chapter or rules adopted pursuant to this chapter.

(b) Restrictions on the scope of the registrant's accounting practice, including, without limitation, restriction of audit or attest function practice, restriction of tax practice or restriction of consulting services.

(d) Professional education requirements.

(e) A decree of censure.

(f) Probation requirements best adapted to protect the public welfare.

(g) Reimbursement of the board's costs of investigations and proceedings initiated under this chapter, including attorney fees.

(h) A requirement for restitution payments to accounting services clients or to other persons suffering economic loss resulting from violations of this chapter or rules adopted pursuant to this chapter.

11. "Employer" means a person or entity that hires an individual to perform a service and that directs and controls the manner in which the service is performed.

12. "Federal securities laws" means the securities act of 1933, the securities exchange act of 1934, the public utility holding company act of 1935 and the investment company act of 1940, as amended.

13. "Financial statements":

(a) Means statements and footnotes related to statements that purport to show a financial position or changes in a financial position in conformity with generally accepted accounting principles or other comprehensive basis of accounting.

(b) Includes balance sheets, statements of income, statements of retained earnings, statements of cash flows, statements of changes in an owner's equity and other commonly used or recognized summaries of financial information.

14. "Firm" means a business organization that is engaged in the practice of public accounting and that is established under the laws of any state or foreign country, including a sole practitioner, partnership, professional corporation, professional limited liability company, limited liability company, limited liability partnership or any other entity recognized by the board that has met the applicable requirements contained in sections 32‑731 and 32‑732.

15. "Good cause" means factors that temporarily prevent a registrant from satisfying a particular requirement in a specific instance as determined by the board and may include:

(a) A disability.

(b) An illness.

(d) Military service.

(e) Financial hardship.

(f) A natural disaster.

(g) Any condition or circumstance that the board deems relevant.

16. "Jurisdiction" means, for the purposes of examination, certification or limited reciprocity privilege, the fifty states of the United States, the District of Columbia, the United States Virgin Islands, Guam, or the Commonwealth of the northern Mariana Islands or the Commonwealth of Puerto Rico.

17. "Letter of concern" means an advisory letter to notify a registrant that, while the evidence does not warrant disciplinary action, the board believes that the registrant should modify or eliminate certain practices and that continuation of the activities that led to the evidence being submitted to the board may result in board action against the registrant. A letter of concern is not a disciplinary action.

18. "Limited reciprocity privilege" means the permission to practice as a certified public accountant in this state pursuant to section 32‑725 for an individual whose principal place of business is outside of this state.

19. "Management advisory services" means advisory services consisting of the development of findings, conclusions or recommendations for the recipient's consideration and decision making.

20. "Practice of accounting" means providing accounting services for a client or an employer.

21. "Practice of public accounting" means providing accounting services for a client but does not include providing accounting services, other than attest services or compilation services, for a nonprofit entity or a family member without an expectation of and without receiving compensation.

22. "Principal place of business" means the office designated by the individual or firm as the principal location for the practice of accounting.

23. "Public accountant" means an individual who has been issued a certificate of authority by the board to practice as a public accountant.

24. "Registrant" means any certified public accountant, public accountant or firm that is registered with the board.

25. "Related courses" means:

(a) Business administration.

(b) Statistics.

(d) Economics.

(e) Finance.

(f) Management.

(g) Business law.

(h) College algebra or more advanced mathematics.

(i) Advanced written communication.

(j) Advanced oral communication.

(k) Ethics.

(l) Marketing.

(m) Other courses closely related to the subject of accounting and satisfactory to the board. END_STATUTE

Sec. 2. Section 32-721, Arizona Revised Statutes, is amended to read:

START_STATUTE32-721. Certified public accountants; qualifications

A. The board shall issue a certificate of certified public accountant to any individual who complies with all of the following:

1. Meets the requirements of section 41‑1080.

2. Is at least eighteen years of age.

3. Is of good moral character.

4. Has not engaged in any conduct that would constitute grounds for revocation or suspension of a certificate or other disciplinary action pursuant to section 32‑741.

5. Meets the requirements of subsection B, C or D of this section.

B. If the applicant passes the uniform certified public accountant examination and has never been certified, registered or licensed as a certified public accountant in this state or another jurisdiction, the applicant must comply with both of the following:

1. Have had at least two thousand hours of paid or unpaid experience, either before or after passing all sections of the examination for uniform certified public accountant examination, that has exposed the applicant to and provided the applicant with experience in the practice of accounting. The applicant's experience must be sufficient to demonstrate the applicant's ability for critical inquiry and analysis of financial accounting information, including balance sheets, income statements, cash flow statements and tax returns and the applicant's ability to communicate, either orally or in writing, on the results of an inquiry or analysis of that information to an employer, client or third party.

2. Present satisfactory evidence that the person has successfully obtained a baccalaureate degree or higher degree from an accredited institution or a college or university that maintains standards comparable to those of an accredited institution and that the applicant has completed at least one hundred fifty semester hours of education of which:

(a) At least thirty‑six semester hours are nonduplicative accounting courses of which at least thirty semester hours are upper division upper‑level courses.

(b) At least thirty semester hours are related courses.

C. If the applicant passes the uniform certified public accountant examination or the international qualification examination and has a certificate, registration or license to practice as a certified public accountant in another jurisdiction and the applicant has never had a certificate issued by the board expire or be relinquished or revoked, at least one of the following shall apply:

1. The certificate, registration or license is issued by a jurisdiction whose requirements are determined by the board to be substantially equivalent to the requirements prescribed in subsection B of this section.

2. The applicant has a baccalaureate degree or its equivalent or a higher degree from an accredited institution or a college or university that maintains standards comparable to those of an accredited institution and either of the following applies:

(a) The applicant has been employed as a certified public accountant in the practice of accounting for at least three years and has completed at least one hundred fifty semester hours of education that includes both of the following:

(i) At least twenty‑four semester hours of nonduplicative accounting courses, of which twelve semester hours are upper division upper‑level courses.

(ii) At least eighteen semester hours in related courses.

(b) The applicant has been employed as a certified public accountant in the practice of accounting for at least five of the ten preceding years and has completed both of the following:

(i) At least twenty‑four semester hours of nonduplicative accounting courses, of which twelve semester hours are upper division upper‑level courses.

(ii) At least eighteen semester hours in related courses.

3. The applicant has been employed as a certified public accountant in the practice of accounting for at least ten of the fifteen preceding years.

D. If an applicant passes the international uniform certified public accountant qualification examination of the American institute of certified public accountants, all of the following apply:

1. The applicant's country has a mutual recognition agreement with the national association of state boards of accountancy that has been adopted by the board.

2. The board recognizes that the applicant's qualifications are substantially equivalent to the qualifications of certified public accountants in the United States in the areas of education, examination and experience. END_STATUTE

Sec. 3. Section 32-723, Arizona Revised Statutes, is amended to read:

START_STATUTE32-723. Uniform certified public accountant examination; qualifications

A. A person shall not be permitted to take the uniform certified public accountant examination unless the person presents satisfactory evidence that the person has successfully obtained a baccalaureate degree or a higher degree from an accredited institution or a college or university that maintains standards comparable to those of an accredited institution. The evidence must show both of the following:

1. At least twenty‑four semester hours of nonduplicative accounting courses of which twelve semester hours are upper division upper‑level courses.

2. At least eighteen semester hours in related courses.

B. The board may contract with a public or private entity for the administration of the examination. The examination may be conducted under a uniform examination system.

C. Within a reasonable time after the examination the board or its contracted agent shall notify each candidate of the candidate's grade. Any candidate may request a grade review or an appeal by submitting a uniform certified public accountant examination score review or appeal form to the board or the board's contracted agent. END_STATUTE

Sec. 4. Section 32-741, Arizona Revised Statutes, is amended to read:

START_STATUTE32-741. Revocation or suspension of certificate; disciplinary action; letter of concern

A. After notice and an opportunity for a hearing, the board may revoke or suspend any certificate granted under this chapter and may take disciplinary action concerning the holder of any certificate for any of the following causes:

1. Conviction of a felony under the laws of any state jurisdiction or of the United States if civil rights have not been restored pursuant to title 13, chapter 9 or other applicable recognized judicial or gubernatorial order.

2. Conviction of any crime that has a reasonable relationship to the practice of accounting by a certified public accountant or by a public accountant, including crimes involving accounting or tax violations, dishonesty, fraud, misrepresentation, embezzlement, theft, forgery, perjury or breach of fiduciary duty, regardless of whether civil rights have been restored.

3. Fraud or deceit in obtaining a certificate as a certified public accountant or in obtaining a certificate as a public accountant under this chapter.

4. Dishonesty, fraud or gross or continuing negligence in the practice of accounting.

5. Discipline to the holder of any certificate or other authority to practice or refusal to renew the certificate or other authority to practice as a certified public accountant by any other state jurisdiction or foreign country for any cause other than failure to pay license or registration fees.

6. Violation of any of the provisions of this chapter, of title 44, chapter 12, article 13 or of any fraud provisions of the federal securities laws.

7. Final judgment in a civil action if the court makes findings of accounting violations, dishonesty, fraud, misrepresentation or breach of fiduciary duty.

8. Final judgment or order in a civil action or administrative proceeding if the court or agency makes findings of violations of any fraud provisions of the laws of this state any jurisdiction or federal securities laws.

9. Violation of any decision, order or rule issued or adopted by the board.

10. Suspension or revocation for cause of the right to practice before the federal securities exchange commission or any other governmental body or agency or the public company accounting oversight board or its successor.

11. Offering or accepting commissions or contingency fees for services rendered for clients for whom the attest function is also offered or rendered in the performance of the practice of accounting unless:

(a) The fee is fixed by a court or another public authority.

(b) In a tax matter, the fee is determined based on the results of a judicial proceeding or the finding of a governmental agency.

12. Failing to disclose to a client that the registrant has received or expects to receive a commission from a third party for any engagement, services or product sales involving services other than the attest function.

13. Making any false or misleading statement or verification in support of an application for a certificate, registration or permit filed by another person.

14. Making a false or misleading statement:

(a) To the board or its designated agent.

(b) On a form required by the board.

15. Failing to respond in writing or furnish information in a timely manner to the board or its designated agent, if the information is legally requested by the board and is in the registrant's possession or control.

B. Pursuant to title 41, chapter 6, article 10, the board may summarily suspend the certificate of any certified public accountant or public accountant pending proceedings for revocation or other disciplinary action on the receipt of either of the following:

1. A notice of conviction of any crime that has a reasonable relationship to the practice of accounting, including crimes involving accounting or tax violations, dishonesty, fraud, misrepresentation, embezzlement, theft, forgery, perjury or breach of fiduciary duty or of any felony.

2. A final judgment or order in a civil action or administrative proceeding in which the court or agency made findings of violations of any fraud provisions of the laws of this state any jurisdiction or federal securities laws.

C. The board may take disciplinary action against a holder of a certificate issued pursuant to this chapter who is practicing accounting even if the person is not representing to the public that the person is a certified public accountant or a public accountant and even if the person is practicing accounting in a firm that is not registered by the board.

D. The board may issue a letter of concern if, in the opinion of the board, there is insufficient evidence to support disciplinary action against the registrant, but the board believes, as a result of information ascertained during an investigation, that continuation of the activities that led to the investigation may result in future board action against the registrant. A registrant may file a response with the board within thirty days after receipt of a letter of concern. Letters of concern issued by the board and records kept by the board in connection with investigations leading to letters of concern are confidential and are not public records. END_STATUTE

Sec. 5. Section 32-741.03, Arizona Revised Statutes, is amended to read:

START_STATUTE32-741.03. Revoked certificate; qualifications for new certificate

A. If the board revokes the certificate of an individual registrant, the individual shall return the certificate to the board. If the individual is unable to return the certificate, the individual must sign and submit to the board an affidavit on a form prescribed by the board stating that the individual is unable to return the certificate to the board.

B. An individual whose certificate has been revoked shall not assume or use the title or designation of "certified public accountant" or "public accountant" or the abbreviation "C.P.A.", "CPA", "P.A." or "PA".

C. Except as otherwise provided in this subsection, the board shall not issue a certificate to an individual whose certificate has been revoked until five years after the effective date of revocation. If the revocation is based only on section 32‑741, subsection A, paragraph 1 or 2 and the criminal conviction is ultimately reversed on appeal, the board shall enter an order vacating the revocation.

D. An individual whose certificate has been revoked may apply for and the board may issue a new certificate if the individual does all of the following:

1. Files an application for reinstatement on a form prescribed by the board and pays the reinstatement application fee pursuant to section 32‑729.

2. Demonstrates through substantial evidence presented to the board that the individual is completely rehabilitated with respect to the conduct that was the basis of the revocation of the certificate. Demonstration of rehabilitation shall include evidence of the following:

(a) The individual has not engaged in any conduct during the revocation period that, if the individual had been registered during the period, would have constituted a basis for revocation or suspension pursuant to section 32‑741.

(b) With respect to any criminal conviction that constitutes any part of the basis for the previous revocation, civil rights have been fully restored pursuant to statute or an applicable recognized judicial or gubernatorial order.

(c) The individual has made restitution has been made as ordered by the board or by a court of competent jurisdiction as a result of the individual's violation of this chapter or rules adopted pursuant to this chapter.

(d) The individual has addressed or remedied any complaints, investigations or board‑ordered requirements that are pending or outstanding at the time of revocation.

(d) (e) Other evidence of rehabilitation that the board deems appropriate.

3. Submits proof that the individual has satisfied continuing professional education requirements as prescribed by the board.

4. If not waived by the board, presents satisfactory evidence from an accredited institution or a college or university that maintains standards comparable to those of an accredited institution that the individual has completed at least one hundred fifty semester hours of education as follows:

(a) At least thirty‑six semester hours are accounting courses of which at least thirty semester hours are upper-level courses.

(b) At least thirty semester hours are related courses.

5. If prescribed by the board, presents evidence that the individual has retaken and passed the uniform certified public accountant examination.

6. On board approval of reinstatement, pays the registration fee pursuant to section 32‑729. END_STATUTE

Sec. 6. Section 32-741.04, Arizona Revised Statutes, is amended to read:

START_STATUTE32-741.04. Relinquishment of certificate with disciplinary proceedings pending; qualifications for new certificate

A. A certified public accountant or public accountant may relinquish the individual's certificate pending or in lieu of an investigation or disciplinary proceedings or while under a disciplinary order. The board shall consider a relinquishment tendered by a certified public accountant or public accountant pursuant to this section and shall determine whether to accept the relinquishment. The board shall issue an order documenting its decision.

B. An individual whose certificate has been relinquished shall not assume or use the title or designation of "certified public accountant" or "public accountant" or the abbreviation "C.P.A.", "CPA", "P.A." or "PA".

C. An individual who relinquishes a certificate pursuant to this section may apply for reinstatement and the board may issue a new certificate if the individual does all of the following:

1. Files an application for reinstatement on the form prescribed by the board and pays the reinstatement application fee pursuant to section 32‑729.

2. Demonstrates through substantial evidence presented to the board that the individual is completely rehabilitated with respect to the conduct that was pending at the time of relinquishment. Demonstration of rehabilitation shall include evidence of the following:

(a) The individual has not engaged in any conduct during the relinquishment period that, if the individual had been registered during the period, would have constituted a basis for revocation or suspension pursuant to section 32‑741.

(b) With respect to any criminal conviction that constitutes any part of the basis for the relinquishment, civil rights have been fully restored pursuant to statute or an applicable recognized judicial or gubernatorial order.

(c) The individual has addressed or redeemed remedied any complaints, investigations or any board order board-ordered requirements that are pending or outstanding at the time of relinquishment.

(d) The individual has made restitution as ordered by the board or by a court of competent jurisdiction as a result of the individual's violation of this chapter or rules adopted pursuant to this chapter.

(d) (e) Other evidence of rehabilitation that the board deems appropriate.

3. Submits proof that the individual has satisfied continuing education requirements as prescribed by the board.

(a) At least thirty-six semester hours are accounting courses of which at least thirty semester hours are upper-level courses.

(b) At least thirty semester hours are related courses.

5. If prescribed by the board, presents evidence that the individual has retaken and passed the uniform certified public accountant examination.

6. On board approval of reinstatement, pays the registration fee pursuant to section 32‑729.

D. If the board accepts the relinquishment of a certificate of a certified public accountant or public accountant, the person shall return the certificate to the board and shall attach to the certificate a document that is signed and dated and that is in substantially the following form:

I, (insert name of registrant), acknowledge that disciplinary proceedings have been initiated against me pursuant to title 32, chapter 6, article 3, Arizona Revised Statutes, and I relinquish my right to practice accounting as a (insert either "certified public accountant" or "public accountant") in the state of Arizona. I understand that if I choose to apply for a new certificate, I must meet all requirements for certification pursuant to section 32‑741.04, Arizona Revised Statutes. I further understand that, in deciding whether to issue a new certificate to me, the board will consider all disciplinary actions currently pending against me and any other matters it determines to be appropriate.END_STATUTE

Sec. 7. Section 32-742, Arizona Revised Statutes, is amended to read:

START_STATUTE32-742. Revocation or suspension of firm's registration; failure to renew or reinstate; reinstatement; relinquishment

A. After notice and an opportunity for a hearing, the board shall revoke a firm's registration to practice public accounting if at any time it does not have all the qualifications prescribed by this chapter.

B. After notice and an opportunity for a hearing, the board may revoke or suspend a firm's registration to practice public accounting and may additionally take disciplinary action concerning the registrant for any of the causes enumerated in section 32‑741, subsection A or for any of the following additional causes:

1. The revocation or suspension of any certificate issued by the board of any partner, shareholder, member, manager, officer, director, agent or employee of the firm.

2. The cancellation, revocation, suspension or refusal to renew the authority of the firm or any Arizona partner, shareholder, member, manager, officer, director, agent or employee to practice public accounting in any other state for any cause other than failure to pay a registration fee in the other state.

C. The board shall suspend, without notice or hearing, the registration to practice public accounting of any firm that fails to register as required by section 32‑730 and pay the registration fee as required by section 32‑729. Terms of A suspension issued under this subsection:

1. Shall include a provision that the suspension shall be vacated when the registrant has paid all past due fees and penalties. If the firm fails to reinstate its registration within twelve months after the date of suspension, the registration expires.

2. Is not a disciplinary order.

D. A firm whose registration has expired for failure to renew may apply for reinstatement. The board may reinstate the registration if the firm meets all of the following requirements:

1. Files an application on a form prescribed by the board.

2. Has not engaged in any conduct that would constitute grounds for revocation or suspension of a registration pursuant to section 32‑741.

3. On board approval of reinstatement, pays the registration fee pursuant to section 32‑729.

E. A firm may relinquish its registration pending or in lieu of an investigation or a disciplinary proceeding or while under a disciplinary order. The board shall consider a relinquishment tendered by the firm pursuant to this section and may determine whether to accept the relinquishment. The board shall issue an order documenting its decision.

F. A firm whose registration has been relinquished shall not assume or use the title or designation "certified public accountant" or "public accountant" or the abbreviation "c.p.a.", "cpa", "p.a." or "pa".

G. A firm whose registration has been relinquished pursuant to this section may apply for reinstatement and the board may issue a new registration if the firm does all of the following:

1. Files an application for reinstatement on the form prescribed by the board and pays the registration fee pursuant to section 32-729, paragraph 4.

2. Demonstrates through substantial evidence presented to the board that the firm is completely rehabilitated with respect to the conduct that was pending at the time of relinquishment. Demonstration of rehabilitation includes evidence of the following:

(a) The firm or any partner of the firm has not engaged in any conduct during the relinquishment period that, if the firm or partner of the firm had been registered during that period, would have constituted a basis for revocation or suspension pursuant to section 32-741.

(b) The firm has addressed or remedied any complaints, investigations or board-ordered requirements that are pending or outstanding at the time of relinquishment.

3. Meets all of the requirements for registration pursuant to this chapter.

H. If the board accepts the relinquishment of a registration of a firm, before the relinquishment may take effect, the firm shall submit a document that is signed and dated and that is in substantially the following form:

I, (insert name of registrant acting on behalf of the firm), acknowledge that disciplinary proceedings have been initiated against (insert name of firm) pursuant to title 32, chapter 6, article 3, Arizona Revised Statutes, and the firm relinquishes its right to practice accounting as a certified public accounting firm in the state of Arizona. I understand that if the firm applies for a new registration, it must meet all requirements for registration pursuant to section 32-742, Arizona Revised Statutes. I further understand that, in deciding whether to issue a new registration to the firm, the board will consider all disciplinary actions currently pending against the firm and any other matters it determines to be appropriate.

Dated this ____ day of _____, 20___.

By: (insert name of firm, name of individual signing on behalf of firm, and that individual's position in firm) END_STATUTE