BillCam

HB-5236, As Passed Senate, March 8, 2018

SUBSTITUTE FOR

HOUSE BILL NO. 5236

A bill to amend 1980 PA 299, entitled

"Occupational code,"

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

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

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

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

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

by 2010 PA 215.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

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

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

but does not include providing a compilation:

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

with the statements on auditing standards.

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

accordance with the statements on standards for accounting and

review services.

(iii) An examination of prospective financial information to

be performed in accordance with the statements on standards for

attestation engagements.

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

public company accounting oversight board auditing standards.

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

engagement to be performed in accordance with the statements on

standards for attestation engagements, other than an examination

described in subparagraph (iii).

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

either of the following:

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

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

evidenced by the issuance of a certificate as a certified public

accountant under section 725 or 726 and a license or registration

issued under section 727.

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

this state and who satisfies the requirements set forth in section

727a.

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

practice of public accounting.

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

accordance with statements on standards for accounting and review

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

information that is the representation of management or owners

without undertaking to express any assurance on the statements.

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

company, unincorporated association, sole proprietorship operating

under an assumed name, or other legal entity.

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

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

(d) is directed.

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

this article.

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

principal place of business is not located in this state.

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

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

attesting to or offering to attest to the reliability of a

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

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

types of information concerning the entity that is the subject of

the opinion present fairly the condition of the entity:

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

given.

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

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

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

(iii) The scope of the accounting procedures rendered in

connection with the presentation of the entity's financial

statement.

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

location designated by the licensee for the purposes of substantial

equivalency and reciprocity.

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

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

language that states or implies assurance as to the reliability of

attested information or compiled financial statements and that also

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

the individual or firm issuing it has special knowledge or

competence in accounting or auditing. Such a statement or

implication of special knowledge or competence may arise from use

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

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

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

disclaims an opinion when that form of language is conventionally

understood to imply any positive assurance as to the reliability of

the attested information or compiled financial statements referred

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

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

language that is conventionally understood to imply that assurance

or special knowledge and competence, or both.

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

developed and scored by the American Institute of Certified Public

Accountants or a successor organization.

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

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

the following activities when performed or offered to be performed

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

certified public accountant for a client or a potential client:

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

compilation services.

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

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

business valuation, forensic accounting, and fraud examination

services.

(d) The furnishing of advice on tax matters.

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

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

members as follows:

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

a certificate as a certified public accountant, who are licensed

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

certified public accountants for not less than 5 years.

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

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

this state.

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

instructor of accounting above the elementary level at an

accredited college or university.

(4) The director may promulgate the following rules:

(a) Rules of professional conduct for establishing and

maintaining high standards of competence and integrity in the

practice of public accounting.

(b) Rules governing corporations practicing public accounting,

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

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

applicable.

applicant to sit for the uniform CPA exam.

(d) (c) Rules governing educational and experience

requirements for the issuance of a certificate as a certified

public accountant.

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

before the board.

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

institutions by the board.

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

section 729.

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

to implement and enforce this article.

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

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

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

public accountant or firm composed of certified public accountants

who are licensed to practice under this article if the individual

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

name.

(b) A licensed certified public accountant of another

licensing jurisdiction who does not meet the requirements of

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

for the practice of public accounting in that country, from

temporarily and periodically engaging in the practice of public

accounting in this state if all of the following requirements are

met:

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

accounting in another licensing jurisdiction or foreign country.

(ii) The temporary practice is conducted in conformity with

section 736 and applicable rules promulgated by the director, if

any.

(iii) The individual secures a temporary permit from the

department to conduct the practice in this state.

records customarily prepared by an attorney in connection with the

attorney's professional work.

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

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

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

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

organization from signing a statement or report in reference to the

financial affairs of the organization with wording designating the

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

principal of an organization holds in that organization.

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

performance of that individual's official duties.

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

individual or firm from keeping books, making trial balances or

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

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

prepared by a certified public accountant.

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

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

its professional services in this state in the practice of public

accountancy and from using the certified public accountant

designation so long as it complies with the requirements of section

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

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

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

substantially equivalent to this state's requirements, shall have

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

public accountancy without the need to obtain a certificate,

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

individual meets either or both of the following:

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

from another licensing jurisdiction that requires, as a condition

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

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

including a baccalaureate or higher degree conferred by a college

or university.

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

accountant examination.CPA exam.

(iii) Possesses at least 1 year of experience including

providing any type of service or advice involving the use of

accounting, attest, compilation, management advisory, financial

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

through government, industry, academic, or public practice as

verified by a licensee.

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

from another licensing jurisdiction that does not meet the

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

certified public accountant qualifications that are substantially

equivalent to those requirements. Any individual who passed the

uniform certified public accountant examination CPA exam and holds

a valid license issued by another licensing jurisdiction prior to

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

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

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

who offers or renders professional services, whether in person or

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

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

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

Such an An individual described in this subsection is subject to

the requirements of section 734a.

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

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

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

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

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

(b) An individual who represents the firm performs any

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

any client that has its home office in this state.

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

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

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

practicing public accounting in Michigan under section 727a.

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

article shall meet both of the following requirements:

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

of the firm are held directly or beneficially by individuals who

are licensed in good standing as certified public accountants of

this state or another state or the equivalent in another licensing

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

who is not a certified public accountants accountant must be an

active individual participants participant in the firm or 1 or more

of its affiliated entities. An individual with practice privileges

under section 727a who performs services for which a firm license

is required under this section is not required to obtain a

certificate under section 726 or a registration or license under

section 727.

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

in this state are performed under the supervision of an individual

who is licensed and in good standing as a certified public

accountant in this state or another state or the equivalent in

holds an equivalent authorization to practice public accounting

from another licensing jurisdiction acceptable to the board.

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

address within 30 days of the change.

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

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

accordance with the statements on standards for accounting and

review services, perform an examination, other than an engagement

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

procedures engagement in accordance with the statements on

standards for attestation engagements, or perform a compilation for

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

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

authorized in this section without a license issued under

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

following conditions:

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

and (b) and section 729(2).

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

practice privileges under section 727a.

the licensing jurisdiction where the individual described in

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

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

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

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

professional services within the practice of public accountancy,

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

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

the following conditions:

(a) It performs those services through an individual with

practice privileges under section 727a.

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

perform those services in the licensing jurisdiction where those

individuals with practice privilege have their the individual

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

business.

section 729(2).

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

licensee shall must successfully complete at least 40 hours of

continuing education for each year since the issuance of the

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

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

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

make exceptions from the continuing education requirements of this

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

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

continuing education requirement described in this subsection:

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

education requirements for a period of 12 months, beginning on the

date of his or her original license.

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

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

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

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

in 1 year of a license cycle.

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

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

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

professional ethics in 1 year of a license cycle.

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

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

must be the statutes and administrative rules of this state

applicable to public accountancy. A statewide professional

association of certified public accountants approved by the

department shall create the content for this 1 hour of professional

ethics education.

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

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

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

the following:

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

over into the next year is 40 hours.

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

the minimum accounting and auditing education requirements

described in subdivision (b) for the next year.

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

the minimum professional ethics requirement described in

subdivision (c) for the next year.

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

education in public accountancy described in subdivision (d) to

meet the minimum ethics requirements for the next license cycle.

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

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

she has met the continuing education requirements under this

subsection.

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

or her license is considered to have met the continuing education

requirements under this subsection if he or she meets the

continuing education requirements for renewal of an individual

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

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

principal place of business is located does not have continuing

education requirements for renewal of a license, the nonresident

licensee must comply with all continuing education requirements for

renewal of a license under this subsection.

(h) On request, a licensee must provide the department with 1

of the following, as applicable:

(i) For a licensee with a principal place of business located

in this state, proof acceptable to the department that the licensee

meets the continuing education requirements for license renewal in

this state.

(ii) For a nonresident licensee, proof acceptable to the

department, from the state board or other licensing authority in

the licensing jurisdiction in which his or her principal place of

business is located, that the nonresident licensee meets the

continuing education requirements for license renewal in that

licensing jurisdiction.

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

of the following services shall participate in a peer review

program established by rule of the department and approved by the

board:

(a) Audit.

(b) Review.

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

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

proof of peer review obtained within the 3 years immediately

preceding the application.

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

peer review program under this subsection shall notify the

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

consecutive pass with deficiencies rating. Verbal testimony or

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

confidential and shall be exempt from disclosure to the department,

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

deficiencies rating.

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

licensees become effective as follows:

(a) For licensed firms and sole practitioners whose attest

services include audits, beginning March 1, 2008.

(b) For licensed firms and sole practitioners whose attest

services include compilation with disclosures relied upon by third

parties, or review, or both compilation with disclosures and

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

2009.

services include compilation without disclosures relied upon by

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

compilation with disclosures relied upon by third parties, or

review, or both compilation with disclosures and review under

subdivision (b), beginning March 1, 2010.

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

requirements of, and is exercising the practice privilege granted

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

individual, simultaneously consent each agree to all of the

following as a condition of the exercise of that privilege:

(a) To the personal and subject matter jurisdiction and

disciplinary authority of the board and the department.

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

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

longer valid, that the individual will cease offering or rendering

professional services in this state individually and on behalf of a

firm.

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

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

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

this board against the individual or the firm employing that

employs that individual.

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

section 727a may perform an engagement described in section

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

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

section 728.

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

this article who offers or renders public accounting services or

using uses the certified public accountant title in another

licensing jurisdiction or before a state or federal agency is

subject to the disciplinary action in this state under this article

for an act committed in another licensing jurisdiction or before a

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

discipline for an act committed in another licensing jurisdiction

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

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

licensing jurisdictional authority and may accept, as prima facie

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

issued by another state licensing board or other licensing

jurisdictional authority.

Enacting section 1. This amendatory act takes effect 90 days

after the date it is enacted into law.