Session Law

Identifying Information:L. 2001 ch. 120
Other Identifying Information:2001 House Bill 2343
Tax Type:Other
Brief Description:An Act concerning accountants; relating to the board of accountancy; relating to peer review and permits; amending K.S.A. 2000 Supp. 1-202, 1-302b, 1-310, 1-311, 1-312, 1-321 and 1-501 and repealing the existing sections.
Keywords:


Body:

CHAPTER 120

HOUSE BILL No. 2343


An Act concerning accountants; relating to the board of accountancy; relating to peer review

and permits; amending K.S.A. 2000 Supp. 1-202, 1-302b, 1-310, 1-311, 1-312, 1-321

and 1-501 and repealing the existing sections.




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

Section 1. K.S.A. 2000 Supp. 1-302b is hereby amended to read as

follows: 1-302b. (a) No applicant who holds a Kansas certificate issued by

the board shall receive a permit to practice in this state as a certified

public accountant until the applicant submits evidence satisfactory to the

board of having completed one year of accounting experience. This ex-

perience shall include providing any type of service or advice involving

the use of attest or nonattest skills all of which was verified by a certified

public accountant holding an active license to practice, meeting require-

ments prescribed by the board by rule. This experience would be ac-

ceptable if it was gained through employment in government, industry,

academia or public practice.

(b) Any individual permit holder who is responsible for supervising

attest or compilation services and signs or authorizes someone to sign the

accountant's report on any audit, review, compilation or the examination

of prospective financial information on behalf of the firm, shall meet the

experience or competency requirements, as adopted by the board

through rules and regulations.

(c) Any individual permit holder who signs or authorizes someone to

sign the accountant's report on any audit, review, compilation or the ex-

amination of prospective financial information on behalf of the firm, shall

meet the experience or competency requirement of subsection (b).

(d) As an alternative to the requirements of subsection (a), an indi-

vidual with an active license issued by another state who establishes such

individual's principal place of business in this state shall request the is-

suance of both a certificate and a permit to practice from the board prior

to establishing such principal place of business. The board may issue both

a certificate and permit to such individual who obtains from the NASBA

national qualification appraisal service verification that such individual's

C.P.A. qualifications are substantially equivalent to the C.P.A. licensure

requirements of the uniform accountancy act. An application under this

section may be made through the NASBA qualifications appraisal service

or similar organization approved by the board. Any individual meeting

the requirements set forth in this subsection who is denied a certificate

and a permit to practice shall have the opportunity to be heard pursuant

to the Kansas administrative procedures act.

Sec. 2. K.S.A. 2000 Supp. 1-310 is hereby amended to read as fol-

lows: 1-310. (a) Permits to engage in the practice of certified public ac-

countancy in this state shall be issued by the board to persons who have

met the requirements under K.S.A. 1-302b, and amendments thereto.

(b) Each holder of a Kansas certificate, which is numbered with an

odd number, who is qualified under K.S.A. 1-302b, and amendments

thereto, shall have a permit to practice issued or renewed on a biennial

basis which shall expire on the next July 1 which occurs after the date the

permit was issued or renewed and which occurs in an odd-numbered

year.

(c) Each holder of a Kansas certificate, which is numbered with an

even number, who is qualified under K.S.A. 1-302b, and amendments

thereto, shall have a permit to practice issued or renewed on a biennial

basis which shall expire on the next July 1 which occurs after the date the

permit was issued or renewed and which occurs in an even-numbered

year.

(d) A person may renew a permit within 12 months of its expiration

date if such person submits a complete and sufficient renewal application

together with the fee prescribed by K.S.A. 1-301, and amendments

thereto.

(e) As a condition for renewal of a permit to practice, the board shall

require all permit holders to furnish with such applicant's renewal appli-

cation, evidence of participation in a peer review program unless waived

pursuant to K.S.A. 1-501, and amendments thereto, and participation in

continuing education in accounting, auditing, or related areas of at least

80 hours during the two-year period for renewal unless the board waives

all or a portion of the continuing education requirements. The board may

adopt rules and regulations regarding peer review and continuing edu-

cation including the number of continuing education hours required for

each year of the two-year period and the type of continuing education.

As a condition for renewal of a permit to practice, the board shall require

permit holders who do not have their principal place of business in Kansas

and who are not required to register pursuant to K.S.A. 1-308, and

amendments thereto, to furnish with such applicant's renewal application

evidence of participation in a peer review program unless waived for good

cause as determined by the board.

(f) The board may exempt from the continuing education require-

ments an individual who holds a permit from another state if:

(1) The permit holder has a principal place of business located out-

side the state of Kansas;

(2) the permit holder verifies to the board's satisfaction that such

person has met the continuing education requirements of the state in

which the principal place of business is located;

(3) the board considers the continuing education requirements of the

state in which the principal place of business is located to be substantially

equivalent to those of Kansas; and

(4) the state in which the principal place of business is located extends

the same exemption to Kansas permit holders who practice in that state.

(g) A person who fails to renew a permit within 12 months after its

expiration may apply for reinstatement by making application on a form

provided by the board, submitting a reinstatement fee as prescribed by

K.S.A. 1-301 and amendments thereto, and submitting proof that such

person has obtained 40 hours of qualifying continuing education within

the preceding 12 months prior to applying for reinstatement.

Sec. 3. K.S.A. 2000 Supp. 1-311 is hereby amended to read as fol-

lows: 1-311. (a) The board may deny an application for a Kansas certifi-

cate, revoke or suspend any certificate issued under the laws of this state

including a Kansas certificate, or any registration granted under K.S.A.

1-308, and amendments thereto, or may revoke, suspend or refuse to

renew any permit issued under K.S.A. 1-310 and amendments thereto,

and any notification issued pursuant to K.S.A. 2000 Supp. 1-322 and

amendments thereto, may censure the holder of any such permit, certif-

icate, or notification or registration, limit the scope of practice of any

permit holder, and may impose an administrative fine not exceeding

$2,000, for any one or any combination of the following causes:

(1) Fraud or deceit in obtaining a certificate, permit, firm registration

or notification;

(2) cancellation, revocation, suspension or refusal to renew a person's

authority to practice for disciplinary reasons in any other jurisdiction for

any cause;

(3) failure, on the part of a holder of a permit to practice or notifi-

cation and a registered firm to maintain compliance with the require-

ments for issuance or renewal of such permit, or notification or registra-

tion;

(4) revocation or suspension of the right to practice before any state

or federal agency;

(5) dishonesty, fraud or gross negligence in the practice of certified

public accountancy or in the filing or failure to file the certificate holder's

own income tax returns;

(6) violation of any provision of this act or rule and regulation of the

board except for a violation of a rule of professional conduct;

(7) willful violation of a rule of professional conduct;

(8) violation of any order of the board;

(9) conviction of any felony, or of any crime an element of which is

dishonesty or fraud, under the laws of the United States, of Kansas or of

any other state, if the acts involved would have constituted a crime under

the laws of Kansas;

(10) performance of any fraudulent act while holding a Kansas cer-

tificate;

(11) making any false or misleading statement or verification, in sup-

port of an application for a certificate, permit, notification or firm regis-

tration filed by another; or

(12) failure to establish timely compliance with peer review pursuant

to K.S.A. 1-501, and amendments thereto; and

(12) (13) any conduct reflecting adversely on a permit holder's fitness

to practice certified public accountancy.

(b) In lieu of or in addition to any remedy specifically provided in

subsection (a), the board may require of a permit holder satisfactory com-

pletion of such continuing education programs as the board may specify.

(c) All administrative proceedings pursuant to this section shall be

conducted in accordance with the provisions of the Kansas administrative

procedure act and the act for judicial review and civil enforcement of

agency actions.

Sec. 4. K.S.A. 2000 Supp. 1-312 is hereby amended to read as fol-

lows: 1-312. After notice and hearing as provided by the Kansas admin-

istrative procedure act: (a) The board shall revoke or suspend the regis-

tration of any registered firm if at any time it does not have all the

qualifications prescribed by K.S.A. 1-308, and amendments thereto; (b)

the board may revoke or suspend the registration of any registered firm

or may revoke, suspend or refuse to renew the permit to practice of any

member of a registered firm, or may censure the holder of any such

permit for any of the causes enumerated in K.S.A. 1-311, and amend-

ments thereto; (c) the board may revoke or suspend the registration of

any registered firm upon the cancellation, revocation, suspension or re-

fusal to renew the authority of the firm or any partner, officer, shareholder

or member thereof to practice public accounting in any other state; and

(d) the board may revoke or suspend the registration of a registered part-

nership if any corporate member thereof ceases to be a professional cor-

poration in good standing under the professional corporation law of Kan-

sas or if the board has revoked or suspended the permit to practice of

any shareholder of such professional corporation. (a) Except as provided

in subsection (b), the board may deny an application to register a firm,

revoke or suspend a firm's registration, censure a firm, limit the scope of

practice of a firm or impose such remedial action as it deems necessary

to protect the public interest, or both, and impose an administrative fine

not exceeding $2,000 for any one or any combination of the following

causes:

(1) Failure to meet the requirements of K.S.A. 1-308 and amendments

thereto;

(2) fraud or deceit in obtaining a registration;

(3) revocation or suspension of a firm's right to practice before any

state or federal agency;

(4) dishonesty, fraud or gross negligence in the practice of certified

public accountancy;

(5) violation of any provision of chapter 1 of the Kansas Statutes An-

notated and rules and regulations promulgated by the board except for a

violation of a rule of professional conduct;

(6) willful violation of a rule of professional conduct;

(7) violation of any order of the board;

(8) cancellation, revocation, suspension or refusal to renew the au-

thority of a firm to practice certified public accountancy in any other

state;

(9) conviction of a firm of any felony, or of any crime an element of

which is dishonesty or fraud, under the laws of the United States, of

Kansas or of any other state, if the acts involved would have constituted

a crime under the laws of Kansas; or

(10) failure to establish timely compliance with peer review pursuant

to K.S.A. 1-501 and amendments thereto;

(b) In actions arising under peer review for reports modified for mat-

ters relating to attest services, the board may take such remedial action

as it deems necessary to protect the public interest. However, the board

may not limit the scope of practice of attest services of a firm or limit the

scope of practice of attest services of any permit holder under K.S.A. 1-

311, and amendments thereto, for failure to comply with generally ac-

cepted accounting principles, generally accepted auditing standards and

other similarly recognized authoritative technical standards unless:

(1) The firm has received at least two modified peer review reports

during 12 consecutive years relating to attest services and the board finds

that the firm has exhibited a course of conduct that reflects a pattern of

noncompliance with applicable professional standards and practices; or

(2) the firm has failed to abide by remedial measures required by a

peer review committee or the board.

(c) Nothing in subsection (b) shall be construed to preclude the board

from: Limiting the scope of practice of attest services of a firm or limiting

the scope of practice of attest services of a permit holder under K.S.A. 1-

311, and amendments thereto; or taking such remedial action as the board

deems necessary to protect the public interest, after a review of an adverse

peer review report based on matters relating to attest services if the board

determines that the firm failed to comply with generally accepted ac-

counting principles, generally accepted auditing standards and other sim-

ilarly recognized authoritative technical standards.

(d) All administrative proceedings pursuant to this section shall be

conducted in accordance with the provisions of the Kansas administrative

procedure act and the act for judicial review and civil enforcement of

agency actions.

(e) The board shall not have the power to assess fines under this sec-

tion if a fine has been assessed for the same or similar violation under the

provisions of subsection (a) of K.S.A. 1-311 and amendments thereto.

Sec. 5. K.S.A. 2000 Supp. 1-321 is hereby amended to read as fol-

lows: 1-321. When used in this act, the following terms have the meanings

indicated:

(a) ``Actively participate'' means participation that is continuous as

one's primary occupation.

(b) ``Affiliated entity'' means one that provides services to the CPA

firm or provides services to the public that are complementary to those

provided by the CPA firm.

(c) ``AICPA'' means the American institute of certified public ac-

countants.

(d) ``Attest'' means providing the following financial statement serv-

ices:

(1) Any audit or other engagement to be performed in accordance

with the statements on auditing standards (SAS);

(2) any audit to be performed in accordance with the Kansas munic-

ipal audit guide;

(3) any review of a financial statement or compilation of a financial

statement to be performed in accordance with the statements on stan-

dards for accounting and review services (SSARS); and

(4) any examination of prospective financial information engagement,

except a compilation, to be performed in accordance with the statements

on standards for attestation engagements (SSAE); and.

(5) the statements on standards and guide specified in this act shall

be adopted by reference by the board pursuant to rulemaking and shall

be those developed for general application by the AICPA or the Kansas

division of accounts and reports.

(e) ``Board'' means the Kansas board of accountancy established un-

der K.S.A. 1-201 and amendments thereto.

(f) ``Certificate'' means a certificate as a certified public accountant

issued under K.S.A. 1-302 and amendments thereto, or a certificate as a

certified public accountant issued after examination under the law of any

other state.

(g) ``Client'' means a person or entity that agrees with a permit holder

to receive any professional service.

(h) ``Compilation'' means providing a service to be performed in ac-

cordance with the statements on standards for accounting and review

services (SSARS) or performed in accordance with the statements on stan-

dards for attestation engagements (SSAE) that is presented in the form of

financial statements or information that is the representation of manage-

ment, or both, without undertaking to express any assurance on the state-

ments.

(h) (i) ``Equity capital'' means (1) capital stock, capital accounts, cap-

ital contributions or undistributed earnings of a registered firm as referred

to in K.S.A. 1-308 and amendments thereto; and (2) loans and advances

to a registered firm made or held by its owners. ``Equity capital'' does not

include an interest in bonuses, profit sharing plans, defined benefit plans

or loans to a registered firm from banks, financial institutions or other

third parties that do not actively participate in such registered firm.

(i) (j) ``Good moral character'' means lack of a history of professional

dishonesty or other felonious acts.

(j) (k) ``Active license'' means a certificate or a permit to practice

issued by another state that is currently in force and authorizes the holder

to practice certified public accountancy.

(k) (l) ``Licensee'' means the holder of a certificate or a permit to

practice issued by this state or another state.

(l) (m) ``Manager'' means a manager of a limited liability company.

(m) (n) ``Member'' means a member of a limited liability company.

(n) (o) ``NASBA'' means the national association of state boards of

accountancy.

(o) (p) ``Nonattest'' means providing the following services:

(1) The preparation of tax returns and providing advice on tax mat-

ters;

(2) the preparation of any compilation;

(2) (3) management advisory, consulting, litigation support and as-

surance services, except for attest services;

(3) (4) financial planning; and

(4) (5) any other financial service not included in the statements on

auditing standards, the statements on standards for accounting and review

services, the standards for attestation engagements as developed by the

American institute of certified public accountants or as defined by the

board.

(p) (q) ``Practice of certified public accountancy'' means performing

or offering to perform attest or nonattest services for the public while

using the designation ``certified public accountant'' or ``C.P.A.'' in con-

junction with such services.

(q) (r) ``Practice of public accountancy'' means performing or offering

to perform attest or nonattest services for the public by a person not

required to have a permit to practice or a firm not required to register

with the board.

(r) (s) ``Professional'' means arising out of or related to the specialized

knowledge or skills associated with CPAs.

(s) (t) ``Report,'' when used with reference to financial statements,

means an opinion, report or other form of language that states or implies

assurance as the reliability of any financial statements and that also in-

cludes or is accompanied by any statement or implication that the person

or firm issuing it has special knowledge or competence in accounting or

auditing. Such a statement or implication of special knowledge or com-

petence may arise from use, by the issuer of the report, of names or titles

indicating that the person or firm is an accountant or auditor or from the

language of the report itself. The term report includes any form of lan-

guage which disclaims an opinion when such form of language is conven-

tionally 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; and it includes any other form

of language that is conventionally understood to imply such assurance or

such special knowledge or competence.

(t) (u) ``Rule'' means any rule or regulation adopted by the board.

(u) (v) ``State'' means any state of the United States, the District of

Columbia, Puerto Rico, the U.S. Virgin Islands and Guam; except that

``this state'' means the state of Kansas.

(v) (w) ``Substantial equivalency'' is a determination by the board of

accountancy or its designee that the education, examination and experi-

ence requirements contained in the statutes and administrative rules of

another jurisdiction are comparable to, or exceed the education, exami-

nation and experience requirements contained in the uniform account-

ancy act or that an individual CPA's education, examination and experi-

ence qualifications are comparable to or exceed the education,

examination and experience requirements contained in the uniform ac-

countancy act.

(w) (x) ``Uniform accountancy act'' means model legislation issued by

the AICPA and NASBA in existence on July 1, 2000. The board shall

adopt the act by reference pursuant to rulemaking. The board shall adopt

the version of the act in existence on July 1, 2000.

Sec. 6. K.S.A. 2000 Supp. 1-501 is hereby amended to read as fol-

lows: 1-501. Commencing with permits firm registrations scheduled for

renewal for the fiscal year beginning on July 1, 1994 on December 31,

2001, and thereafter:

(a) The board of accountancy may require as a condition for renewal

of a permit to practice firm registration that an applicant or the applicant's

firm a firm that provides attest services undergo a quality review or peer

review and submit evidence of such so that the board may determine the

degree of the applicant's firm's compliance with generally accepted ac-

counting principles, generally accepted auditing standards and other sim-

ilarly recognized authoritative technical standards. The reviews shall oc-

cur at least once every three years with the cost of such review to be

borne by the applicant or the applicant's firm.

(b) The applicant's or applicant's firms' completion of a quality review

or peer review program endorsed or supported by the American institute

of certified public accountants or other substantially similar programs

shall satisfy the requirements of this section. The board shall provide for

oversight of these programs by adoption of rules and regulations.

(c) The board may establish criteria for determining when the results

of a review under this section are satisfactory to the board. As a result of

the review the board may suspend or revoke a permit to practice or firm

registration when the results of the review under this section are unsat-

isfactory to the board. The board may renew a permit or firm registration

when the results of the review under this section are unsatisfactory to the

board if the applicant or applicant's firm agrees to follow a particular

education or remedial program prescribed by the board.

(d) Failure of an applicant or the applicant's firm to undergo a review

under this section constitutes grounds for revocation or suspension by the

board of a permit to practice or certificate as prescribed by K.S.A. 1-311,

and amendments thereto, or to revoke or suspend a firm registration as

prescribed by K.S.A. 1-312, and amendments thereto, unless the board

determines that failure to have been due to a reasonable cause.

(e) An applicant (c) A firm at the time of application, may request

in writing upon forms provided by the board, a waiver from the review

requirement. The board may grant a waiver if one or more of the follow-

ing conditions are met: the firm does not perform or has not performed

any attest services during the twelve-month period preceding the date of

application or for good cause as determined by the board.

(1) The applicant and the applicant's firm do not engage in and do

not intend to engage in during the following year, financial reporting areas

of practice, including but not limited to, financial audits, reviews and

compilations;

(2) for reasons of health;

(3) due to military service;

(4) in instances of hardship; or

(5) for other good cause as determined by the board.

An applicant A firm granted a waiver pursuant to subsection (1) on the

basis that the firm does not perform or intend to perform attest services

shall immediately notify the board if the applicant or the applicant's firm

engages in such practice and thus becomes subject to the review.

(f) (d) Except as provided by K.S.A. 60-437, and amendments

thereto, and in actions by the board of accountancy to enforce this section

subsections (e) and (f) of this section, any reports, statements, memo-

randa, transcripts, findings, records, or working papers prepared and any

opinions formulated, in connection with any quality review or peer review

shall be privileged and shall not be subject to discovery, subpoena or other

means of legal compulsion for their release to any person or entity or be

admissible in evidence in any judicial or administrative proceeding, except

that such privilege shall not exist when the material in question is involved

in a dispute between a reviewer and the person or entity firm being

reviewed.

(e) Nothing in subsection (d) shall limit the authority of the board to

require a person whose work is the subject of a peer review or a firm to

provide a copy of an adverse or modified peer review report and any

documents that contain comments from peer reviewers, responses to com-

ments from the person or firm and any document identifying follow-up

requirements for the purpose of determining the person's or firm's com-

pliance with generally accepted accounting principles, generally accepted

auditing standards and other similarly recognized authoritative technical

standards, provided however, the board may not request or require a

person or firm subject to a peer review to provide a peer review report

or any other document contained in this section unless the peer review

report has been accepted by a report acceptance committee under the

peer review program after December 31, 2001.

(f) In any proceeding before the board in which discussion or admis-

sion into evidence of peer review report documents identified in subsection

(e) is proposed, the board or presiding officer shall conduct that portion

of the proceeding in closed session. In closing a portion of such proceeding,

the board or presiding officer may exclude any person from the proceed-

ing except the person whose work is the subject of peer review, members

of the permit holder's firm, the attorneys representing the parties, the

board's attorneys, necessary witnesses and a court reporter. The board or

presiding officer shall make the portions of the agency record in which

such documents are disclosed subject to a protective order prohibiting

further disclosure. Documents that are privileged under subsection (d)

and that are considered during a closed proceeding shall not be subject

to discovery, subpoena or other means of legal compulsion for their release

to any person or entity. No person in attendance at a closed portion of

such proceeding shall at a subsequent civil, criminal or administrative

hearing, be required to testify regarding the existence or content of a

document privileged under subsection (d) which was disclosed in a closed

portion of a proceeding, nor shall such testimony be admitted into evi-

dence in any subsequent civil, criminal or administrative hearing. All

other evidence shall be presented as part of the proceeding in an open

meeting. Offering any testimony or records in the open portion of a pro-

ceeding shall not be deemed a waiver of the peer review privilege created

in subsection (d).

(g) No person who participates in the conduct of any peer review

within the scope of this section shall be liable in damages to any person

for any action taken or recommendation made in connection with the peer

review process.

Sec. 7. K.S.A. 2000 Supp. 1-202 is hereby amended to read as fol-

lows: 1-202. (a) Each year the board shall meet and organize by electing

a chairperson and a vice-chairperson from its membership. The board

shall appoint a secretary, who need not be a member of the board. The

board shall meet at the call of the chairperson but not less than twice

each year and shall have a seal. The chairperson and the secretary of the

board shall have the power to administer oaths.

(b) The board shall keep records of all proceedings and actions by

and before it. In any proceedings in court, civil or criminal, arising out of

or founded upon any provisions of this act, copies of such records which

are certified as correct by the secretary of the board under the seal of the

board shall be admissible in evidence and shall be prima facie evidence

of the correctness of the contents thereof.

(c) The board may:

(1) provide for certification, notification and registration and issue per-

mits to practice in accordance with the provisions of this act;

(2) adopt, amend and revoke rules and regulations governing its ad-

ministration and enforcement of this act, including but not limited to: (A)

Educational qualifications required under K.S.A. 1-302a and amend-

ments thereto; (B) experience qualifications required under K.S.A. 1-

302b and amendments thereto; (C) continuing professional education

qualifications required under K.S.A. 1-310 and amendments thereto; (D)

professional conduct directed to controlling the quality of services by

licensees, and dealing among other things with independence, integrity

and objectivity, competence and technical standards, responsibilities to

the public and clients, commissions and referral fees, contingent fees,

advertising, firm names, discreditable acts and communication with the

board; (E) professional standards applicable to licensees; (F) the manner

and circumstances of use of the titles ``certified public accountant'' and

``C.P.A.''; (G) peer reviews required in K.S.A. 1-501 and amendments

thereto; (H) the definition of substantial equivalency for purposes of

K.S.A. 2000 Supp. 1-322 and amendments thereto; and (I) such other

rules and regulations as the board may deem necessary to regulate the

practice of certified public accountancy.

(d) The board shall:

(1) Keep accounts of its receipts and disbursements;

(2) keep a register of Kansas certificates issued by the board;

(3) deny, revoke, suspend and reinstate certificates, notifications, firm

registrations and permits; and

(4) initiate proceedings, hold hearings and do all things necessary to

regulate the practice of certified public accountancy.

(e) Any statements on standards and guides imposed by the board

shall meet the standards or guides developed for general application either

by the American institute of certified public accountants or the division

of accounts and reports which are in effect on July 1, 2001, or any later

version as adopted by the board in rules and regulations.

(e) (f) A majority of the board shall constitute a quorum for the trans-

action of any business at any meeting of the board.

Sec. 8. K.S.A. 2000 Supp. 1-202, 1-302b, 1-310, 1-311, 1-312, 1-321

and 1-501 are hereby repealed.

Sec. 9. This act shall take effect and be in force from and after its

publication in the statute book.

Approved April 18, 2000.


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Date Composed: 09/25/2001 Date Modified: 09/25/2001