SB0565 94TH GENERAL ASSEMBLY

LRB094 10891 LJB 41439 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
SB0565

Introduced 2/17/2005, by Sen. Louis S. Viverito

SYNOPSIS AS INTRODUCED:

225 ILCS 450/0.03	from Ch. 111, par. 5500.03
225 ILCS 450/16	from Ch. 111, par. 5517

Amends the Illinois Public Accounting Act. Provides a definition of "Peer Review Administrator". Requires firms and sole practitioners providing accounting services under the Act to undergo a peer review as a condition of renewing a license unless an exemption applies. Allows the Department of Financial and Professional Regulation to adopt rules. Provides penalties for failure to comply with remedial actions determined appropriate by the Peer Review Administrator. Requires the firm or sole practitioner to pay for the costs of the peer review. Provides that the peer review proceedings, records, reports, and other documents are privileged and provides exceptions to the privilege. Provides for the peer review year of combined or divided firms or sole practitioners. Grants civil immunity except for reckless or willful misconduct. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Illinois Public Accounting Act is amended by changing Sections 0.03 and 16 as follows:

(225 ILCS 450/0.03) (from Ch. 111, par. 5500.03)

(Section scheduled to be repealed on January 1, 2014)

Sec. 0.03. Definitions. As used in this Act, unless the context otherwise requires:

(a) "Registered Certified Public Accountant" means any person who has been issued a registration under this Act as a Registered Certified Public Accountant.

(b) "Licensed Certified Public Accountant" means any person licensed under this Act as a Licensed Certified Public Accountant.

(c) "Committee" means the Public Accountant Registration Committee appointed by the Director.

(d) "Department" means the Department of Professional Regulation.

(e) "Director" means the Director of Professional Regulation.

(f) "License", "licensee" and "licensure" refers to the authorization to practice under the provisions of this Act.

(g) "Peer review program" means a study, appraisal, or review of one or more aspects of the professional work of an individual a person or firm in the practice of public accounting to determine the degree of compliance by the individual or firm with generally accepted accounting principles and auditing standards and other generally accepted technical standards, conducted by persons who hold current licenses to practice public accounting under the laws of this or another state and who are not affiliated with the individual or firm being reviewed certified or licensed under this Act, including quality review, peer review, practice monitoring, quality assurance, and similar programs undertaken voluntarily or as a prerequisite to the providing of professional services under government requirements, or any similar internal review or inspection that is required by professional standards.

(h) "Review committee" means any person or persons conducting, reviewing, administering, or supervising a peer review program.

(i) "University" means the University of Illinois.

(j) "Board" means the Board of Examiners established under Section 2.

(k) "Registration", "registrant", and "registered" refer to the authorization to hold oneself out as or use the title "Registered Certified Public Accountant" or "Certified Public Accountant", unless the context otherwise requires.

(l) "Peer Review Administrator" means the American Institute of Certified Public Accountants, the Illinois CPA Society, and other organizations that the Department may designate that meet the requirements of subsection (f) of Section 16 of this Act and other rules that the Department may adopt.

(Source: P.A. 92-457, eff. 7-1-04; 93-683, eff. 7-2-04.)

(225 ILCS 450/16) (from Ch. 111, par. 5517)

(Section scheduled to be repealed on January 1, 2014)

Sec. 16. Expiration and renewal of licenses; renewal of registration; continuing education.

(a) The expiration date and renewal period for each license issued under this Act shall be set by rule.

(b) Every holder of a license or registration under this Act may renew such license or registration before the expiration date upon payment of the required renewal fee as set by rule.

(c) Every application for renewal of a license by a licensed certified public accountant who has been licensed under this Act for 3 years or more shall be accompanied or supported by any evidence the Department shall prescribe, in satisfaction of completing, each 3 years, not less than 120 hours of continuing professional education programs in subjects given by continuing education sponsors registered by the Department upon recommendation of the Committee. Of the 120 hours, not less than 4 hours shall be courses covering the subject of professional ethics. All continuing education sponsors applying to the Department for registration shall be required to submit an initial nonrefundable application fee set by Department rule. Each registered continuing education sponsor shall be required to pay an annual renewal fee set by Department rule. Publicly supported colleges, universities, and governmental agencies located in Illinois are exempt from payment of any fees required for continuing education sponsor registration. Failure by a continuing education sponsor to be licensed or pay the fees prescribed in this Act, or to comply with the rules and regulations established by the Department under this Section regarding requirements for continuing education courses or sponsors, shall constitute grounds for revocation or denial of renewal of the sponsor's registration.

(d) Licensed Certified Public Accountants are exempt from the continuing professional education requirement for the first renewal period following the original issuance of the license.

Notwithstanding the provisions of this subsection (c), the Department may accept courses and sponsors approved by other states, by the American Institute of Certified Public Accountants, by other state CPA societies, or by national accrediting organizations such as the National Association of State Boards of Accountancy.

Failure by an applicant for renewal of a license as a licensed certified public accountant to furnish the evidence shall constitute grounds for disciplinary action, unless the Department in its discretion shall determine the failure to have been due to reasonable cause. The Department, in its discretion, may renew a license despite failure to furnish evidence of satisfaction of requirements of continuing education upon condition that the applicant follow a particular program or schedule of continuing education. In issuing rules and individual orders in respect of requirements of continuing education, the Department in its discretion may, among other things, use and rely upon guidelines and pronouncements of recognized educational and professional associations; may prescribe rules for the content, duration, and organization of courses; shall take into account the accessibility to applicants of such continuing education as it may require, and any impediments to interstate practice of public accounting that may result from differences in requirements in other states; and may provide for relaxation or suspension of requirements in regard to applicants who certify that they do not intend to engage in the practice of public accounting, and for instances of individual hardship.

The Department shall establish by rule a means for the verification of completion of the continuing education required by this Section. This verification may be accomplished through audits of records maintained by licensees; by requiring the filing of continuing education certificates with the Department; or by other means established by the Department.

The Department may establish, by rule, guidelines for acceptance of continuing education on behalf of licensed certified public accountants taking continuing education courses in other jurisdictions.

(e) For renewals on and after January 1, 2009, as a condition for granting a renewal license to firms and sole practitioners who provide services requiring a license under this Act, the Department shall require that the firm or sole practitioner undergo a peer review covering the immediately preceding 3-year period, accepted by a Peer Review Administrator in accordance with this Section, unless the firm or sole practitioner is exempted under the provisions of subsection (i) of this Section. Each firm or sole practitioner shall submit to the Department with its renewal application a letter from the Peer Review Administrator stating the date on which the peer review was satisfactorily completed.

A new firm or sole practitioner not subject to subsection (l) shall undergo its first peer review within 18 months after it is granted its initial license.

The rules of the Department may lengthen any of the periods between required peer reviews prescribed in this subsection (e) in the manner, under the circumstances, or with respect to firms that the Department in its discretion may consider appropriate.

(f) The Department may adopt rules establishing guidelines for peer reviews, which shall do all of the following:

(1) Require that a peer review be conducted pursuant to a program and standards of the American Institute of Certified Public Accountants. The Department shall approve only Peer Review Administrators that the Department finds comply with established standards for performing and reporting on peer reviews.

(2) Require that a peer review be conducted by a reviewer that is independent of the firm reviewed and approved by the Peer Review Administrator under established standards.

(3) Other than in the peer review process, prohibit the use or public disclosure of information obtained by the reviewer, the Peer Review Administrator, or the Department during or in connection with the peer review process. The requirement that information not be publicly disclosed shall not apply to a hearing before the Department that the firm or sole practitioner requests be public or to the information described in paragraph (3) of subsection (i) of this Section.

(g) If a firm or sole practitioner does not comply with any remedial actions determined appropriate by the Peer Review Administrator, the Peer Review Administrator shall refer the matter to the Department to determine if further action under this subsection (g) is warranted. The Department may at its discretion or shall upon submission of a written application by the firm or sole practitioner hold a hearing to determine whether the firm or sole practitioner complies with the appropriate professional standards and practices. The hearing shall be confidential and shall not be open to the public unless requested by the firm or sole practitioner. If the Department after conducting a hearing determines that the firm or sole practitioner complies with the appropriate professional standards and practices, it shall issue an order requiring the Peer Review Administrator to take any necessary action to record and implement the Department's determination and to restore the status of compliance of the firm or sole practitioner. However, if the Department after conducting the hearing determines that the firm or sole practitioner does not comply with the appropriate professional standards and practices, it may issue an order that requires both of the following:

(1) Remedial action, which may include any or all of the following:

(A) requiring the sole practitioner or employees of the firm to complete general or specific continuing professional education courses;

(B) requiring the sole practitioner or firm to undergo a peer review more frequently than every 3 years; or

(C) other remedial action as recommended by the Committee.

(2) An affidavit from the firm or sole practitioner, submitted within the time specified by the Department, indicating completion of the required remedial actions.

(h) The firm or sole practitioner reviewed shall pay for any peer review performed. The Peer Review Administrator may charge a fee to each firm and sole practitioner sufficient to cover its costs of administering the peer review program.

(i) A firm or sole practitioner shall be exempt from the requirement to undergo a peer review if:

(1) Within 3 years before the date of application for renewal licensure, the sole practitioner or firm has undergone a peer review conducted in another state or foreign jurisdiction that meets the requirements of paragraphs (1) and (2) of subsection (f) of this Section. The sole practitioner or firm shall submit to the Department a letter from the organization administering the most recent peer review stating the date on which the peer review was completed.

(2) The sole practitioner or firm satisfies all of the following conditions:

(A) during the preceding 2 years, the firm has not accepted or performed any audit or review engagement;

(B) within the next 2 years, the firm does not intend to accept or perform any audit or review engagement; and

(C) the firm agrees to notify the Department within 30 days of accepting an audit or review engagement and to undergo a peer review within 18 months of accepting an audit or review engagement.

(3) For reasons of personal health, military service, or other good cause, the Department determines that the sole practitioner or firm is entitled to an exemption, which may be granted for a period of time not to exceed 12 months.

(j) In any civil action, arbitration, or administrative proceeding, regardless of whether a licensee is a party thereto, all of the following shall apply:

(1) The proceedings, records (including, without limitation, letters of acceptance, peer review reports, letters of comment, and letters of response), and working papers related to the peer review process of any reviewer, administering organization, or board member are privileged and not subject to discovery, subpoena, or other means of legal process and may not be introduced into evidence.

(2) No employee, member, or agent of a Peer Review Administrator or reviewer shall be permitted or required to testify as to any matters produced, presented, disclosed, or discussed during or in connection with the peer review process or be required to testify to any finding, recommendation, evaluation, opinion, or other actions of any person in connection with the peer review process.

(3) No privilege exists under this subsection (j):

(A) for information presented or considered in the peer review process that was otherwise available to the public;

(B) for materials not prepared in connection with a peer review merely because the materials subsequently are presented or considered as part of the peer review process; or

(C) in connection with an administrative proceeding or related civil action brought for the purpose of enforcing this Section.

(k) If a peer review report indicates that a firm or sole practitioner complies with the appropriate professional standards and practices set forth in the rules of the Department, the Peer Review Administrator shall destroy all working papers and documents, other than report-related documents, related to the peer review within 90 days after issuance of the letter of acceptance by the Peer Review Administrator. If a peer review letter of acceptance indicates that corrective action is required, the Peer Review Administrator may retain documents and reports related to the peer review until completion of the next peer review or other agreed-to corrective actions.

(l) In the event the practices of 2 or more firms or sole practitioners are merged or otherwise combined, the surviving firm shall retain the peer review year of the largest firm, as determined by the number of accounting and auditing hours of each of the practices. In the event that the practice of a firm is divided or a portion of its practice is sold or otherwise transferred, any firm or sole practitioner acquiring some or all of the practice that does not already have its own review year shall retain the review year of the former firm. In the event that the first peer review of a firm that would otherwise be required by this subsection (l) would be less than 12 months after its previous review, a review year shall be assigned by Peer Review Administrator so that the firm's next peer review occurs after not less than 12 months of operation, but not later than 18 months of operation.

(m) No Peer Review Administrator or reviewer, or any of its members, employees, agents, or any person furnishing professional counsel or services shall be civilly liable by reason of the performance of any duty, function, or activity under this Section so long as the person or entity has not engaged in recklessness or willful misconduct.

(Source: P.A. 92-457, eff. 7-1-04; 93-683, eff. 7-2-04.)

Section 99. Effective date. This Act takes effect upon becoming law.