1-1 By: Armbrister, Moncrief S.B. No. 1358
1-2 (In the Senate - Filed March 8, 2001; March 13, 2001, read
1-3 first time and referred to Committee on Business and Commerce;
1-4 April 9, 2001, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 5, Nays 2; April 9, 2001,
1-6 sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR S.B. No. 1358 By: Fraser
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to the regulation of the practice of public accounting.
1-11 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-12 SECTION 1. Subsection (a), Section 901.002, Occupations
1-13 Code, is amended to read as follows:
1-14 (a) In this chapter:
1-15 (1) "Attest service" means:
1-16 (A) an audit or other engagement required by the
1-17 board to be performed in accordance with the auditing standards
1-18 adopted by the American Institute of Certified Public Accountants
1-19 or another national accountancy organization recognized by the
1-20 board;
1-21 (B) an engagement required by the board to be
1-22 performed in accordance with standards for accounting and review
1-23 services adopted by the American Institute of Certified Public
1-24 Accountants or another national accountancy organization recognized
1-25 by the board;
1-26 (C) an engagement required by the board to be
1-27 performed in accordance with standards for attestation engagements
1-28 adopted by the American Institute of Certified Public Accountants
1-29 or another national accountancy organization recognized by the
1-30 board; or
1-31 (D) any other assurance service required by the
1-32 board to be performed in accordance with professional standards
1-33 adopted by the American Institute of Certified Public Accountants
1-34 or another national accountancy organization recognized by the
1-35 board.
1-36 (2) "Board" means the Texas State Board of Public
1-37 Accountancy.
1-38 (3) [(2)] "Certificate" means a certificate issued to
1-39 a certified public accountant.
1-40 (4) [(3)] "Certified public accountant" means a person
1-41 who holds a certificate issued under this chapter.
1-42 (5) "Certified public accountancy firm" means a person
1-43 who holds a firm license.
1-44 (6) "Client" means a person who enters into an
1-45 agreement with a license holder or a license holder's employer to
1-46 receive a professional accounting service.
1-47 (7) [(4)] "Corporation" means a corporation authorized
1-48 by a statute applicable to this state or by an equivalent law of
1-49 another state or a foreign country, including a professional public
1-50 accounting corporation organized under The Texas Professional
1-51 Corporation Act (Article 1528e, Vernon's Texas Civil Statutes).
1-52 (8) [(5)] "Firm" means a sole proprietorship,
1-53 partnership, corporation, limited liability company, or other
1-54 business entity engaged in the practice of public accountancy.
1-55 (9) "Firm license" means a license issued under
1-56 Subchapter H.
1-57 (10) "License" means a license issued under Subchapter
1-58 I.
1-59 (11) "Peer review" means the study, appraisal, or
1-60 review of the professional accounting work of a public accountancy
1-61 firm that performs attest services by a certificate holder who is
1-62 not affiliated with the firm.
1-63 (12) "Professional accounting services" or
1-64 "professional accounting work" means services or work that requires
2-1 the specialized knowledge or skills associated with certified
2-2 public accountants, including:
2-3 (A) issuing reports on financial statements;
2-4 (B) providing management or financial advisory
2-5 or consulting services;
2-6 (C) preparing tax returns; and
2-7 (D) providing advice in tax matters.
2-8 (13) [(6) "Practice unit" means an office of a firm
2-9 that is required to be registered with the board to practice public
2-10 accountancy.]
2-11 [(7)] "Public accountant" means a person authorized to
2-12 practice public accountancy under the Public Accountancy Act of
2-13 1945 (Article 41a, Vernon's Texas Civil Statutes).
2-14 [(8) "Sole proprietorship" means an unincorporated
2-15 firm that is owned and controlled by one person engaged in the
2-16 practice of public accountancy.]
2-17 SECTION 2. Subchapter A, Chapter 901, Occupations Code, is
2-18 amended by adding Section 901.0021 to read as follows:
2-19 Sec. 901.0021. MEANING AND IMPLICATION OF REPORT. (a) In
2-20 this chapter, a reference to a report used with respect to a
2-21 financial statement means an opinion, report, or other document,
2-22 including an assurance prepared in accordance with standards for
2-23 accounting and review services adopted by the American Institute of
2-24 Certified Public Accountants or another national accountancy
2-25 organization recognized by the board, that:
2-26 (1) states or implies assurance as to the reliability
2-27 of the financial statement; and
2-28 (2) includes or is accompanied by a statement or
2-29 implication that the person issuing the opinion, report, or other
2-30 document has special knowledge or competence in accounting or
2-31 auditing.
2-32 (b) A statement or implication of assurance as to the
2-33 reliability of a financial statement or as to the special knowledge
2-34 or competence of the person issuing the opinion, report, or other
2-35 document includes any form of language that is conventionally
2-36 understood to constitute such a statement or implication.
2-37 (c) A statement or implication of special knowledge or
2-38 competence in accounting or auditing may arise from:
2-39 (1) the use by the issuer of the opinion, report, or
2-40 other document of a name or title indicating that the person is an
2-41 accountant or auditor; or
2-42 (2) the language of the opinion, report, or other
2-43 document itself.
2-44 SECTION 3. Subsections (a) and (c), Section 901.003,
2-45 Occupations Code, are amended to read as follows:
2-46 (a) In this chapter, "practice of public accountancy" means:
2-47 (1) the performance for a client by a person who is
2-48 certified, licensed, or registered under this chapter of a service
2-49 that involves the use of accounting, attesting, or auditing skills;
2-50 (2) the performance or offer of performance for a
2-51 client or potential client by a person who represents to the public
2-52 that the person is certified, licensed, or registered under this
2-53 chapter of a service that involves the use of accounting,
2-54 attesting, or auditing skills;
2-55 (3) the performance of activities of a person or
2-56 practice unit licensed under this chapter in:
2-57 (A) preparing or reporting on a financial
2-58 statement or report that is to be used by an investor, [unless the
2-59 report is prepared for internal use by] the management of an
2-60 organization, a third party, or a financial institution, unless the
2-61 report is prepared for internal use only; or
2-62 (B) preparing a tax return that is filed with a
2-63 taxing authority; or
2-64 (4) the supervision of an activity described by
2-65 Subdivision (3).
2-66 (c) For purposes of this section, a person represents to the
2-67 public that the person is certified, licensed, or registered under
2-68 this chapter if the person makes an oral or written representation
2-69 that the person is certified, licensed, or registered. A written
3-1 representation includes a representation communicated by office
3-2 sign, business card, letterhead, or advertisement. A
3-3 representation does not include:
3-4 (1) the display of an original certificate or
3-5 registration unless a license is also displayed;
3-6 (2) a representation made by a faculty member of an
3-7 educational institution solely in connection with the duties of the
3-8 person as a faculty member; or
3-9 (3) a representation in a book, article, or other
3-10 publication, or a representation made in connection with the
3-11 promotion of the publication, unless the representation includes an
3-12 offer to perform a service or to sell a product other than the
3-13 publication.
3-14 SECTION 4. Subsection (a), Section 901.004, Occupations
3-15 Code, is amended to read as follows:
3-16 (a) This chapter does not:
3-17 (1) restrict an official act of a person acting in the
3-18 person's capacity as:
3-19 (A) an officer of the state or of a county,
3-20 municipality, or other political subdivision, including a county
3-21 auditor;
3-22 (B) an officer of a federal department or
3-23 agency; or
3-24 (C) an assistant, deputy, or employee of a
3-25 person described by Paragraph (A) or (B);
3-26 (2) prohibit a person who is not a certified public
3-27 accountant or public accountant from serving as an employee of:
3-28 (A) a certified public accountant or public
3-29 accountant licensed by the board; or
3-30 (B) a firm composed of certified public
3-31 accountants or public accountants licensed by the board; [or]
3-32 (3) prohibit a person licensed by the federal
3-33 government as an enrolled agent from performing an act or using a
3-34 designation authorized by federal law;
3-35 (4) prohibit an attorney or firm of attorneys from
3-36 preparing or presenting records or documents customarily prepared
3-37 by an attorney or firm of attorneys in connection with the
3-38 attorney's or firm's professional work in the practice of law; or
3-39 (5) prohibit an employee, officer, or director of a
3-40 financial institution, as defined by Section 201.101, Finance Code,
3-41 from preparing or presenting records or documents when lawfully
3-42 acting within the scope of the activities of the institution.
3-43 SECTION 5. Section 901.005, Occupations Code, is amended to
3-44 read as follows:
3-45 Sec. 901.005. FINDINGS; PUBLIC POLICY; PURPOSE. (a) The
3-46 practice of public accountancy is a learned profession that
3-47 requires specialized education and experience. That practice has
3-48 historically been defined to include a broad range of financial,
3-49 advisory, and attest services, including:
3-50 (1) issuing a report on a financial statement;
3-51 (2) preparing a tax return;
3-52 (3) providing advice in a tax matter;
3-53 (4) providing management or financial advisory or
3-54 consulting services;
3-55 (5) recommending the sale of a product if the
3-56 recommendation requires or implies accounting or auditing skill;
3-57 and
3-58 (6) providing litigation support services.
3-59 (b) The attest service is part of the practice of public
3-60 accountancy. That service provides assurance to the public,
3-61 especially the public markets, that the management of commercial
3-62 entities has reasonably described the financial status of those
3-63 entities. That assurance contributes to the strength of the
3-64 economy and public markets of this state and to the soundness and
3-65 reliability of the financial system. The strength of the financial
3-66 system in this state is supported by the competence, integrity, and
3-67 expertise of the persons who attest to financial statements in this
3-68 state.
3-69 (c) Notwithstanding Subsection (b), the public relies on the
4-1 competence and integrity of certified public accountants in all of
4-2 its dealings with certified public accountants and not merely in
4-3 connection with their performance of the attest service.
4-4 (d) The terms "accountant" and "auditor," and derivations,
4-5 combinations, and abbreviations of those terms, have an implication
4-6 of competence in the profession of public accountancy on which the
4-7 public relies in personal, business, and public activities and
4-8 enterprises.
4-9 (e) [(b)] The policy of this state and the purpose of this
4-10 chapter are to provide that:
4-11 (1) the admission of persons to the practice of public
4-12 accountancy require education and experience commensurate with the
4-13 requirements of the profession;
4-14 (2) a person who represents that the person practices
4-15 public accountancy be qualified to do so;
4-16 (3) a person licensed as a certified public
4-17 accountant:
4-18 (A) [engaged in the practice of public
4-19 accountancy] maintain high standards of professional competence,
4-20 integrity, and learning; and
4-21 (B) demonstrate competence and integrity in all
4-22 dealings with the public that rely on or imply the special skills
4-23 of a certified public accountant and not merely in connection with
4-24 the performance of the attest service;
4-25 (4) areas of specialized practice require special
4-26 training; and
4-27 (5) the activities and competitive practices of
4-28 persons practicing public accountancy be regulated to be free of
4-29 commercial exploitation to provide the public with a high level of
4-30 professional competence at reasonable fees by independent,
4-31 qualified persons.
4-32 SECTION 6. Subsection (a), Section 901.051, Occupations
4-33 Code, is amended to read as follows:
4-34 (a) The Texas State Board of Public Accountancy consists of
4-35 15 members appointed by the governor with the advice and consent of
4-36 the senate as follows:
4-37 (1) 10 certified public accountant members, at least
4-38 eight of whom are, on the date of appointment:
4-39 (A) a sole practitioner; or
4-40 (B) an owner or employee of a certified public
4-41 accountancy firm [engaged in public practice]; and
4-42 (2) five public members who are not:
4-43 (A) licensed under this chapter; or
4-44 (B) financially involved in an organization
4-45 subject to board regulation.
4-46 SECTION 7. Sections 901.158 and 901.159, Occupations Code,
4-47 are amended to read as follows:
4-48 Sec. 901.158. RULES RESTRICTING [ADVERTISING OR] COMPETITIVE
4-49 PRACTICES [BIDDING]. The board in its rules of professional
4-50 conduct may regulate the [not restrict advertising or] competitive
4-51 practices of [bidding by] a license holder [except] as necessary to
4-52 ensure that the[:]
4-53 [(1) the license holder's communications, including
4-54 advertising and price information, are informative, free of
4-55 deception, and consistent with the professionalism expected and
4-56 deserved by the public from a person engaged in the practice of
4-57 public accountancy;]
4-58 [(2) the license holder's conduct is free from fraud,
4-59 undue influence, deception, intimidation, overreaching, and
4-60 harassment;]
4-61 [(3) the license holder does not engage in an
4-62 uninvited solicitation, by use of a means other than mass media
4-63 advertisement, to perform professional accounting services;]
4-64 [(4) a contract between a license holder and a state
4-65 agency, publicly owned utility, or political subdivision, including
4-66 a county, municipality, district, or authority, for the performance
4-67 of professional accounting services is not solicited or awarded on
4-68 the basis of competitive bids submitted in violation of law;]
4-69 [(5) a contract for the preparation of a financial
5-1 statement or an opinion on a financial statement includes
5-2 information necessary to protect the public if:]
5-3 [(A) the financial statement or opinion can be
5-4 used by or given to a person other than a party to the contract to
5-5 induce reliance on the statement or opinion; and]
5-6 [(B) the contract is entered into on the basis
5-7 of competitive bids; or]
5-8 [(6) a] license holder does not engage in a
5-9 competitive practice that:
5-10 (1) [(A)] impairs the independence or quality of a
5-11 service provided by a license holder;
5-12 (2) [(B)] impairs or restricts the public's
5-13 opportunity to obtain professional accounting services of high
5-14 quality at a reasonable price; or
5-15 (3) [(C)] unreasonably restricts competition among
5-16 license holders.
5-17 Sec. 901.159. PEER [QUALITY] REVIEW. (a) The board by rule
5-18 shall provide for a peer [quality] review program to review the
5-19 work product of a license holder or of the certified public
5-20 accountancy firm in which the license holder is a member [practice
5-21 unit], in lieu of the [a] license holder, to the extent necessary
5-22 to comply with any applicable standards adopted by generally
5-23 recognized bodies responsible for setting accounting standards.
5-24 Peer review must include a verification that each individual in a
5-25 certified public accountancy firm who is responsible for
5-26 supervising attest services and who signs or authorizes another
5-27 person to sign an accountant's reports on financial statements on
5-28 behalf of the firm meets the competency requirements of the
5-29 professional standards that apply to those services.
5-30 (b) The board by rule shall establish a fee in an amount not
5-31 to exceed $200 to be paid by a certified public accountancy firm
5-32 [practice unit], or by a license holder who is not a member of a
5-33 certified public accountancy firm [practice unit], for each peer
5-34 [quality] review required by the board under this section.
5-35 SECTION 8. Subsection (c), Section 901.160, Occupations
5-36 Code, is amended to read as follows:
5-37 (c) Except on written authorization as provided by
5-38 Subsection (b), the following information gathered or received by
5-39 the board is confidential and not subject to disclosure under
5-40 Chapter 552, Government Code:
5-41 (1) information regarding the qualifications of an
5-42 applicant or license holder to be certified [or registered] as a
5-43 certified public accountant; [and]
5-44 (2) information regarding the qualifications of an
5-45 applicant or firm license holder to be issued a firm license as a
5-46 certified public accountancy firm; and
5-47 (3) information regarding a disciplinary action under
5-48 Subchapter K against a license holder or an applicant to take the
5-49 uniform CPA examination, before a public hearing on the matter.
5-50 SECTION 9. Subsection (a), Section 901.161, Occupations
5-51 Code, is amended to read as follows:
5-52 (a) Any statement or record prepared or an opinion formed in
5-53 connection with a positive enforcement[, quality review,] or peer
5-54 review is privileged and is not:
5-55 (1) subject to discovery, subpoena, or other means of
5-56 legal compulsion for release to a person other than the board; or
5-57 (2) admissible as evidence in a judicial or
5-58 administrative proceeding other than a board hearing.
5-59 SECTION 10. Section 901.162, Occupations Code, is amended by
5-60 adding Subsection (c) to read as follows:
5-61 (c) Each board member and each employee, volunteer, or agent
5-62 of the board is immune from personal liability for an action taken
5-63 in good faith in the discharge of the board's responsibilities.
5-64 The state shall hold each board member and each employee,
5-65 volunteer, or agent of the board harmless from any cost, damage, or
5-66 attorney's fees arising from a claim or suit against that person
5-67 with respect to matters to which that immunity applies.
5-68 SECTION 11. Subsection (a), Section 901.163, Occupations
5-69 Code, is amended to read as follows:
6-1 (a) The board shall develop and maintain a system for
6-2 tracking a complaint filed with the board against a person who
6-3 holds a license or firm license [registered under this chapter].
6-4 SECTION 12. Subchapter D, Chapter 901, Occupations Code, is
6-5 amended by adding Section 901.165 to read as follows:
6-6 Sec. 901.165. RULES FOR ATTEST SERVICES. (a) The board by
6-7 rule shall specify those services that constitute attest services.
6-8 (b) Attest services are required to be performed in
6-9 accordance with professional standards. The board may adopt by
6-10 reference the standards developed for general application by the
6-11 American Institute of Certified Public Accountants or another
6-12 nationally recognized accountancy organization.
6-13 SECTION 13. Subsection (c), Section 901.253, Occupations
6-14 Code, is amended to read as follows:
6-15 (c) The board may obtain criminal history record information
6-16 maintained by a law enforcement agency, including the Department of
6-17 Public Safety and the Federal Bureau of Investigation
6-18 identification division, to investigate the qualifications of an
6-19 individual who applies to take the uniform CPA examination or to be
6-20 certified or issued a firm license [registered] under this chapter.
6-21 SECTION 14. Section 901.254, Occupations Code, is amended to
6-22 read as follows:
6-23 Sec. 901.254. EDUCATION REQUIREMENTS. [(a)] To be eligible
6-24 to take the uniform CPA examination, an applicant must:
6-25 (1) hold a baccalaureate or graduate degree, or its
6-26 equivalent as determined by board rule, conferred by a
6-27 board-recognized institution of higher education; and
6-28 (2) complete at least[:]
6-29 [(A)] 150 semester hours or quarter-hour
6-30 equivalents in board-recognized courses, including an accounting
6-31 concentration or equivalent courses as determined by board rule[;]
6-32 [(B) 30 semester hours or quarter-hour
6-33 equivalents in board-recognized accounting courses, as defined by
6-34 board rule, including at least 20 semester hours or quarter-hour
6-35 equivalents in core accounting courses, as defined by board rule;
6-36 and]
6-37 [(C) 20 semester hours or quarter-hour
6-38 equivalents in board-recognized college or university
6-39 accounting-related courses in other areas of business
6-40 administration].
6-41 SECTION 15. Subsection (a), Section 901.256, Occupations
6-42 Code, is amended to read as follows:
6-43 (a) To be eligible to receive a certificate, a person must
6-44 complete:
6-45 (1) at least two years of work experience under the
6-46 supervision of a certified public accountant; or
6-47 (2) at least one year of work experience acceptable to
6-48 the board, including experience providing a service or advice
6-49 involving accounting, attest services, management or financial
6-50 advisory or consulting services, tax services, or other services
6-51 the board considers appropriate for an [under the supervision of a
6-52 certified public] accountant, if the person:
6-53 (A) has completed at least 150 semester hours of
6-54 college credits; or
6-55 (B) holds a graduate degree.
6-56 SECTION 16. Subsection (a), Section 901.259, Occupations
6-57 Code, is amended to read as follows:
6-58 (a) The board shall issue a certificate to a person who
6-59 holds a certificate or license issued by another state if the
6-60 person:
6-61 (1) satisfies at least one of the following:
6-62 (A) holds a certificate or license as a
6-63 certified public accountant from a state that the National
6-64 Association of State Boards of Accountancy's National Qualification
6-65 Appraisal Service has verified as having education, examination,
6-66 and experience requirements for certification or licensure that are
6-67 comparable to or exceed the requirements for licensure as a
6-68 certified public accountant of The American Institute of Certified
6-69 Public Accountants/National Association of State Boards of
7-1 Accountancy Uniform Accountancy Act and the board determines that
7-2 the licensure requirements of that Act are comparable to or exceed
7-3 the licensure requirements of this chapter;
7-4 (B) obtains from the National Association of
7-5 State Boards of Accountancy's National Qualification Appraisal
7-6 Service verification that the individual's education, examination,
7-7 and experience qualifications are comparable to or exceed the
7-8 requirements for licensure as a certified public accountant of The
7-9 American Institute of Certified Public Accountants/National
7-10 Association of State Boards of Accountancy Uniform Accountancy Act
7-11 and the board determines that the licensure requirements of that
7-12 Act are comparable to or exceed the licensure requirements of this
7-13 chapter;
7-14 (C) [has passed the uniform CPA examination with
7-15 grades that were passing grades in this state on the date the
7-16 person took the examination;]
7-17 [(2) satisfies at least one of the following:]
7-18 [(A)] meets the requirements for issuance of a
7-19 certificate in this state other than the requirement providing the
7-20 grades necessary to pass the uniform CPA examination;
7-21 (D) [(B)] met the requirements in effect for
7-22 issuance of a certificate in this state on the date the person was
7-23 issued a certificate by the other state; or
7-24 (E) [(C)] has completed at least four years of
7-25 experience practicing public accountancy, if the experience:
7-26 (i) occurred after the person passed the
7-27 uniform CPA examination and within the 10 years preceding the date
7-28 of application; and
7-29 (ii) satisfies requirements established by
7-30 board rule; and
7-31 (2) [(3)] has met the continuing professional
7-32 education requirements that apply to a license holder under this
7-33 chapter for the three-year period preceding the date of
7-34 application.
7-35 SECTION 17. Subchapter F, Chapter 901, Occupations Code, is
7-36 amended by adding Section 901.260 to read as follows:
7-37 Sec. 901.260. CERTIFICATE BASED ON FOREIGN CREDENTIALS.
7-38 (a) The board may issue a certificate to an applicant who holds a
7-39 substantially equivalent foreign credential if:
7-40 (1) the foreign jurisdiction that granted the
7-41 credential has an analogous provision allowing a person who holds a
7-42 certificate issued by this state to obtain that foreign
7-43 jurisdiction's comparable credential;
7-44 (2) the foreign credential:
7-45 (A) entitles the holder to issue reports on
7-46 financial statements;
7-47 (B) was issued by a foreign jurisdiction that
7-48 regulates the practice of public accountancy on the basis of
7-49 education, examination, and experience requirements established by
7-50 the jurisdiction; and
7-51 (C) has not expired or been revoked, suspended,
7-52 limited, or probated; and
7-53 (3) the applicant:
7-54 (A) received the credential based on education
7-55 and examination requirements that are comparable to or exceed those
7-56 in effect in this state on the date that the foreign credential was
7-57 granted;
7-58 (B) satisfied one of the following:
7-59 (i) completed an experience requirement in
7-60 the jurisdiction that granted the foreign credential that is
7-61 comparable to or exceeds the experience requirements established
7-62 under this chapter;
7-63 (ii) completed at least four years of
7-64 professional accounting experience in this state; or
7-65 (iii) within the 10 years preceding the
7-66 date of the application, has met equivalent requirements prescribed
7-67 by board rule;
7-68 (C) passed a uniform qualifying examination
7-69 acceptable to the board covering national standards; and
8-1 (D) passed an examination acceptable to the
8-2 board covering the laws, rules, and code of ethical conduct in
8-3 effect in this state.
8-4 (b) An applicant for a certificate under Subsection
8-5 (a) must list in the application each jurisdiction, foreign and
8-6 domestic, in which the applicant has applied for or holds a
8-7 credential to practice public accountancy. Each holder of a
8-8 certificate issued under Subsection (a) shall notify the board in
8-9 writing of the issuance, denial, revocation, suspension,
8-10 limitation, or probation of a credential or the commencement of a
8-11 disciplinary or enforcement action by any jurisdiction not later
8-12 than the 30th day after the effective date of that action.
8-13 (c) The board's determination of whether a foreign
8-14 credential is substantially equivalent to a certificate issued
8-15 under this chapter is not subject to judicial review.
8-16 SECTION 18. Section 901.301, Occupations Code, is amended to
8-17 read as follows:
8-18 Sec. 901.301. ADMINISTRATION; BOARD RULES. (a) The board
8-19 shall conduct or contract with another person to conduct [each]
8-20 uniform CPA examinations [examination] administered under this
8-21 chapter.
8-22 (b) The board by rule may establish the:
8-23 (1) manner in which a person may apply for the
8-24 examination;
8-25 (2) time, date, and place for the examination;
8-26 (3) manner in which the examination is conducted; and
8-27 (4) [method used to grade the examination;]
8-28 [(5) criteria used to determine a passing score on the
8-29 examination; and]
8-30 [(6)] manner in which a person's examination score is
8-31 reported to the person.
8-32 SECTION 19. Subsection (a), Section 901.304, Occupations
8-33 Code, is amended to read as follows:
8-34 (a) For each examination or reexamination, the board by rule
8-35 shall apportion an amount of the total examination fee among the
8-36 parts of the examination that an applicant is eligible to take on a
8-37 particular examination date. For each examination or
8-38 reexamination, the board shall collect a [The total examination]
8-39 fee set by board rule [may] not to exceed the cost of administering
8-40 the examination [$250].
8-41 SECTION 20. Section 901.305, Occupations Code, is amended to
8-42 read as follows:
8-43 Sec. 901.305. FREQUENCY OF EXAMINATION. A [The board shall
8-44 administer a] uniform CPA examination shall be administered under
8-45 this chapter as often as necessary but at least once each year.
8-46 SECTION 21. Subsection (a), Section 901.306, Occupations
8-47 Code, is amended to read as follows:
8-48 (a) The board may use or require the use of all or part of
8-49 the uniform CPA examination and any related service available from:
8-50 (1) the American Institute of Certified Public
8-51 Accountants; or
8-52 (2) the National Association of State Boards of
8-53 Accountancy, if doing so would result in a greater degree of
8-54 reciprocity with the examination results of other states.
8-55 SECTION 22. Section 901.307, Occupations Code, is amended to
8-56 read as follows:
8-57 Sec. 901.307. GRADING EXAMINATION [MINIMUM PASSING GRADE].
8-58 (a) The board by rule shall:
8-59 (1) adopt a method for grading the examination; and
8-60 (2) establish the criteria for passing [A person must
8-61 attain a grade of at least 75 percent on each subject of the
8-62 examination to pass] the examination.
8-63 (b) Rules adopted under this section must, to the extent
8-64 possible, be uniform with those of other states.
8-65 SECTION 23. Subchapter H, Chapter 901, Occupations Code, is
8-66 amended to read as follows:
8-67 SUBCHAPTER H. FIRM LICENSE [REGISTRATION] REQUIREMENTS
8-68 Sec. 901.351. FIRM LICENSE REQUIRED. (a) A firm may not
8-69 provide attest services or use the title "CPA's," "CPA Firm,"
9-1 "Certified Public Accountants," "Certified Public Accounting Firm,"
9-2 or "Auditing Firm" or a variation of one of those titles unless the
9-3 firm holds a firm license issued under this subchapter.
9-4 (b) The board shall grant or renew a firm license to
9-5 practice as a certified public accountancy firm to:
9-6 (1) a firm that applies and demonstrates the necessary
9-7 qualifications in accordance with this subchapter; or
9-8 (2) a firm originally licensed as a certified public
9-9 accountancy firm in another state that:
9-10 (A) establishes an office in this state; and
9-11 (B) demonstrates the necessary qualifications in
9-12 accordance with this subchapter.
9-13 (c) A firm license issued under Subsection (b)(2) is
9-14 automatically revoked and may not be renewed if the firm does not
9-15 maintain a license as a certified public accountancy firm in the
9-16 other state.
9-17 (d) A firm license must be renewed annually.
9-18 (e) The board by rule shall specify:
9-19 (1) the form of the application for a firm license;
9-20 (2) the fee for an original or renewal firm license,
9-21 which may be based on the number of owners, members, partners,
9-22 shareholders, or employee license holders in this state, not to
9-23 exceed $25 for each of those persons; and
9-24 (3) the requirements for renewal of a firm license.
9-25 [REGISTRATION REQUIRED. A certified public accountant, a public
9-26 accountant, a firm of certified public accountants or public
9-27 accountants, and each office of that firm in this state, including
9-28 a practice unit, and a person described by Section 901.355 and each
9-29 office of that person in this state may not engage in the practice
9-30 of public accountancy unless the person is registered with the
9-31 board.]
9-32 Sec. 901.352. APPLICATION FOR FIRM LICENSE OR REGISTRATION.
9-33 (a) An applicant for a firm license or registration must provide
9-34 the board with satisfactory evidence of eligibility for a firm
9-35 license or registration.
9-36 (b) The board may examine an application and may refuse to
9-37 issue a firm license or register an applicant who does not meet the
9-38 standards imposed under this chapter.
9-39 Sec. 901.353. RESIDENT MANAGER. (a) An office established
9-40 or maintained in this state [for the practice of public accountancy
9-41 in this state] by a firm of certified public accountants, a firm of
9-42 public accountants, or a person described by Section 901.355 must
9-43 be under the direct supervision of a resident manager who:
9-44 (1) is an owner, member, partner, shareholder, or
9-45 employee of the firm or person that occupies the office; and
9-46 (2) is licensed under this chapter.
9-47 (b) A resident manager may serve in that capacity in only
9-48 one office at a time except as authorized by board rule. The board
9-49 by rule may [shall] establish a registration procedure under which
9-50 a person may serve as resident manager of more than one office at a
9-51 time.
9-52 Sec. 901.354. FIRM LICENSE [REGISTRATION] INFORMATION AND
9-53 ELIGIBILITY. (a) An applicant for initial issuance or renewal of
9-54 a firm license must show that a majority of the ownership of the
9-55 firm, in terms of financial interests and voting rights, belongs to
9-56 persons who hold certificates issued under this chapter or are
9-57 licensed in another state. A firm and its owners shall comply with
9-58 board rules regardless of whether the firm includes owners who are
9-59 not license holders.
9-60 (b) A certified public accountancy firm may include
9-61 individuals as owners who are not license holders if:
9-62 (1) the firm designates to the board a license holder
9-63 who resides in this state to be responsible for the firm's firm
9-64 license and the supervision of the firm;
9-65 (2) each owner who is not a license holder and who is
9-66 a resident of this state as determined by board rule:
9-67 (A) is actively involved in the firm or an
9-68 affiliated entity;
9-69 (B) is of good moral character as demonstrated
10-1 by a lack of history of dishonest or felonious acts;
10-2 (C) holds a baccalaureate or graduate degree
10-3 conferred by a college or university acceptable to the board or
10-4 equivalent education as determined by the board;
10-5 (D) maintains any professional designation held
10-6 by the individual in good standing with the appropriate
10-7 organization or regulatory body that is identified or used in an
10-8 advertisement, letterhead, business card, or other firm-related
10-9 communication;
10-10 (E) has passed an examination on the rules of
10-11 professional conduct as determined by board rule;
10-12 (F) complies with the rules of professional
10-13 conduct as determined by board rule; and
10-14 (G) maintains professional continuing education
10-15 applicable to license holders as required by board rule; and
10-16 (3) the firm and the owners who are not license
10-17 holders comply with board disciplinary actions and other
10-18 requirements the board may impose by rule.
10-19 (c) The board by rule may adopt a system to investigate the
10-20 background of individual owners who are not license holders under
10-21 this chapter.
10-22 (d) The board may obtain criminal history record information
10-23 maintained by the Department of Public Safety, the Federal Bureau
10-24 of Investigation identification division, and other law enforcement
10-25 agencies to investigate the qualifications of an individual who is
10-26 not a license holder under this chapter.
10-27 (e) The board may require an individual who is not a license
10-28 holder under this chapter to submit a complete set of fingerprints.
10-29 If the individual does not provide the complete set of fingerprints
10-30 on request, the board may refuse to allow that individual to become
10-31 an owner of a certified public accountancy firm and may cancel or
10-32 refuse to issue or renew a firm license to the firm.
10-33 (f) An applicant for issuance or renewal of a firm license
10-34 under this section must register each office of the firm and show
10-35 that all attest services performed in this state and each office in
10-36 this state are under the supervision of a person who holds a
10-37 certificate issued under this chapter or by another state.
10-38 (g) An application for a firm license [registration] under
10-39 this chapter must be made on an affidavit of the owner, an officer,
10-40 or the general partner of the firm, as applicable, stating:
10-41 (1) the name of the firm;
10-42 (2) the firm's post office address in this state;
10-43 (3) the address of the firm's principal office;
10-44 (4) [if the firm is a partnership or corporation,] the
10-45 address of each office of the firm in this state;
10-46 (5) the name of the resident manager of each office of
10-47 the firm in this state; and
10-48 (6) [if the firm is a partnership,] the name,
10-49 residence, and post office address of:
10-50 (A) each partner, member, shareholder, or other
10-51 owner; and
10-52 (B) if the firm is a partnership, each
10-53 shareholder of a partner that is a professional corporation.
10-54 (h) [(b)] A sole proprietorship is eligible for a firm
10-55 license [registration] if the sole proprietor and each resident
10-56 manager of an office of the sole proprietorship in this state are
10-57 certified public accountants in good standing.
10-58 (i) [(c) A partnership is eligible for registration as a
10-59 partnership that includes a certified public accountant if:]
10-60 [(1) at least one general partner is a certified
10-61 public accountant or corporation of certified public accountants
10-62 licensed in this state in good standing;]
10-63 [(2) each partner engaged in the practice of public
10-64 accountancy in this state is a certified public accountant or
10-65 corporation of certified public accountants licensed in this state
10-66 in good standing;]
10-67 [(3) each partner not engaged in the practice of
10-68 public accountancy in this state is a certified public accountant
10-69 or corporation of certified public accountants licensed in another
11-1 state in good standing; and]
11-2 [(4) each resident manager of an office of the
11-3 partnership in this state is a certified public accountant licensed
11-4 in this state in good standing.]
11-5 [(d) A partnership is eligible for registration as a
11-6 partnership that includes a public accountant if:]
11-7 [(1) at least one general partner is a certified
11-8 public accountant, public accountant, or corporation of certified
11-9 public accountants or public accountants licensed in this state in
11-10 good standing;]
11-11 [(2) each partner engaged in the practice of public
11-12 accountancy in this state is a certified public accountant, public
11-13 accountant, or corporation of certified public accountants or
11-14 public accountants licensed in this state in good standing;]
11-15 [(3) each partner not engaged in the practice of
11-16 public accountancy in this state is a certified public accountant,
11-17 public accountant, or corporation of certified public accountants
11-18 or public accountants licensed in another state in good standing;
11-19 and]
11-20 [(4) each resident manager of an office of the
11-21 partnership in this state is a certified public accountant or
11-22 public accountant licensed in this state in good standing.]
11-23 [(e) A corporation is eligible for registration as a
11-24 corporation engaged in the practice of public accountancy if the
11-25 corporation meets the requirements applicable to partnerships under
11-26 this chapter.]
11-27 [(f)] The board shall determine whether an applicant is
11-28 eligible for a firm license [registration] under this section. The
11-29 board by rule shall define "good standing" for purposes of this
11-30 section.
11-31 (j) [(g)] A certified public accountancy firm [sole
11-32 proprietorship] shall notify the board not later than the 31st day
11-33 after the date on which information in the affidavit is changed,
11-34 including information regarding the admission or withdrawal of an
11-35 owner or [a] resident manager[. A partnership shall notify the
11-36 board within one month after the date on which information in the
11-37 affidavit is changed, including information regarding the admission
11-38 or withdrawal of a partner].
11-39 (k) A certified public accountancy firm that is no longer in
11-40 compliance with this section because of a change in firm ownership
11-41 or personnel that occurs after the firm receives or renews a firm
11-42 license shall report that fact to the board not later than the 30th
11-43 day after the date the firm ceases to be in compliance and shall
11-44 take corrective action to bring the firm into compliance. Failure
11-45 to bring the firm into compliance within a reasonable time as
11-46 determined by board rule is grounds for the suspension or
11-47 revocation of the firm's firm license.
11-48 Sec. 901.355. REGISTRATION FOR CERTAIN [OUT-OF-STATE OR]
11-49 FOREIGN APPLICANTS. (a) The [A certified public accountant of
11-50 another state or the] holder of a certificate, license, or degree
11-51 authorizing the person to practice public accountancy in a foreign
11-52 country may register with the board as [a certified public
11-53 accountant of the other state or as] the holder of a certificate,
11-54 license, or degree issued by the foreign country, if the board
11-55 determines that the standards under which the applicant was
11-56 certified or otherwise authorized to practice public accountancy
11-57 were at least as high as the standards of this state at the time
11-58 that authority was granted.
11-59 (b) To register with the board under this section, the
11-60 person must pay:
11-61 (1) the fee for issuance of a license as provided by
11-62 Section 901.154; and
11-63 (2) a processing fee in an amount set by the board not
11-64 to exceed $250.
11-65 (c) A person registered under this section may renew the
11-66 registration in the manner provided for renewal of a license under
11-67 Subchapter I.
11-68 (d) A person's registration under this section is
11-69 automatically revoked and may not be renewed if the person does not
12-1 maintain the authority to practice public accountancy in the other
12-2 [state or] country. The board shall adopt rules to ensure that the
12-3 person maintains that authority.
12-4 Sec. 901.356. TEMPORARY PRACTICE PERMIT FOR CERTAIN
12-5 OUT-OF-STATE [OR FOREIGN] APPLICANTS. A certified public
12-6 accountancy firm [accountant] of another state that does not hold a
12-7 firm license issued under this chapter[, a partnership or
12-8 professional corporation composed entirely of certified public
12-9 accountants of another state, or the holder of a certificate,
12-10 license, or degree authorizing the person to practice public
12-11 accountancy in a foreign country] may temporarily practice in this
12-12 state on professional business incident to the firm's [person's]
12-13 regular practice outside this state if the firm [person]:
12-14 (1) submits an application for a permit accompanied by
12-15 a fee in an amount not to exceed $100, as provided by board rule;
12-16 and
12-17 (2) conducts the temporary practice according to the
12-18 laws of this state and the board's rules of professional conduct.
12-19 SECTION 24. Section 901.401, Occupations Code, is amended to
12-20 read as follows:
12-21 Sec. 901.401. LICENSE REQUIRED. (a) An individual who
12-22 holds a certificate issued under this chapter must also hold [A
12-23 person may not practice public accountancy unless the person holds]
12-24 a license issued under this chapter.
12-25 (b) Each office of a certified public accountancy firm or a
12-26 firm of [certified] public accountants [or public accountants] must
12-27 hold a license issued under this chapter [to engage in the practice
12-28 of public accountancy].
12-29 SECTION 25. Subsection (a), Section 901.402, Occupations
12-30 Code, is amended to read as follows:
12-31 (a) On payment of the required fees, the board shall issue a
12-32 license to an applicant who:
12-33 (1) holds a certificate issued under this chapter; or
12-34 (2) holds a firm license issued [is registered with
12-35 the board] under this chapter.
12-36 SECTION 26. Section 901.403, Occupations Code, is amended to
12-37 read as follows:
12-38 Sec. 901.403. APPLICATION FOR AND RENEWAL OF LICENSE
12-39 [RENEWAL REQUIRED]. [(a)] The board shall specify:
12-40 (1) the form of the application for a license;
12-41 (2) the term of a license; and
12-42 (3) the requirements for [provide for the] renewal of
12-43 a license. [A person licensed under this chapter must pay to the
12-44 board a biennial license fee. On payment of the required fee, the
12-45 board shall renew the person's license for a period of two years.]
12-46 [(b) A license expires on December 31 of the applicable year
12-47 or on another date as set by the board under Subsection (c). The
12-48 board shall provide that half of the licenses issued by the board
12-49 expire in each even-numbered year and that the other half expire in
12-50 each odd-numbered year. The board shall prorate the license fee
12-51 for a person whose license term is for less than two years as a
12-52 result of the board's providing for half of the licenses to expire
12-53 in consecutive years.]
12-54 [(c) The board by rule may adopt a system under which
12-55 licenses expire on a date other than December 31. For the biennium
12-56 in which the license expiration date is changed, license fees shall
12-57 be prorated on a monthly basis so that each license holder pays
12-58 only that portion of the fee that is allocable to the number of
12-59 months during which the license is valid. On renewal of the
12-60 license on the new expiration date, the total license renewal fee
12-61 is payable.]
12-62 SECTION 27. Subsections (a) and (c), Section 901.411,
12-63 Occupations Code, are amended to read as follows:
12-64 (a) A license holder who is an individual shall participate
12-65 in a program of continuing professional education designed to
12-66 maintain professional competency. The program must comply with
12-67 rules adopted by the board [complete at least 120 hours of
12-68 continuing professional education in each three-year period, 20
12-69 hours of which must be completed in each one-year period].
13-1 (c) The board by rule shall provide for the [biennial]
13-2 reporting of continuing professional education by a license holder
13-3 to coincide with the person's license renewal date.
13-4 SECTION 28. Subchapter I, Chapter 901, Occupations Code, is
13-5 amended by adding Section 901.412 to read as follows:
13-6 Sec. 901.412. REGISTRATION OF OUT-OF-STATE PRACTITIONER WITH
13-7 SUBSTANTIALLY EQUIVALENT QUALIFICATIONS. (a) An individual who
13-8 holds a certificate or license as a certified public accountant
13-9 issued by another state and whose principal place of business is
13-10 not in this state may exercise all the privileges of certificate
13-11 and license holders of this state without obtaining a certificate
13-12 or license under this chapter if:
13-13 (1) the National Association of State Boards of
13-14 Accountancy's National Qualification Appraisal Service has verified
13-15 that the other state has education, examination, and experience
13-16 requirements for certification or licensure that are comparable to
13-17 or exceed the requirements for licensure as a certified public
13-18 accountant of The American Institute of Certified Public
13-19 Accountants/National Association of State Boards of Accountancy
13-20 Uniform Accountancy Act and the board determines that the licensure
13-21 requirements of that Act are comparable to or exceed the licensure
13-22 requirements of this chapter; or
13-23 (2) the individual obtains from the National
13-24 Association of State Boards of Accountancy's National Qualification
13-25 Appraisal Service verification that the individual's education,
13-26 examination, and experience qualifications are comparable to or
13-27 exceed the requirements for licensure as a certified public
13-28 accountant of The American Institute of Certified Public
13-29 Accountants/National Association of State Boards of Accountancy
13-30 Uniform Accountancy Act and the board determines that the licensure
13-31 requirements of that Act are comparable to or exceed the licensure
13-32 requirements of this chapter.
13-33 (b) An individual who meets the requirements of Subsection
13-34 (a)(1) or (2) must register with the board to practice public
13-35 accountancy in this state. To register with the board, the
13-36 individual must:
13-37 (1) in the manner prescribed by board rule, notify the
13-38 board of the person's intent to practice; and
13-39 (2) pay a processing fee in an amount set by the board
13-40 not to exceed $250.
13-41 (c) An individual who registers under this section:
13-42 (1) is subject to the personal and subject matter
13-43 jurisdiction and disciplinary authority of the board and the courts
13-44 of this state;
13-45 (2) must comply with this chapter and the board's
13-46 rules; and
13-47 (3) is considered to have appointed the regulatory
13-48 agency of the state that issued the individual's certificate or
13-49 license as the individual's agent on whom process may be served in
13-50 any action or proceeding by the board against the individual.
13-51 (d) An individual's practice privileges under this section
13-52 are automatically revoked if the individual does not maintain the
13-53 authority to practice public accountancy in the other state.
13-54 SECTION 29. Sections 901.451, 901.452, 901.453, and 901.454,
13-55 Occupations Code, are amended to read as follows:
13-56 Sec. 901.451. USE OF TITLE OR ABBREVIATION FOR "CERTIFIED
13-57 PUBLIC ACCOUNTANT." (a) A person may not assume or use the title
13-58 or designation "certified public accountant," the abbreviation
13-59 "CPA," or any other title, designation, word, letter, abbreviation,
13-60 sign, card, or device tending to indicate that the person is a
13-61 certified public accountant unless the person holds a certificate
13-62 under this chapter[, or a firm composed of certified public
13-63 accountants, unless:]
13-64 [(1) the person is certified or registered, as
13-65 appropriate, and licensed under this chapter; and]
13-66 [(2) each of the person's offices in this state for
13-67 the practice of public accounting is maintained and registered as
13-68 required under Subchapter H].
13-69 (b) A person may not provide attest services or assume or
14-1 use the title "certified public accountants," the abbreviation
14-2 "CPAs," or any other title, designation, word, letter,
14-3 abbreviation, sign, card, or device tending to indicate that the
14-4 person is a certified public accountancy firm unless:
14-5 (1) the person holds a firm license issued under this
14-6 chapter;
14-7 (2) ownership of the person complies with the
14-8 requirements of this chapter and rules adopted by the board; and
14-9 (3) the person complies with board rules authorizing
14-10 the practice.
14-11 (c) The title or designation "certified public accountant"
14-12 and the abbreviation "CPA" may not be used in connection with an
14-13 office that is required to be under the supervision of a resident
14-14 manager under Section 901.353 unless the resident manager holds a
14-15 certificate and a license issued under this chapter.
14-16 Sec. 901.452. USE OF TITLE OR ABBREVIATION FOR "PUBLIC
14-17 ACCOUNTANT." A person may not assume or use the title or
14-18 designation "public accountant" or any other title, designation,
14-19 word, letter, abbreviation, sign, card, or device tending to
14-20 indicate that the person is a public accountant, or a firm composed
14-21 of public accountants, unless:
14-22 (1) the person is certified [or registered, as
14-23 appropriate,] and licensed under this chapter; and
14-24 (2) each of the person's offices in this state for the
14-25 practice of public accounting is maintained and practices under a
14-26 firm license [registered] as required under Subchapter H.
14-27 Sec. 901.453. USE OF OTHER TITLES OR ABBREVIATIONS.
14-28 (a) Except as provided by Subsection (b), a person may not assume
14-29 or use:
14-30 (1) a title or designation likely to be confused with
14-31 "certified public accountant" or "public accountant," including
14-32 "certified accountant," "chartered accountant," "enrolled
14-33 accountant," [or] "licensed accountant," "registered accountant,"
14-34 or "accredited accountant"; or
14-35 (2) an abbreviation likely to be confused with "CPA,"
14-36 including "CA," "PA," "EA," "RA," "LA," or "AA." [or "LA."]
14-37 (b) A person may hold the person out to the public as an
14-38 "accountant," "auditor," or any combination of those terms if:
14-39 (1) the person holds a license issued under this
14-40 chapter; and
14-41 (2) each of the person's offices in this state for the
14-42 practice of public accounting is maintained and practices under a
14-43 firm license [registered] as required under Subchapter H.
14-44 Sec. 901.454. TITLE USED BY CERTAIN OUT-OF-STATE OR FOREIGN
14-45 ACCOUNTANTS. (a) A person who is an accountant of another state
14-46 [or foreign country] may use the title under which the accountant
14-47 is generally known in the state [or country] from which the
14-48 accountant received a certificate, license, or degree, followed by
14-49 the name of that state [or country], if:
14-50 (1) the person [is registered and] holds a license
14-51 issued under this chapter; and
14-52 (2) each of the person's offices in this state for the
14-53 practice of public accountancy is maintained and practices under a
14-54 firm license [registered] as required under Subchapter H.
14-55 (b) A person who holds a certification, degree, license, or
14-56 other credential granted in a foreign jurisdiction that entitles
14-57 the person to engage in the practice of public accountancy or its
14-58 equivalent in that jurisdiction may use in this state any title or
14-59 designation under which the person practices in the foreign
14-60 jurisdiction, followed by a translation of the title or designation
14-61 into English if it is in a different language and by the name of
14-62 that jurisdiction, if:
14-63 (1) the person's activities in this state are limited
14-64 to the provision of professional accounting services to persons who
14-65 are residents, governments, or business entities of that foreign
14-66 jurisdiction; and
14-67 (2) the person does not perform attest services or
14-68 issue reports on the financial statements of any other person in
14-69 this state.
15-1 (c) A person registered under Section 901.355 shall
15-2 [represent to the public that the person is a certified public
15-3 accountant of the state that issued the certificate or] use the
15-4 title held in the country from which the person received a
15-5 certificate, license, or degree, and shall indicate the name of the
15-6 [state or] country.
15-7 SECTION 30. Subsection (c), Section 901.455, Occupations
15-8 Code, is amended to read as follows:
15-9 (c) A corporation that is [registered and] licensed under
15-10 this chapter may practice public accountancy under a corporate name
15-11 indicating that it is engaged in that practice.
15-12 SECTION 31. Sections 901.456 and 901.457, Occupations Code,
15-13 are amended to read as follows:
15-14 Sec. 901.456. REPORTS ON FINANCIAL STATEMENTS; USE OF NAME
15-15 OR SIGNATURE ON CERTAIN DOCUMENTS. (a) Only a license holder may
15-16 issue a report on a financial statement of another person or
15-17 otherwise perform or offer to perform an attest service.
15-18 (b) A person who is not a license holder:
15-19 (1) may not use language in any statement related to
15-20 the financial affairs of a person that is conventionally used by
15-21 license holders in reports on financial statements;
15-22 (2) may prepare financial statements; and
15-23 (3) may issue nonattest transmittals or information
15-24 regarding nonattest transmittals if the transmittals or information
15-25 do not purport to be in compliance with standards for accounting
15-26 and review services adopted by the American Institute of Certified
15-27 Public Accountants or another national accountancy organization
15-28 recognized by the board.
15-29 (c) The following safe harbor language may be used by a
15-30 person who is not a license holder without violating Subsection
15-31 (b): "(I/We) have prepared the accompanying balance sheet of
15-32 (client's name) as of (date) and the related statements of income,
15-33 retained earnings, and cash flow changes in financial position for
15-34 the (period then ended). These financial statements, which are the
15-35 representation of management and which are presented to be used for
15-36 federal income tax purposes, (are/are not) in agreement with the
15-37 company's financial records. Management has elected to omit
15-38 substantially all informative disclosures with respect to these
15-39 financial statements. If the omitted disclosures were included in
15-40 the above financial statements, they might influence the user's
15-41 conclusion concerning the company's financial position, results of
15-42 operations, and/or changes in financial position. (I/We) do not
15-43 express any form of assurance with respect to these financial
15-44 statements."
15-45 (d) Unless a person is in compliance with this chapter, the
15-46 person may not sign on or affix to an accounting or financial
15-47 statement, or an opinion on, report on, or certificate to an
15-48 accounting or financial statement, the person's name or a trade or
15-49 assumed name used by the person in the person's profession or
15-50 business with any wording indicating that the person:
15-51 (1) is an accountant or auditor; or
15-52 (2) has expert knowledge in accounting or auditing.
15-53 (e) [(b)] This section does not prohibit:
15-54 (1) a partner, officer, employee, or principal of an
15-55 organization from signing a statement or report regarding the
15-56 financial affairs of the organization with wording that designates
15-57 the position, office, or title held by the person in the
15-58 organization; [or]
15-59 (2) any act of a public official or public employee in
15-60 the performance of the person's duties as a public official or
15-61 public employee; or
15-62 (3) the performance by a person who is not a license
15-63 holder of a service that is not an attest service and that involves
15-64 the use of bookkeeping skills, including:
15-65 (A) the preparation of tax returns;
15-66 (B) management advisory services; or
15-67 (C) the preparation of financial statements
15-68 without the issuance of reports.
15-69 (f) A license holder who performs attest services must
16-1 provide those services in accordance with standards adopted by the
16-2 American Institute of Certified Public Accountants or another
16-3 national accountancy organization recognized by the board.
16-4 Sec. 901.457. ACCOUNTANT-CLIENT PRIVILEGE. (a) A license
16-5 holder or a partner, member, officer, shareholder, or employee of a
16-6 license holder may not voluntarily disclose information
16-7 communicated to the license holder or a partner, member,
16-8 shareholder, or employee of the license holder by a client in
16-9 connection with services provided to the client by the license
16-10 holder or a partner, member, shareholder, or employee of the
16-11 license holder [in the practice of public accountancy], except with
16-12 the permission of the client or the client's representative.
16-13 (b) This section does not prohibit a license holder from
16-14 disclosing information that is required to be disclosed:
16-15 (1) by the professional standards for reporting on the
16-16 examination of a financial statement;
16-17 (2) under [in] a summons under the provisions of the
16-18 Internal Revenue Code of 1986 and its subsequent amendments, the
16-19 Securities Act of 1933 (15 U.S.C. Section 77a et seq.) and its
16-20 subsequent amendments, or the Securities Exchange Act of 1934 (15
16-21 U.S.C. Section 78a et seq.) and its subsequent amendments or under
16-22 a court order if the summons or order:
16-23 (A) is addressed to the license holder;
16-24 (B) mentions the client by name; and
16-25 (C) requests specific information concerning the
16-26 client [court proceeding];
16-27 (3) in an investigation or proceeding conducted by the
16-28 board;
16-29 (4) in an ethical investigation conducted by a
16-30 professional organization of certified public accountants; or
16-31 (5) in the course of a peer [quality] review under
16-32 Section 901.159.
16-33 SECTION 32. Subsections (a) and (b), Section 901.458,
16-34 Occupations Code, are amended to read as follows:
16-35 (a) In this section, "direct labor cost" means:
16-36 (1) the total compensation paid to a person who
16-37 performs services; and
16-38 (2) the employer payroll expenses related to that
16-39 compensation, including workers' compensation insurance premiums,
16-40 social security contributions, costs of participating in retirement
16-41 plans, group insurance costs, and unemployment taxes.
16-42 (b) A person creates a presumption of loss of independence
16-43 if the person:
16-44 (1) holds a certificate or firm license issued under
16-45 this chapter [or is registered under this chapter]; and
16-46 (2) performs or offers to perform an attest [a]
16-47 service [involving auditing skills] for compensation that is less
16-48 than the direct labor cost reasonably expected to be incurred in
16-49 performing the service.
16-50 SECTION 33. Subchapter J, Chapter 901, Occupations Code, is
16-51 amended by adding Section 901.460 to read as follows:
16-52 Sec. 901.460. PERFORMING ATTEST SERVICES. (a) A
16-53 certificate holder may perform attest services only in a certified
16-54 public accountancy firm.
16-55 (b) A license holder who is an individual and who is
16-56 responsible for supervising attest services or signs or authorizes
16-57 another person to sign an accountant's reports on financial
16-58 statements on behalf of a certified public accountancy firm must
16-59 meet the competency requirements of the professional standards that
16-60 apply to those services.
16-61 SECTION 34. Sections 901.501, 901.502, and 901.504,
16-62 Occupations Code, are amended to read as follows:
16-63 Sec. 901.501. DISCIPLINARY POWERS OF BOARD. (a) On a
16-64 determination that a ground for discipline exists under Section
16-65 901.502, after notice and hearing as provided by Section 901.509,
16-66 the board may:
16-67 (1) revoke a certificate, firm license, or practice
16-68 privilege [or registration] issued under this chapter;
16-69 (2) suspend under any terms a certificate, firm
17-1 license, practice privilege [registration], or license issued under
17-2 this chapter for a period not to exceed five years;
17-3 (3) refuse to renew a license;
17-4 (4) place a license holder on probation;
17-5 (5) reprimand a license holder;
17-6 (6) limit the scope of a license holder's practice;
17-7 (7) require a license holder to complete a peer review
17-8 program conducted in the manner prescribed by the board;
17-9 (8) require a license holder to complete a continuing
17-10 education program specified by the board;
17-11 (9) impose on a license holder the direct
17-12 administrative costs incurred by the board in taking action under
17-13 Subdivisions (1) through (8) [(6)]; or
17-14 (10) [(8)] impose an administrative penalty under
17-15 Subchapter L.
17-16 (b) If a person's [an individual's] license suspension is
17-17 probated, the board may require the person [individual] to:
17-18 (1) report regularly to the board on matters that are
17-19 the basis of the probation;
17-20 (2) limit practice to the areas prescribed by the
17-21 board; or
17-22 (3) continue or renew professional education until the
17-23 license holder attains a degree of skill satisfactory to the board
17-24 in those areas that are the basis of the probation.
17-25 Sec. 901.502. GROUNDS FOR DISCIPLINARY ACTION. The board
17-26 may discipline a person under Section 901.501 for:
17-27 (1) fraud or deceit in obtaining a certificate, firm
17-28 license [registration], or license under this chapter;
17-29 (2) fraud, dishonesty, or gross negligence in the
17-30 performance of services as a license holder [practice of public
17-31 accountancy], including:
17-32 (A) knowingly participating in the preparation
17-33 of a false or misleading financial statement or tax return; or
17-34 (B) failing to file the license holder's own
17-35 income tax return;
17-36 (3) the failure of a person who is certified or
17-37 required to hold a firm license [registered] under this chapter to
17-38 obtain a license not later than the third anniversary of the date
17-39 on which the person was certified or required to obtain a firm
17-40 license [registered];
17-41 (4) the failure of a person who is licensed under this
17-42 chapter to renew the license not later than the third anniversary
17-43 of the date on which the person most recently obtained or renewed
17-44 the license;
17-45 (5) a violation of Subchapter J, other than Section
17-46 901.457 or 901.459;
17-47 (6) a violation of a rule of professional conduct
17-48 adopted by the board;
17-49 (7) a revocation or suspension of the certificate or
17-50 firm license [registration] or a revocation, suspension, or refusal
17-51 to renew the license of the person's partner, member, or
17-52 shareholder;
17-53 (8) a revocation, cancellation, placement on
17-54 probation, limitation on the scope of practice, or suspension by
17-55 another state, or a refusal of renewal by another state, of the
17-56 authority issued by that state to the person, or to the person's
17-57 partner, member, or shareholder, to engage in the practice of
17-58 public accountancy for a reason other than the failure to pay the
17-59 appropriate authorization [registration] fee;
17-60 (9) a revocation or suspension of, or a voluntary
17-61 consent decree concerning, the right of the person, or of the
17-62 person's partner, member, or shareholder, to practice before a
17-63 state or federal agency for a reason the board determines warrants
17-64 its action;
17-65 (10) a final conviction of or the imposition of
17-66 deferred adjudication for an offense under the laws of any state or
17-67 the United States that:
17-68 (A) is a felony; or
17-69 (B) includes fraud or dishonesty as an element
18-1 of the offense; [or]
18-2 (11) conduct indicating lack of fitness to serve the
18-3 public as a professional accountant; or
18-4 (12) a violation by a license holder or an owner of a
18-5 certified public accountancy firm who is not a license holder of:
18-6 (A) this chapter;
18-7 (B) professional standards adopted by the board;
18-8 or
18-9 (C) a rule or order adopted by the board.
18-10 Sec. 901.504. LICENSE REVOCATION BASED ON VIOLATION OF
18-11 CHAPTER. After notice and hearing as provided by Section 901.509,
18-12 the board:
18-13 (1) may revoke a license that was issued or renewed in
18-14 violation of this chapter or a rule adopted under this chapter; and
18-15 (2) shall revoke the firm [registration and] license
18-16 of a sole proprietorship, partnership, [or] corporation, limited
18-17 liability company, or other business entity that does not meet each
18-18 qualification for a firm license [registration] prescribed by this
18-19 chapter.
18-20 SECTION 35. Subsections (a) and (d), Section 901.505,
18-21 Occupations Code, are amended to read as follows:
18-22 (a) On conviction of a person of an offense under the laws
18-23 of any state or the United States that is a felony or that includes
18-24 fraud or dishonesty as an element of the offense, after notice and
18-25 hearing as provided by Section 901.509, the board may:
18-26 (1) suspend a certificate or firm license
18-27 [registration] issued under this chapter; or
18-28 (2) suspend or refuse to renew a license issued under
18-29 this chapter.
18-30 (d) If the conviction is reversed, set aside, or modified so
18-31 that the underlying offense is not a felony or an offense that
18-32 includes fraud or dishonesty as an element of the offense, the
18-33 board shall reinstate the certificate, firm license [registration],
18-34 or license suspended under this section. A reinstatement under
18-35 this subsection does not limit the board's right to take other
18-36 disciplinary action authorized by this subchapter.
18-37 SECTION 36. Sections 901.506 and 901.507, Occupations Code,
18-38 are amended to read as follows:
18-39 Sec. 901.506. VOLUNTARY SURRENDER OF CERTIFICATE OR FIRM
18-40 LICENSE [REGISTRATION]. (a) Subject to board approval, a person
18-41 [an individual] who holds a certificate or firm license
18-42 [registration] issued under this chapter may resign and surrender
18-43 the certificate or firm license [registration] to the board at any
18-44 time and for any reason.
18-45 (b) A person [An individual] who resigns and surrenders a
18-46 certificate or firm license [registration] may not apply for
18-47 reinstatement of the certificate or firm license [registration].
18-48 The person [individual] may be issued a new certificate or firm
18-49 license [registration] on completion of all requirements for the
18-50 issuance of an original certificate or firm license [registration].
18-51 The board may not issue a certificate to an individual who
18-52 previously resigned a certificate unless:
18-53 (1) after the date of resignation, the individual
18-54 completes the examination requirement for a new certificate; or
18-55 (2) on application, the board waives the examination
18-56 requirement.
18-57 (c) A person [An individual] who applies for a new
18-58 certificate or firm license [registration] must, if applicable,
18-59 disclose in the application the fact that the person [individual]
18-60 previously resigned and surrendered a certificate or firm license
18-61 [registration] during the course of a disciplinary investigation or
18-62 proceeding conducted by the board. The board shall consider that
18-63 fact in determining whether to issue a new certificate or firm
18-64 license [registration] to the person [individual].
18-65 Sec. 901.507. REINSTATEMENT. On receipt of a written
18-66 application, and after notice and hearing, the board may:
18-67 (1) issue a new certificate to an individual whose
18-68 certificate was revoked;
18-69 (2) issue a new firm license to [reregister] a person
19-1 whose firm license [registration] was revoked;
19-2 (3) reinstate a suspended license or modify the terms
19-3 of the suspension;
19-4 (4) approve a previously denied application to take
19-5 the uniform CPA examination; or
19-6 (5) reinstate an individual's previously voided
19-7 uniform CPA examination grades.
19-8 SECTION 37. Subchapter K, Chapter 901, Occupations Code, is
19-9 amended by adding Section 901.511 to read as follows:
19-10 Sec. 901.511. DISCIPLINARY ACTION FOR ACT COMMITTED IN
19-11 ANOTHER STATE. (a) A license holder of this state who offers to
19-12 perform or performs professional accounting services or who uses
19-13 the license holder's title as a certified public accountant in
19-14 another state or jurisdiction is subject to disciplinary action in
19-15 this state for an act committed in the other state or jurisdiction
19-16 for which the license holder would be subject to discipline as a
19-17 license holder of the other state or jurisdiction.
19-18 (b) The board shall investigate any complaint made by the
19-19 regulatory agency of another state or jurisdiction concerning a
19-20 license holder of this state.
19-21 SECTION 38. Subsection (b), Section 901.601, Occupations
19-22 Code, is amended to read as follows:
19-23 (b) An action under Subsection (a)(1) must be brought in
19-24 district court in:
19-25 (1) Travis County, if the person is licensed under
19-26 this chapter or is not a resident of this state; or
19-27 (2) the county in which the person resides, if the
19-28 person is a resident of this state but is not licensed under this
19-29 chapter.
19-30 SECTION 39. Subsection (c), Section 901.602, Occupations
19-31 Code, is amended to read as follows:
19-32 (c) A complaint filed under this section must be filed in a
19-33 district court in:
19-34 (1) Travis County, if the complaint is filed against a
19-35 person who is [registered or] licensed under this chapter or is not
19-36 a resident of this state; or
19-37 (2) the county in which the person resides, if the
19-38 complaint is filed against a person who is a resident of this state
19-39 but is not [registered or] licensed under this chapter.
19-40 SECTION 40. Subchapter M, Chapter 901, Occupations Code, is
19-41 amended by adding Sections 901.603, 901.604, and 901.605 to read as
19-42 follows:
19-43 Sec. 901.603. INTERVENTION IN ACTION. Subject to approval
19-44 by the board, a license holder or a professional organization of
19-45 certified public accountants may intervene in an action by the
19-46 board or may bring an action in the name of the license holder or
19-47 professional organization to enforce any provision of this chapter
19-48 against a person who does not hold a license or firm license.
19-49 Sec. 901.604. SINGLE ACT AS EVIDENCE OF PRACTICE. In an
19-50 action brought under this chapter, evidence of a single act
19-51 prohibited by this chapter is sufficient to justify a penalty,
19-52 injunction, restraining order, or conviction without evidence of a
19-53 general course of conduct.
19-54 Sec. 901.605. APPOINTMENT OF SECRETARY OF STATE AS AGENT. A
19-55 person who is not a resident of this state and who applies for a
19-56 certificate or firm license is considered to have appointed the
19-57 secretary of state as the applicant's agent for service of process
19-58 in any action or proceeding against the applicant arising out of
19-59 any transaction connected with or incidental to professional
19-60 accounting services performed by the applicant while the applicant
19-61 holds a certificate or firm license.
19-62 SECTION 41. (a) This Act takes effect September 1, 2001.
19-63 (b) A person who is registered under Subchapter H, Chapter
19-64 901, Occupations Code, on the effective date of this Act is
19-65 considered to hold a firm license under that subchapter as amended
19-66 by this Act and is not required to obtain a firm license under that
19-67 subchapter until the date the registration expires.
19-68 (c) The Texas State Board of Public Accountancy shall adopt
19-69 rules under Subsection (a), Section 901.304, and Section 901.307,
20-1 Occupations Code, as amended by this Act, not later than January 1,
20-2 2002.
20-3 (d) Subsection (a), Section 901.304, and Section 901.307,
20-4 Occupations Code, as amended by this Act, apply only to an
20-5 examination given on or after the date the Texas State Board of
20-6 Public Accountancy adopts rules under those sections as required by
20-7 this Act. An examination given before the date the board adopts
20-8 rules under those sections is governed by the law in effect when
20-9 the examination was given, and the former law is continued in
20-10 effect for that purpose.
20-11 (e) The change in law made by this Act applies only to an
20-12 offense committed on or after the effective date of this Act. For
20-13 purposes of this subsection, an offense is committed before the
20-14 effective date of this Act if any element of the offense occurs
20-15 before that date.
20-16 (f) An offense committed before the effective date of this
20-17 Act is governed by the law in effect when the offense was
20-18 committed, and the former law is continued in effect for that
20-19 purpose.
20-20 * * * * *