HBA-DMH S.B. 1358 77(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 1358 By: Armbrister Licensing & Administrative Procedures 5/2/2001 Engrossed BACKGROUND AND PURPOSE The public accounting profession is a key component of business and commerce in Texas. Because of changes in the profession brought about by technology, the globalization of business, and the demand for a wide array of services being sought by the public, modernization of accounting regulation is necessary. New concepts must be embraced to regulate the profession across state and federal boundaries, to allow the assimilation of diverse financial disciplines into a single organization, to recognize new national competency standards for attest services, and to concentrate regulation in those areas where the public trust is highest. Senate Bill 1358 modernizes accounting regulation by simplifying yet strengthening the practice of certified public accountants (CPAs) across state lines, allowing financial professionals of other disciplines to partner with CPAs in one organization, strengthening required competency standards for attest services, and focusing regulation of those attest services while maintaining the CPA's requirement to offer competence, integrity, and objectivity in all services offered to the public. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the Texas State Board of Public Accountancy in SECTION 7 (Section 901.158, Occupations Code), SECTION 12 (Section 901.165, Occupations Code), SECTION 14 (Section 901.254, Occupations Code), SECTION 17 (Section 901.260, Occupations Code), SECTION 19 (Section 901.304, Occupations Code), SECTION 22 (Section 901.307, Occupations Code), SECTION 23 (Sections 901.351 and 901.354, Occupations Code), and SECTION 41 of this bill. ANALYSIS Senate Bill 1358 amends the Occupations Code to establish provisions for the regulation of assurance and attest services in the scope of the Public Accountancy Act (Act). The bill authorizes the Texas State Board of Public Accountancy (board) to contract with another person to conduct uniform Certified Public Accountant (CPA) examinations and modifies the fees the board is required to collect for each CPA examination (Secs. 901.301 and 901.304). The bill deletes the provision providing that a person must attain a grade of at least 75 percent on each subject of the examination to pass the examination, and requires the board by rule to adopt a method for grading the examination and to estabish the criteria for passing the examination (Sec. 901.307). The bill requires the board to adopt rules for examination or reexamination fees and grading not later than January 1, 2002 (SECTION 41). The bill requires the board by rule to provide for the reporting, rather than the biennial reporting, of continuing professional education relating to a license holder. The bill requires an individual license holder to participate in a program of continuing professional education designed to maintain professional competency that complies with board rule (Sec. 901.411). The bill modifies the circumstances for which the board is required to issue a certificate or license to a person who holds a certificate or license in another state, modifies practice privileges of an out-of-state certificate or license holder, and provides for the appointment of the secretary of state as the nonresident certificate or license holder's agent (Secs. 901.259, 901.412, and 901.605). The bill provides that an applicant for the uniform CPA examination must have completed specified semester hours, including an accounting concentration or equivalent courses as determined by board rule (Sec. 901.254). The bill authorizes the board to issue a certificate to an applicant who holds a substantially equivalent foreign credential if certain conditions and requirements are met (Sec. 901.260). The bill requires the board to investigate any complaint made by the regulatory agency of another state or jurisdiction concerning a license holder and sets forth provisions for disciplinary actions for acts committed by a license holder in another state (Sec. 901.511). The bill authorizes the board by rule to adopt a system to investigate the background of an individual owner of a CPA firm who is not a license holder under the Act (Sec. 901.354). The bill modifies license information and eligibility requirements for a firm (Sec. 901.354). The bill deletes specific requirements for license renewal and requires the board to specify the form of the application for a license, the term of a license, and the requirements for renewal of a license (Sec. 901.403). The bill clarifies the use of titles by certain certificate and license holders (Secs. 901.452-901.454). The bill establishes issuing requirements for a report on a financial statement and provides safe harbor language that a person who is not a license holder may use without committing a financial statement reporting violation (Sec. 901.456). The bill modifies the board's authority to take disciplinary action (Secs. 901.501 and 901.502). The bill removes the prohibitions limiting the rule adopting powers of the board relating to advertising or competitive bidding by a license holder and authorizes the board to establish rules regulating competitive practices (Sec. 901.158). The bill redesignates the quality review program as the peer review program and sets forth provisions regarding verification (Sec. 901.159). The bill specifies that certain actions of an attorney or firm of attorneys or a representative of a financial institution are not restricted under the Act (Sec. 901.004). The bill requires the state to hold each board member, employee, or agent of the board and volunteer member of a constructive enforcement committee of the board harmless from any cost, damage, or attorney's fees arising from a claim or suit against that person for an action taken by the person in good faith in the discharge of the board's responsibilities (Sec. 901.162). The bill sets forth provisions regarding intervention in an action by the board and evidence sufficient to justify a penalty (Secs. 901.603 and 901.604). The bill modifies the application of the Texas Sunset Act by providing that the board is abolished September 1, 2005, rather than September 1, 2003 ( Sec. 901.006). EFFECTIVE DATE September 1, 2001.