CBA's full docket: CPE, client notification, peer review under scrutiny. (Government Relations).

The California Board of Accountancy is considering a regulation that would require CPAs who perform audits, reviews and compilations to complete eight hours of continuing professional education focused on the detection and reporting of fraud related to financial statements.

The CBA is developing regulations to implement the requirement and providing guidelines as to the kinds of courses that would qualify. For CPAs subject to the 24-hour auditing and accounting CPE requirement, this eight-hour requirement would be additional and increase the amount of CPE to 32 hours.

The regulation will be presented in March with a public hearing scheduled for July.

Client Notification

CPAs are required by Code of Regulations, Title 16, Division 1, Article 9, Section 50 to notify clients that they are licensed by the CBA.

CPAs can comply with this requirement in one of several ways: posting their CPA certificate in their office; having clients sign a dated and retained statement that they understand the CPA is licensed; sending an e-mail or posting the notice on a website indicating that the CPA is licensed by the CBA; including a statement in 12-point type above the signature line on a contract or letter to the client; or posting a notice in 48-point type in the reception area.

The only stipulation is that the notice must be reasonably calculated to be received by the client. CPAS posting the certificate in their offices would not be in compliance if clients never visited their offices.

The CBA is planning to strengthen this requirement in some, as yet undetermined, fashion.

Upcoming Regulatory Hearing

A public hearing will be held March 22 in Los Angeles on proposed regulations to implement the new reporting requirements for California CPAs; the records retention requirement; and other changes made to statutes in 2002.

Prior to the hearing, you may mail or e-mail written comments to the CBA.

To review the regulations, go to www.calcpa.org/members/GR/.

Peer Review

The CBA is reviewing a California law that would require firms with four or more CPAs to undergo a peer review every three years beginning in 2006 if the firm performs audits or reviews.

The CBA will determine if the law should be changed to eliminate the mandate in light of changes at the federal level.

A task force has been appointed to examine peer review and develop a report to the Legislature. The task force had its first meeting Jan. 23 and received a report from CPA Linda McCrone, CalCPA's director of technical services. McCrone presented data from the CBA's report on its quality monitoring program documenting the benefits of peer review.

Information also was provided which said that smaller firms (six or fewer professionals) received a significantly higher rate of findings than firms that employ more than six CPAs.

Charles Drott, CPA member of the CBA, is the task force chair and is on record as being opposed to the current peer review system.

Budget Woes Impact CBA

The state has had a hiring freeze--which (unless otherwise exempted) applies to state government agencies even if they do not receive general funds--for almost a year.

The CBA has several vacancies in its enforcement, examinations and licensing units. The enforcement vacancies are CPA investigator positions, some of which became vacant as CPAs were recruited away by another state agency shortly before the hiring freeze began.

CalCPA has an ongoing commitment to protect the public, but the decline in staff has the potential to impact that protection and create problems for CPA candidates.

CBA Members Appointed

In January, Senate President Pro Tem John Burton appointed San Francisco Bay Area attorney Renata Sos to the CBA, and Speaker Herb Wesson appointed Clifton Johnson, a Union Bank Manager, to the board.

The CBA has four vacancies remaining--three CPA slots and one unlicensed member--that will be appointed by Coy. Gray Davis.

Sunset Review to Begin

All regulatory boards are required to undergo periodic sunset reviews to document their effectiveness and efficiency in regulating the profession. During that review, proposals for major changes in regulation or even elimination of the regulatory board are brought forward.

Legislation passed last year will require sunset review of the CBA next year and the board is preparing its report to the Legislature.

Corporate Governance Task Force

Gov. Davis has appointed a task force on corporate governance composed of his appointees and department heads, including representatives of the CBA staff.

The task force met through the fall to consider what changes in California law should be made to increase oversight on corporations and the CPA profession in California.

That task force has completed a report to the governor, but it was not made public.

Officers Elected

Wendy Perez, CPA and CalCPA member, was elected CBA president in November. Ian Thomas, a non-licensee, was elected vice president, and Joseph Tseng, CPA and CalCPA member, was elected secretary/treasurer.

Bruce Allen is CalCPA's director of government relations.