New laws impact all CPAs. (Practice Alert).New California laws that will have the greatest impact on the CPA (Computer Press Association, Landing, NJ) An earlier membership organization founded in 1983 that promoted excellence in computer journalism. Its annual awards honored outstanding examples in print, broadcast and electronic media. The CPA disbanded in 2000. profession are AB 2873 (Frommer), AB 2970 (Wayne), AB 270 (Correa, Figueora), AB 2834 (Midgen) and SB1955 (Figueroa). Among the areas addressed by these laws and pending regulatory action are: Documentation Audit documentation must be retained for seven or more years. And all firms--whether they serve public or private companies--must have written retention and destruction policies for audit documentation. AB 2873 also establishes a rebuttable presumption A conclusion as to the existence or nonexistence of a fact that a judge or jury must draw when certain evidence has been introduced and admitted as true in a lawsuit but that can be contradicted by evidence to the contrary. . Beginning Jan. 1, 2003, you must supply and retain work papers Noun 1. work papers - a legal document giving information required for employment of certain people in certain countries work permit, working papers that would allow any reviewer with relevant knowledge and experience (but having no previous experience with the engagement) to understand the audit completely. If such papers are not in the engagement file and there is a dispute, the burden of proof shifts to the CPA to demonstrate to regulators that the appropriate work was performed. If the papers are not there, it is presumed that the auditor did not do the work. Auditor Cooling-Off Period An interval of time during which no action of a specific type can be taken by either side in a dispute. An automatic delay in certain jurisdictions, apart from ordinary court delays, between the time when Divorce papers are filed and the divorce hearing takes place. Similar to the Sarbanes-Oxley Act See SOX. , AB 2970 prohibits CPAs in a position of significant audit responsibility for an SEC client from assuming a responsible position with the client for one year after they performed the client's audit. Regulatory Changes The California Board of Accountancy has been expanded to 15 members, eight of whom are non-licensees. At least two licensees must be from small firms, which is defined as four or fewer licensees as partners or full-time professionals. The CBA See Capital Builder Account. is the last non-medical board in California to require an unlicensed majority. The new laws clarify (and thus strengthen) the CBA's subpoena subpoena (səpē`nə) [Lat.,=under penalty], in law, an order to a witness to appear before a court. A subpoena ad testificandum [Lat. power for disciplinary purposes. The CBA may require the participation of witnesses and production of files for disciplinary purposes. New laws also clarify that the Administrative Committee is advisory to the CBA and its executive staff. Discipline The definition of a "reportable event" has changed. Beginning Jan. 1, 2003, CPAs must report any of the following events to the CBA within 30 days. These events will be published for public review: * Any restatement of a financial statement by the audit client of a CPA. * Any civil settlement, arbitration award against a CPA relating to the practice of public accounting of $30,000 or more. * Receipt of a notice to a CPA of the initiation of a formal SEC investigation. * Any SEC notice to a licensee requesting a "Wells Submission." * The initiation of an investigation by the Public Company Accounting Oversight Board The Public Company Accounting Oversight Board (or PCAOB) (sometimes called "Peekaboo") is a private-sector, non-profit corporation created by the Sarbanes-Oxley Act, a 2002 United States federal law, to oversee the auditors of public companies. . * Any civil judgment alleging dishonesty, fraud, gross negligence An indifference to, and a blatant violation of, a legal duty with respect to the rights of others. Gross negligence is a conscious and voluntary disregard of the need to use reasonable care, which is likely to cause foreseeable grave injury or harm to persons, property, or , negligence, breach of fiduciary duty, preparation, publication or dissemination of false, fraudulent or materially misleading financial statements, embezzlement embezzlement, wrongful use, for one's own selfish ends, of the property of another when that property has been legally entrusted to one. Such an act was not larceny at common law because larceny was committed only when property was acquired by a "felonious taking," i. , theft, misappropriation misappropriation n. the intentional, illegal use of the property or funds of another person for one's own use or other unauthorized purpose, particularly by a public official, a trustee of a trust, an executor or administrator of a dead person's estate, or by any of funds or property. Also, discipline standards have been lowered from gross negligence to multiple acts of negligence that indicate a lack of competence to practice public accountancy or to operate a bookkeeping practice. Commissions AB 270 clarified the current commission statutes for CPAs to prohibit the sale of services or products for a commission from the existing audit and review clients to include the officers or directors of those clients or client-sponsored retirement plans. However, SB 1995 provides a small business and nonprofit director and officer exemption for commission services. School District Audits A new law requires mandatory six-year rotation of audit partners in school district audit firms; adherence to GAO Yellow Book standards for school district consulting; and the state controller to develop a list of school district audit firms. Non-CPA Ownership Firms with non-CPA owners are required to give notice to clients that non-CPA owners may perform client services now or in the future. |
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