Senate File 237 - Introduced SENATE FILE 237 BY COMMITTEE ON STATE GOVERNMENT (SUCCESSOR TO SSB 1033) A BILL FOR An Act relating to the practice of public accountants. 1 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 2 TLSB 2201SV (1) 87 gh/rn/rj

S.F. 237 Section 1. Section 542.3, subsection 27, Code 2017, is 1 amended to read as follows: 2 27. “State” means a state of the United States, the District 3 of Columbia, Puerto Rico, the United States Virgin Islands, the 4 Commonwealth of the Northern Mariana Islands, or Guam. 5 Sec. 2. Section 542.6, subsection 1, paragraph b, Code 2017, 6 is amended to read as follows: 7 b. The holder of a certificate issued under this section 8 shall only provide attest services in a certified public 9 accounting firm that is issued a permit under section 542.7 , 10 or through a certified public accounting firm with a practice 11 privilege under section 542.20 . 12 Sec. 3. Section 542.7, subsection 1, paragraphs a and c, 13 Code 2017, are amended to read as follows: 14 a. A firm must hold a permit issued under this section if 15 the firm performs attest services in this state or for clients 16 having a home office in this state or has an office in this 17 state and uses the title “CPAs”, “CPA firm”, “certified public 18 accountants”, or “certified public accounting firm”. 19 c. A firm that holds a permit issued under this chapter 20 shall designate to the board the licensee or person with a 21 practice privilege under section 542.20 nonlicensee who is 22 responsible for the proper licensure of the firm and the 23 firm’s compliance with all applicable laws and rules of this 24 state. If such firm has one or more offices in this state, the 25 firm shall designate to the board one or more persons who are 26 licensed under this chapter who are responsible for the proper 27 registration of each Iowa office of the firm and each office’s 28 compliance with all applicable laws and rules of this state. 29 Sec. 4. Section 542.8, subsection 12, paragraph b, 30 subparagraph (2), Code 2017, is amended to read as follows: 31 (2) All nonlicensee owners are of good moral character and 32 active participants in the firm or an affiliated entity. 33 Sec. 5. Section 542.8, subsection 12, paragraphs c and d, 34 Code 2017, are amended to read as follows: 35 -1- LSB 2201SV (1) 87 gh/rn/rj 1/ 5

S.F. 237 c. An individual licensee or person with a practice 1 privilege under section 542.20 who is responsible for 2 compilation services and signs or authorizes someone to sign 3 the accountant’s report on the financial statements on behalf 4 of the firm shall meet the competency requirements set out in 5 nationally recognized professional standards for such services. 6 d. An individual licensee or person with a practice 7 privilege under section 542.20 who signs or authorizes someone 8 to sign the accountant’s report on the financial statements on 9 behalf of the firm shall meet the competency requirements set 10 out in nationally recognized professional standards for such 11 services. 12 Sec. 6. Section 542.20, subsection 5, Code 2017, is amended 13 to read as follows: 14 5. A certified public accounting firm that is licensed 15 in the state of its principal place of business and is not 16 required to hold an Iowa firm license under section 542.7 17 may practice in this state without a firm license under this 18 chapter or notice to the board if the firm’s practice in this 19 state is performed by individuals who hold a license under this 20 chapter or who practice in conformance with subsection 6 , under 21 the following conditions: 22 a. The firm shall not perform attest services, other than 23 review services, in Iowa or for a client having a home office 24 in Iowa. 25 b. a. The firm shall not have an office in Iowa which uses 26 the title “CPAs”, “CPA firm”, “certified public accountants”, 27 or “certified public accounting firm”. 28 c. The firm may perform compilation or review services only 29 if it complies with the ownership and peer review requirements 30 of section 542.7 . 31 d. b. The firm shall not make any representation tending to 32 falsely indicate that the firm is licensed under this chapter . 33 e. c. The firm, upon a client’s or prospective client’s 34 request, shall provide accurate information on the state or 35 -2- LSB 2201SV (1) 87 gh/rn/rj 2/ 5

S.F. 237 states of licensure, principal place of business, contact 1 information, and manner in which licensure status can be 2 verified. 3 f. d. The firm shall comply with all professional 4 standards, laws, and rules that apply to licensees performing 5 the same professional services. 6 e. The firm shall comply with the ownership and peer review 7 requirements of section 542.7. 8 Sec. 7. Section 542.20, subsection 6, paragraph c, Code 9 2017, is amended to read as follows: 10 c. An individual who provides attest services , other than 11 review services, in Iowa or for a client having a home office 12 in Iowa must practice through a certified public accounting 13 firm that is licensed under section 542.7 , or through a 14 certified public accounting firm that is validly licensed in 15 the state of its principal place of business and complies with 16 the ownership and peer review requirements of section 542.7 . 17 Sec. 8. Section 542.20, subsection 6, paragraph h, Code 18 2017, is amended by striking the paragraph. 19 EXPLANATION 20 The inclusion of this explanation does not constitute agreement with 21 the explanation’s substance by the members of the general assembly. 22 This bill modifies provisions relating to the practice of 23 public accountants. 24 The bill adds the Commonwealth of the Northern Mariana 25 Islands to the definition of “state” in Code section 542.3(27). 26 Code section 542.6(1)(b) provides that certified public 27 accountants (CPAs) may only provide attest services in a firm 28 that is issued a permit under Code section 542.7. The bill 29 allows CPAs to also provide attest services through firms with 30 practice privileges as defined in Code section 542.3(24). 31 Code section 542.7(1)(a) requires a firm to obtain a permit 32 if it performs certain attest services in Iowa or if it has an 33 office in Iowa and uses certain titles. The bill removes a 34 firm performing attest services in Iowa from the type of firms 35 -3- LSB 2201SV (1) 87 gh/rn/rj 3/ 5

S.F. 237 requiring a permit. 1 Code section 542.7(1)(c) requires a firm issued a permit to 2 designate to the board the licensee or person with a practice 3 privilege who is responsible for the firm’s licensure and 4 legal compliance. The bill replaces “person with a practice 5 privilege” with “nonlicensee”. 6 Code section 542.8(12)(b) lists the conditions required for 7 a licensed public accounting (LPA) firm to have a nonlicensee 8 owner. The bill requires a nonlicensee owner to be of good 9 moral character in addition to all other current requirements. 10 Code section 542.8(12)(c) and (d) requires a licensee or 11 person with a practice privilege who is authorized to sign an 12 accountant’s report on financial statements on behalf of an LPA 13 firm to meet certain competency requirements. The bill removes 14 “financial statements” in reference to a report requiring these 15 additional competency requirements. 16 Code section 542.20(5) lists the conditions required for a 17 CPA firm to hold practice privileges without needing to obtain 18 a firm license. The bill removes the condition that a firm 19 cannot perform attest services in Iowa, and the condition that 20 a firm may perform compilation or review services only if it 21 complies with the Iowa ownership and peer review requirements. 22 However, the bill adds as a separate condition that a firm must 23 comply with the Iowa ownership and peer review requirements. 24 Code section 542.20(6) lists the conditions required for a 25 person to hold the practice privileges of a CPA without needing 26 to obtain a certificate. Under Code section 542.20(6)(c), 27 a person who provides attest services in Iowa must practice 28 through an Iowa-licensed CPA firm. The bill broadens the types 29 of attesting services applicable in such condition, and allows 30 a person to also practice through a CPA firm that is validly 31 licensed in the state of its principal place of business and 32 complies with the Iowa ownership and peer review requirements. 33 The bill also removes the condition that a person who provides 34 reviews of certain financial statements must provide such 35 -4- LSB 2201SV (1) 87 gh/rn/rj 4/ 5

S.F. 237 services through a CPA firm that is validly licensed in the 1 state of its principal place of business and complies with the 2 Iowa ownership and peer review requirements. 3 -5- LSB 2201SV (1) 87 gh/rn/rj 5/ 5