House File 2489 - Introduced HOUSE FILE 2489 BY COMMITTEE ON STATE GOVERNMENT (SUCCESSOR TO HSB 695) A BILL FOR An Act relating to the auditor of state and including effective 1 date and applicability provisions. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 5451HV (2) 89 ss/rn

H.F. 2489 Section 1. NEW SECTION . 11.31A Auditor of state —— 1 divisions. 2 1. The auditor of state shall adopt rules establishing 3 divisions within the office of auditor of state. For each 4 division within the office of auditor of state that is 5 responsible for performing attest services as described in 6 section 542.3, the auditor of state shall appoint a deputy 7 auditor of state that is a certified public accountant to lead 8 that division. 9 2. If the auditor of state is not a certified public 10 accountant licensed pursuant to chapter 542, the auditor of 11 state shall not sign an attest report issued by the office of 12 auditor of state, but shall defer to the appropriate deputy 13 auditor of state who meets the experience or competency 14 requirements set out in nationally recognized professional 15 standards for such services. 16 3. The auditor of state shall comply with all applicable 17 rules of professional conduct adopted by the Iowa accountancy 18 examining board pursuant to section 542.4. 19 Sec. 2. Section 542.3, subsection 20, Code 2022, is amended 20 to read as follows: 21 20. “Peer review records” means a file, report, or other 22 information relating to the professional competence of 23 an applicant in the possession of a peer review team, or 24 information concerning the peer review developed by a peer 25 review team in the possession of an applicant. “Peer review 26 records” includes peer review reports. 27 Sec. 3. Section 542.3, Code 2022, is amended by adding the 28 following new subsection: 29 NEW SUBSECTION . 20A. “Peer review reports” means a study, 30 appraisal, or review of one or more aspects of a certified 31 public accounting firm’s compliance with applicable accounting, 32 auditing, and other attestation standards adopted by generally 33 recognized standard-setting bodies. 34 Sec. 4. Section 542.7, subsection 4, Code 2022, is amended 35 -1- LSB 5451HV (2) 89 ss/rn 1/ 5

H.F. 2489 to read as follows: 1 4. An applicant for initial issuance or renewal of a permit 2 to practice as a certified public accounting firm is required 3 to register each office of the firm within this state with the 4 board and to show that all attest and compilation services 5 rendered in this state are under the charge of a person holding 6 a valid certificate issued under section 542.6 or 542.19 , or 7 by another state if the holder has a practice privilege under 8 section 542.20 . However, the requirements of this subsection 9 shall not apply to the office of auditor of state if the 10 auditor of state otherwise complies with the requirements of 11 section 11.31A and this section. 12 Sec. 5. Section 542.7, subsection 10, Code 2022, is amended 13 to read as follows: 14 10. a. Peer review records are privileged and confidential, 15 and are not subject to discovery, subpoena, or other means 16 of legal compulsion. Peer review records are not admissible 17 in evidence in a judicial, administrative, or arbitration 18 proceeding. Unless the subject of a peer review timely objects 19 in writing to the administering entity of the peer review 20 program, the administering entity shall make available to the 21 board within thirty days of the issuance of the peer review 22 acceptance letter the final peer review report or such peer 23 review records as are designated by the peer review program in 24 which the administering entity participates. The subject of a 25 peer review may voluntarily submit the final peer review report 26 directly to the board. Information or documents discoverable 27 from sources other than a peer review team do not become 28 nondiscoverable from such other sources because they are made 29 available to or are in the possession of a peer review team. 30 Information or documents publicly available from the American 31 institute of certified public accountants relating to quality 32 or peer review are not privileged or confidential under this 33 subsection . A person or organization participating in the 34 peer review process shall not testify as to the findings, 35 -2- LSB 5451HV (2) 89 ss/rn 2/ 5

H.F. 2489 recommendations, evaluations, or opinions of a peer review team 1 in a judicial, administrative, or arbitration proceeding. 2 b. However, notwithstanding any provision of this subsection 3 to the contrary, peer review reports concerning the office of 4 auditor of state shall be considered a public record pursuant 5 to chapter 22. 6 Sec. 6. NEW SECTION . 542.7A Office of auditor of state. 7 1. The office of auditor of state shall qualify as a 8 certified public accounting firm subject to the requirements of 9 sections 11.31, 11.31A, and 542.7. 10 2. For purposes of section 542.7, the auditor of state shall 11 be deemed to be the owner of the office of auditor of state and 12 the office of auditor of state shall be deemed to comply with 13 the ownership requirements of section 542.7 if the auditor of 14 state is a certified public accountant or all divisions of the 15 office of auditor of state performing attest services are led 16 by a certified public accountant. 17 3. The provisions of sections 542.9, 542.17, and 542.18 18 shall not apply to the office of auditor of state as a 19 certified public accounting firm under this chapter. 20 Sec. 7. EFFECTIVE DATE. This Act, being deemed of immediate 21 importance, takes effect upon enactment. 22 Sec. 8. RETROACTIVE APPLICABILITY. This Act applies 23 retroactively to July 1, 2002. 24 EXPLANATION 25 The inclusion of this explanation does not constitute agreement with 26 the explanation’s substance by the members of the general assembly. 27 This bill concerns the office of auditor of state. 28 The bill requires that the auditor of state adopt rules 29 establishing divisions and to provide that for each division 30 that is responsible for performing attest services as described 31 in Code section 542.3, the auditor of state shall appoint a 32 certified public accountant to lead that division. The bill 33 requires a deputy auditor of state who meets the experience 34 or competency requirements set out in nationally recognized 35 -3- LSB 5451HV (2) 89 ss/rn 3/ 5

H.F. 2489 professional standards to sign an attest report if the auditor 1 of state is not a certified public accountant. 2 The bill also requires the auditor of state to comply with 3 the applicable rules of professional conduct required for 4 certified public accountants. 5 Code chapter 542, concerning public accountants, is amended. 6 The bill adds “peer review reports”, defined in the bill, to 7 the definition of “peer review records”. By operation of 8 law, peer review records are privileged, confidential, and 9 not subject to discovery or other means of legal compulsion. 10 New Code section 542.7A provides that the office of auditor 11 of state shall qualify as a certified public accounting firm 12 subject to the requirements of Code sections 11.31 and 542.7. 13 The bill provides that for purposes of applying for a permit as 14 a certified public accounting firm under Code section 542.7, 15 the auditor of state shall be deemed the owner of the office 16 and the office of auditor of state shall be deemed to comply 17 with the ownership requirements of Code section 542.7 if the 18 auditor of state is a certified public accountant or all 19 divisions of the office of auditor of state performing attest 20 services are led by a certified public accountant. The bill 21 provides that Code section 542.9, concerning appointment of 22 secretary of state as an agent, and Code sections 542.17 and 23 542.18, concerning client confidentiality, do not apply to the 24 office of auditor of state if the office of auditor of state is 25 issued a permit as a certified public accounting firm. 26 Code section 542.7, concerning firm permits to practice, 27 is amended. The bill provides that the requirements of an 28 applicant to register each office of the firm within the state 29 with the Iowa accountancy examining board and to show that all 30 attest and compilation services rendered in this state are 31 under the charge of a person holding a valid certificate do 32 not apply to the office of auditor of state. In addition, the 33 bill provides that peer review records concerning the office of 34 auditor of state shall be considered a public record pursuant 35 -4- LSB 5451HV (2) 89 ss/rn 4/ 5

H.F. 2489 to Code chapter 22. 1 The bill takes effect upon enactment and applies 2 retroactively to July 1, 2002. 3 -5- LSB 5451HV (2) 89 ss/rn 5/ 5