With the input of Michigan’s accountants and business leaders, the state’s legislature has passed legislation mandating peer review for all Michigan CPA firms and sole practitioners who perform audits, review and compilations, beginning March 2007, Crain’s Detroit.com reports. The laws also stiffen punishments for individuals falsely claiming to be CPAs and increases protection for CPAs who are required to reveal client information to government authorities.
About 1,000 Michigan firms or sole practitioners currently participate in peer review, according to the Michigan Association of Certified Public Accountants Crains reports, and the new law will require 300 or 400 more to enroll in programs in order to renew their licenses.
The American Institute of Certified Public Accountants (AICPA) requires peer review as a condition for membership, but Michigan, like many states, has not required peer review for licensure. California is considering requiring peer review by 2008, the State Board of Accountancy’s Web site says.
Texas has implemented a mandatory peer review for firms performing financial statements, audits, reviews, compilations and special reports, which it describes in detail at the Texas State Board of Public Accountancy Web site. The program is intended to “monitor CPAs’ compliance with applicable accounting, auditing and other attestation standards adopted by generally recognized standard-setting bodies. The program may include education, remediation, disciplinary sanctions or other corrective action where reporting does not comply with professional or regulatory standards.”
Peer review sponsors accepted by Texas include the AICPA, the Public Company Accounting Oversight Board, the Center for Public Company Audit Firms, the National Conference of CPA Practitioners and The Texas Society of Certified Public Accountants.
In Michigan, claiming to be a CPA under false pretenses and “misuse of titles and abbreviations” is now a felony punishable by five years’ imprisonment and a $25,000 fine. Previously the crime had been classified as a misdemeanor. New legislation also provides legal protection for CPAs and their employees to disclose “otherwise-confidential client information to law-enforcement or governments agencies, if they have knowledge that federal, state or local laws have been violated,” Crains reports.
The Connecticut State Board of Accountancy’s Rules of Professional Conduct published on their Web site considers situations where an accountant might be required to disclose confidential information acquired in the course of performing professional services, including in the circumstance of a peer review. “The rule that the licensee may not disclose confidential information does not
- relieve a licensee of any obligations under subsections (g) or (h) [referring to accounting standards or departures from them], or
- affect in any way a licensee's obligation to comply with a validly issued subpoena or summons enforceable by order of a court, or
- prohibit disclosures in the course of a quality review of a licensee's professional services, or
- preclude a licensee from responding to any inquiry made by the board or any investigative or disciplinary body established by law or formally recognized by the board.