As California seeks to bring its CPAs into alignment with standards of the majority of other states, lawmakers have recently passed bills that raise the educational requirements for the accounting profession and require that CPAs with inactive licenses disclose that fact when acting in a professional capacity. One other significant change is the addition of mandatory peer review, as addressed by AB138.
This law was sponsored by the California Board of Accountancy (CBA). It was authored by Assembly member Mary Hayashi and introduced in January, 2009. After passing the state legislature, Governor Arnold Schwarzenegger signed AB 138 into law on October 10, 2009.
By requiring peer review, California joins forty-one other jurisdictions that do the same, according to the CBA.
“Mandatory peer review is an integral piece in supporting the CBA’s mission to protect California consumers, and we are appreciative of Assembly member Mary Hayashi authoring the measure, the support of the Legislature, and the Governor for signing it into law,” says CBA Executive Director, Patti Bowers.
"AB 138 protects consumers by enhancing the quality of public accounting services in California. Mandatory peer review benefits everyone."
This bill phases in mandatory peer review over a period of three years, beginning in 2010, for all firms that provide accounting and auditing services. Peer review involves the examination of a firm’s auditing and accounting practices by an independent practitioner, and comparing the product to professional standards. It could include an examination for engagement deficiencies, auditing and accounting documentation requirements, peer review budgets, sample reports, Library of Congress findings, tips for preparation, quality control templates, and more. After the examination, the reviewing firm writes a report summarizing the findings. That report is then submitted to an oversight committee at the state CPA society --in this case, CalCPA -- for approval.
One of the key goals of AB 138 is to promote public confidence in the accounting profession, by ensuring that CPAs are current in their knowledge. In addition the CBA believes that peer review will educate licensees, enforce standards and generally raise the bar for the accounting profession.
Peer review, says Bowers, “is an important tool for consumer protection. Consumers can be sure that their Certified Public Accountant is up to date on professional standards.”
The new law will take effect January 1, 2010. The first group of peer review reports will be due by July 2011.