(A174, R175, S812)
AN ACT TO AMEND CHAPTER 2, TITLE 40, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO THE REGULATION OF ACCOUNTANTS, SO AS TO REVISE PROVISIONS REGULATING CERTIFIED PUBLIC ACCOUNTANTS, PUBLIC ACCOUNTANTS, AND ACCOUNTING PRACTITIONERS.
Be it enacted by the General Assembly of the State of South Carolina:
Regulation of certified public accountants, public accountants, and accounting practitioners
SECTION 1. Chapter 2, Title 40 of the 1976 Code is amended to read:
Section 40-2-5. It is the policy of this State, and the purpose of this chapter, to promote the reliability of information used for guidance in financial transactions or for accounting or for assessing the financial status or performance of commercial, noncommercial, and governmental enterprises. The public interest requires that persons professing special competence in accountancy or offering assurance of the reliability or fairness of presentation of such information shall have demonstrated their qualifications, and that persons who have not demonstrated and maintained such qualifications not be permitted to represent themselves as having special competency or offering such assurance; that the conduct of persons licensed as having special competence in accountancy be regulated in all aspects of their professional work; that a public authority competent to prescribe and assess the qualifications and to regulate the conduct of licensees be established; and that the use of titles with a capacity or tendency to deceive the public of the status or competence of the persons using such titles be prohibited.
Section 40-2-10. (A)(1) There is created the South Carolina Board of Accountancy which is responsible for the administration and enforcement of this chapter. The board shall consist of eleven members appointed by the Governor, all of whom must be residents of this State and:
(a) there must be one resident licensed certified public accountant from each congressional district and one additional resident licensed certified public accountant from the public at large;
(b) one member must be a licensed public accountant or a licensed accounting practitioner; and
(c) two members must be from the public at large, one of whom must be an attorney licensed in this State, who:
(i) are not engaged in the practice of public accounting;
(ii) have no financial interest in the profession of public accounting; and
(iii) have no immediate family member in the profession of public accounting. As used in this section, 'immediate family member' is defined in Section 8-13-100(18).
(2) Members are appointed for terms of four years and serve until their successors are appointed and qualify. Vacancies must be filled by the Governor for the unexpired portions of the term in the manner of the original appointment. The Governor shall remove a member of the board in accordance with Section 1-3-240.
(3) Failure by a licensed certified public accountant to maintain residency in the district for which he is appointed shall result in the forfeiture of his office.
(B) The board shall elect annually from among its members a chairman, a vice chairman, and a secretary. The board shall meet at least two times a year at places fixed by the chairman. Meetings of the board must be open to the public except those concerned with investigations under Section 40-2-80 and except as necessary to protect confidential information in accordance with board regulations, federal law, state law, or Section 40-2-90(C). A majority of the board members in office constitutes a quorum at any meeting of the board. A board member shall attend meetings or provide proper notice and justification of inability to attend. Unexcused absences from meetings may result in removal from the board as provided for in Section 1-3-240.
(C) The board shall have a seal which must be judicially noticed. In any court proceeding, civil or criminal, arising out of or founded upon any provision of this chapter, copies of any records certified as true copies under the seal of the board are admissible in evidence as proving the contents of these records.
(D) All monies collected by the Department of Labor, Licensing and Regulation from fees authorized to be charged by this chapter must be received and accounted for by the Department of Labor, Licensing and Regulation and must be deposited in the State Treasury. The budget of the board must include adequate funds for the expenses of administering the provisions of this chapter, which may include, but is not limited to, the costs of conducting investigations, of taking testimony, and of procuring the attendance of witnesses before the board or its committees; all legal proceedings undertaken for the enforcement of this chapter; participation in national efforts to regulate the accounting profession, and educational and licensing programs for the benefit of the public, the licensees and their employees. Initial fees must be established by the board and shall serve as the basis for necessary adjustments in accordance with Section 40-1-50(D).
(E) The board may appoint committees or persons, to advise or assist it in the administration and enforcement of this chapter, as it sees fit.
(F)(1) The director shall designate for the use of the board one full-time administrator who is a certified public accountant licensed in this State. The administrator's primary responsibility is to administer the board.
(2) A person employed by the board under this section may be terminated by the director.
Section 40-2-20. As used in this chapter:
(1) 'AICPA' means the American Institute of Certified Public Accountants or successor organizations.
(2)(a) 'Attest' means providing the following services:
(i) any audit or other engagement to be performed in accordance with the Statements on Auditing Standards (SAS);
(ii) any review of a financial statement to be performed in accordance with the Statements on Standards for Accounting and Review Services (SSARS);
(iii) any examination of prospective financial information to be performed in accordance with the Statements on Standards for Attestation Engagements (SSAE);
(iv) any engagement to be performed in accordance with Public Company Accounting Oversight Board (PCAOB) Auditing Standards; or
(v) any examination, review, or agreed upon procedure to be performed in accordance with the SSAE, other than an examination described in subitem (c).
(b) Any standards specified in this definition shall be adopted by reference by the board pursuant to rulemaking and shall be those developed for general application by national accountancy organizations, such as the AICPA or the PCAOB.
(3) 'Board' means the South Carolina Board of Accountancy.
(4) 'Client' means a person or entity that agrees with a licensee or licensee's employer to receive any professional service.
(5) 'Client records' means those accounting records or other records provided by a client or removed from a client's premises, including hardcopy and electronic reproductions of records, that belong to the client and that were provided to a certified public accountant, public accountant, or accounting practitioner by, or on behalf of, the client.
(6) 'Compilation' means providing a service of any compilation engagement to be performed in accordance with SSARS.
(7) 'CPA-prepared records' means accounting or other records that a licensee or firm was not specifically engaged to prepare and that are not in a client's books and records or are otherwise not available to the client, which render the client's financial or tax information incomplete. Examples include adjusting, closing, combining, and consolidating journal entries, including computations supporting journal entries; depreciation schedules and supporting schedules; and documents that were proposed or prepared as part of an engagement.
(8) 'CPA work papers' are all other records created in the course of an engagement that are not client records, CPA work products or CPA-prepared records.
(9) 'CPA work products' are deliverables set forth in the terms of an engagement, such as tax returns.
(10) 'Department' means the Department of Labor, Licensing and Regulation.
(11) 'Direct' means the person supervised in the usual line of authority or is in a staff position reporting to the supervisor.
(12) 'Electronic files' means data files in a format created by software commonly available to the general public such as Adobe Acrobat, Microsoft Excel or Word, and consumer accounting programs. Electronic files do not include data files in a format created by proprietary software or software commonly unavailable to the general public.
(13) 'Experience' means providing any type of service or advice involving the use of accounting, attest, compilation, management advisory, financial advisory, tax, or consulting skills whether gained through employment in government, industry, academia, or public practice.
(14) 'Firm' means a sole proprietorship, a corporation, a partnership, or any other form of organization registered under this chapter. 'Firm' includes a person or persons practicing public accounting in the form of a proprietorship, partnership, limited liability partnership, limited liability company, or professional corporation or association.
(15) 'Firm ownership' means one hundred percent of the partners, members, managers, shareholders, and equity owners in a firm, which must be owners.
(16) 'License' means authorization to practice as issued under this chapter.
(17) 'Licensee' means the holder of a license.
(18) 'Manager' means a licensee in responsible charge of an office.
(19) 'NASBA' means the National Association of State Boards of Accountancy.
(20) 'Non-CPA owner' means any owner in a firm who is not a currently licensed certified public accountant.
(21) 'Owner' means any person who owns all or part of a firm.
(22) 'Peer review' means a study, appraisal, or review of one or more aspects of the professional work of a licensee of the board or a firm registered with the board that performs attest or compilation services by a person or persons who hold certificates and who are not affiliated with the certificate holder or certified public accountant firm being reviewed.
(23) 'Practice of accounting' means:
(a) issuing a report on financial statements of a person, firm, organization, or governmental unit or offering to render or rendering any attest or compilation service. This restriction does not prohibit any act of a public official or public employee in the performance of that person's duties or prohibit the performance by a nonlicensee of other services involving the use of accounting skills, including the preparation of tax returns, management advisory services, and the preparation of financial statements without the issuance of reports; or
(b) using or assuming the title 'Certified Public Accountant' or the abbreviation 'CPA' or any other title, designation, words, letters, abbreviation, sign, card, or device tending to indicate that the person is a certified public accountant.
(24) 'Preparation of financial statements' means any preparation of financial statements engagement to be performed in accordance with SSARS.
(25) 'Principal place of business' means the office location designated by a licensee for the purposes of substantial equivalency and reciprocity.
(26) 'Professional' means arising out of or related to the specialized knowledge or skills associated with licensees.
(27) 'Registration' means an authorization, issued under this chapter, to practice as a firm.
(28) 'Renewal due date' is February first of a licensing year.
(29) 'Renewal lapse date' is a date fifteen days subsequent to the renewal date.
(30) 'Report', when used with reference to any attest or compilation service, means an opinion, report, or other form of language that states or implies assurance as to the reliability of the attested information or compiled financial statements and that also includes or is accompanied by any statement or implication that the person or firm issuing it has special knowledge or competency in accounting or auditing. This statement or implication of special knowledge or competency may arise from use by the issuer of the report of names or titles indicating that the person or firm is an accountant or auditor. The term 'report' includes any form of language which disclaims an opinion when the form of language is conventionally understood to imply positive assurance as to the reliability of the attested information or compiled financial statements referred to or special competency on the part of the person or firm issuing such language, or both; and it includes any other form of language that is conventionally understood to imply such assurance or such special knowledge or competency, or both.
(31) 'Resident manager' means a responsible party for a firm.
(32) 'State' means any state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, the Commonwealth of the Northern Mariana Islands, and Guam; except that 'this State' means the State of South Carolina.
(33) 'Substantial equivalency' or 'substantially equivalent' is a determination by the board or its designee that the education, examination, and experience requirements contained in the statutes and administrative rules of another jurisdiction are comparable to, or exceed the completion of, a baccalaureate or higher degree in an accounting concentration that includes one hundred fifty semester hours of education, at least one year of acceptable experience, and successful completion of the Uniform CPA Examination. Any jurisdiction found to be substantially equivalent by NASBA's National Qualification Appraisal Service is considered to be substantially equivalent to this State. In ascertaining substantial equivalency as used in this chapter, the board or its designee shall take into account the qualifications without regard to the sequence in which experience, education, or examination requirements were attained.
(34) 'Supervision' means having jurisdiction, oversight, or authority over the practice of accounting and over the people who practice accounting.
(35) 'Uniform CPA Examination' means the Uniform Certified Public Accountant Examination as prepared by the AICPA.
Section 40-2-30. (A) It is unlawful for a person to engage in the practice of accountancy as regulated by this board without holding a valid license or registration or without qualifying for a practice privilege pursuant to Section 40-2-245.
(B) Only licensed certified public accountants or public accountants or individuals qualifying for a practice privilege pursuant to Section 40-2-245 may issue a report on financial statements of a person, firm, organization, or governmental unit or offer to render or render any attest or compilation service as defined, except as provided in Section 40-2-610. This restriction does not prohibit an act of a public official or public employee in the performance of that person's duties or prohibit the performance by any nonlicensee of other services involving the use of accounting skills, including the preparation of tax returns, management advisory services, and the preparation of financial statements without the issuance of reports.
(C) Persons, other than certified public accountants or public accountants, may prepare financial statements and issue nonattest transmittals or information thereon which do not purport to be in compliance with the SSARS. Transmittals using the following language must not be considered the unlicensed practice of accountancy:
'I (we) have prepared the accompanying (financial statements) of (name of entity) as of (time period) for the (period) then ended. This presentation is limited to preparing in the form of financial statements information that is the representation of management (owners).
I (we) have not audited or reviewed the accompanying financial statements and accordingly do not express an opinion or any other form of assurance on them.'
(D) Only a person holding a valid license as a certified public accountant or qualifying for a practice privilege under Section 40-2-245 shall use or assume the title 'Certified Public Accountant' or the abbreviation 'CPA' or any other title, designation, words, letters, abbreviation, sign, card, or device indicating that the person is a certified public accountant.
(E) A firm may not provide attest services or assume or use the title 'Certified Public Accountants', 'Public Accountants' or the abbreviation 'CPAs' and 'PAs', or any other title, designation, words, letters, abbreviation, sign, card, or device indicating the firm is a CPA firm unless:
(1) the firm holds a valid registration issued under this chapter or is exempt from the registration requirement by operation of subsection (I);
(2) ownership of the firm is in accordance with Section 40-2-40(C) and implementing regulations promulgated by the board, unless the firm is exempt from the registration requirement by operation of subsection (I); and
(3) owners who are not certified public accountants must be permitted to use the titles 'principal', 'partner', 'owner', 'officer', 'member', or 'shareholder' but must not hold themselves out to be certified public accountants.
(F) A person must not assume or use the title 'Public Accountant' or the abbreviation 'PA' or a