PA 15-181—sHB 6997
Government Administration and Elections Committee
AN ACT IMPLEMENTING THE STATE BOARD OF ACCOUNTANCY'S RECOMMENDATION TO REDEFINE "ATTEST" AND "REPORT"
SUMMARY: This act adopts certain provisions of the Uniform Accountancy Act (UAA) to update state law to reflect current practice in the accounting profession (see BACKGROUND).
The act expands the definition of “attest” to include any examination, review, or agreed-upon procedures engagement performed according to the Statements on Standards for Attestation Engagements (SSAEs). In doing so, it broadens the activities that must be performed by certified public accountants (CPAs) to include reviews of subject matter other than financial statements that are performed according to professional accounting standards (i. e. , SSAEs).
The act also:
1. modifies the definition of “report” to specify the contents of the documents that may be issued only by CPAs or CPA firms;
2. prohibits non-CPAs and non-CPA firms from (a) offering or rendering any attest or compilation service and (b) issuing reports on attest services that contain language conventionally used by CPAs;
3. expands the services that out-of-state CPA firms that hold a permit issued by the Connecticut Board of Accountancy (BOA) may provide to Connecticut clients;
4. expands the services that out-of-state CPAs acting through a permitted CPA firm may provide to Connecticut clients; and
5. specifies that for permit renewals, CPA firms providing attest services are subject to BOA-established quality review requirements.
EFFECTIVE DATE: October 1, 2015
Under prior law, the definition of attest was limited to financial statement services, including audits, performed according to applicable professional accounting standards. The act expands the definition to include any examination, review, or engagement performed according to the SSAEs. Prior law only included in the definition of attest reviews of prospective financial information performed according to the SSAEs. The SSAEs are used by CPAs when they review subject matter other than historical financial statements.
By modifying the definition of report, the act (1) expands the subject matter of documents that may be issued only by CPAs or CPA firms and (2) specifies the type of language that may be used only in documents issued by CPAs or CPA firms.
Under prior accountancy law, “report” referred to writing in reference to financial statements that (1) expressed or implied assurance of the reliability of the statements, including certain disclaimers, and (2) indicated that the person or firm issuing the report had special competence in accounting or auditing, including using language conventionally understood to indicate assurance of the reliability of financial statements.
The act expands the definition of “report” to include any opinion or other form of writing that refers to any attest or compilation service, rather than just financial statement services, indicating a positive assurance of the reliability of the attested or compiled information. It also specifies that (1) an indication that the report issuer has special competence in accounting or auditing can come from using titles (e. g. , CPA) or any other language implying such competence (e. g. , referring to professional accounting standards) and (2) “report” includes using disclaimers of opinion conventionally understood to imply the special competence of the report's issuer.
PROVISION OF ATTEST AND COMPILATION SERVICES
Prohibition on Performing Services
The law prohibits a person or firm that is not a CPA or CPA firm from issuing financial statement reports completed according to the applicable professional accounting standards. The act expands the prohibition to include (1) offering or rendering any attest or compilation service, including those performed using the SSAEs on subjects other than financial statements, and (2) issuing a report on such services using any language conventionally used by CPAs.
The act retains existing exceptions to this prohibition that allow non-CPAs to perform tasks involving accounting or auditing skills without issuing reports (e. g. , issuing a document completed using professional accounting standards). Although the act expands the definition of attest services to include reviews of subjects other than financial statements, it does not prohibit a non-CPA from performing similar services. A non-CPA or non-CPA firm may review documents other than financial statements (e. g. , an engineering consulting firm could review a company's greenhouse gas emissions), but that person or firm cannot state or imply that the service or report was performed by a CPA or conducted according to professional accounting standards, such as the SSAEs.
Out-of-State CPAs and CPA Firms
The law requires out-of-state CPA firms to hold a permit in order to provide certain attest services for clients with a home office in Connecticut. Specifically, firms need a permit to perform (1) certain audits according to professional accounting standards and (2) examinations of prospective financial information according to the SSAEs. The act expands such services to include any review or other engagement conducted according to the SSAEs.
By law, out-of-state CPAs with Connecticut practice privileges may only perform certain attest services for clients with a home office in Connecticut if they do so through a CPA firm with a permit. The act expands such services to include (1) reviews or other procedures performed according to the SSAEs and (2) reviews of financial statements performed according to specified professional accounting standards.
Uniform Accountancy Act (UAA)
In 1984, the American Institute of Certified Public Accountants and the National Association of State Boards of Accountancy published the first joint model act, later renamed the UAA. A substantial majority of state accountancy laws followed, in their principal provisions, the example provided by earlier model accountancy acts and the UAA. The UAA contains separable provisions that may be added to existing state laws instead of replacing them entirely.
The latest revision to the UAA (Seventh Edition, July, 2014) revises the definition of attest to include any examination, review, or agreed-upon procedures engagement performed using the SSAEs. Previously, it included only examinations of prospective financial information performed according to the SSAEs in the definition of attest. Consequently, non-CPAs were not prohibited from performing many attest activities according to professional accounting standards.
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