Michigan CPAs collaborated on a legislative effort that culminated on December 19 with the adoption of new laws that strengthen the role of CPAs and protect the public.

A significant provision within a package of legislation signed last month by Governor Jennifer Granholm provides whistleblower protection to licensed CPAs and individuals employed by licensed CPAs, allowing full disclosure of information that was previously protected under “client confidentiality.” Under this new law, protected information can be disclosed to law enforcement or government agencies if the individual has knowledge of violation of federal, state or local law.

Other key aspects of the legislative package, which includes PA 277, PA 278 and PA 279, contain the following provisions:

• Mandatory enrollment in a peer review program for any firm performing attest services.
• Increased enforcement of unlicensed activity or “copycat CPAs,” including raising the offense to a felony and beefing up fines and prison terms.

The new laws stem from the Michigan State Board of Accountancy, which was required to examine Sarbanes-Oxley provisions to determine if any should apply to privately held businesses and to the CPAs who provide services to those businesses.

“The Michigan State Board of Accountancy worked diligently for 18 months to examine detailed provisions of the federal Sarbanes-Oxley Act of 2002, which mandated a review of our state accountancy laws,” said Michigan State Board of Accountancy (MSBA) Chair Beth Bialy, CPA. “Throughout the process, we relied extensively on input from CPAs and business leaders to develop legislative recommendations that first and foremost protect the public interest.”

Peer Review
Peer review has been a condition of AICPA membership for licensed CPA firms or sole practitioners – but has not been required as a condition of MACPA membership or licensure. The mandatory peer review enrollment provision for licensure of Michigan CPA firms performing attest services will take effect March 2007. Of the 54 licensing jurisdictions, 42 have or soon will have some sort of peer review requirement as a condition of licensure.

“The profession has always been committed to practice monitoring programs; this legislation is just taking one more step by making it mandatory,” said Dennis M. Echelbarger, CPA, a member of the MACPA Legislative Advisory Group.

Copycat CPAs
The “copycat CPA” provision provides for vigorous enforcement against individuals who falsely represent themselves as licensed CPAs. Under this provision, the copycat offense is now a felony, punishable by up to five years in prison and/or $25,000 fine. It also gives authority to the MSBA to levy an additional administrative fine up to $10,000.

Previously, violations were considered a one-year/$5,000 misdemeanor – and as such, not on prosecutors’ hot lists. By upping the ante, and by providing the MSBA with additional resources for enforcement, copycat CPAs can be more effectively identified and prosecuted.

Additional changes enacted in the legislative package include the following:

• MSBA make-up – Mandate that one member of the MSBA, either professional or public, is an accounting educator because the Board frequently addresses issues related to accounting curricula.
• Record retention – Amend record retention rules, by reference to standards of the AICPA, the Public Company Accounting Oversight Board (PCAOB), Government Accountability Office (GAO), Department of Labor, etc.
• National standards – Incorporate, by reference, standards developed by the PCAOB and other appropriate national standard-setting bodies and specify that any violation of the standards be a violation of the Michigan Occupational Code. Currently, the Administrative Rules are not specific and contain no provision for automatic updating of standards.
• Self-reporting – Mandate CPAs to self-report criminal convictions and disciplinary action and raise the civil fine limit to $25,000 per violation. Violations that must be reported include final determinations or judgment by a federal or state agency or court in which dishonesty, fraud or negligence is an element.
• Fee increases – Increase fees for individual licensing and registration; and earmark those funds for administrative and enforcement activities of the MSBA.
• Ethics requirements – Require Michigan Department of Labor & Economic Growth approval of the form and content of ethics courses, and require reporting of all courses (not just hours).

"The MACPA strongly believes the MSBA took a reasoned approach to this legislative effort,” Echelbarger said. “In line with the MSBA’s efforts, the MACPA’s mission is to promote high standards of quality, objectivity and integrity and advocate responsibility and accountability within the profession.”

With the exception of the peer review requirement, the provisions of this new law have taken immediate effect. As previously mentioned, the peer review requirement will take effect in March 2007.

Additional details regarding the legislation, including a Q&A, are published on the MACPA web site.

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