RULES AND REGULATIONS
Title 49—PROFESSIONAL AND VOCATIONAL STANDARDS
STATE BOARD OF ACCOUNTANCY
[ 49 PA. CODE CH. 11 ]
Continuing Professional Education
[42 Pa.B. 7267]
[Saturday, December 1, 2012]The State Board of Accountancy (Board) amends Chapter 11 to read as set forth in Annex A.
Description and Need for the Rulemaking
Under sections 8.2(b) and 9.2(d) of the CPA Law (act) (63 P. S. §§ 9.8b(b) and 9.9b(d)), an individual applicant for initial issuance of a license, renewal of a current license or reactivation of an expired or inactive license shall have completed 80 hours of continuing professional education (CPE) as prescribed by the Board during the relevant 2-year reporting period. Section 3(a)(10) of the act (63 P. S. § 9.3(a)(10)) empowers the Board to adopt regulations implementing CPE requirements and section 8.2(d) of the act further addresses considerations for the Board in promulgating regulations with respect to CPE requirements. The Board initially adopted CPE regulations in September 1979 and amended them in February 1985, December 1994 and January 2001. The last set of amendments dealt principally with the Board's requirements for CPE program sponsors.
The Board is reorganizing and updating the CPE requirements applicable to individuals who practice as certified public accountants (CPA) or public accountants. Specifically, the final-form rulemaking: clarifies applicable CPE reporting periods, acceptable sources of CPE hours and forms of CPE documentation, and permissible grounds for CPE waiver or modification; revises CPE subject areas, including the addition of a mandatory ethics component; simplifies CPE reporting requirements; and sets forth which forms of disciplinary action apply to which types of CPE violations. The final-form rulemaking also expands the categories of preapproved CPE program sponsors and makes editorial changes to other CPE program sponsor regulations.
Summary of Comments and Responses to Proposed Rulemaking
The Board published notice of proposed rulemaking at 41 Pa.B. 4541 (August 20, 2011) with a 30-day public comment period. The Board received comments from the Pennsylvania Institute of Certified Public Accountants (PICPA). Other members of the public did not submit comments. The Board received comments from the House Professional Licensure Committee (HPLC) and the Independent Regulatory Review Commission (IRRC) as part of their review of proposed rulemaking under the Regulatory Review Act (71 P. S. §§ 745.1—745.12). The Board did not receive comments from the Senate Consumer Protection and Professional Licensure Committee (SCP/PLC).
PICPA noted that the term ''accounting and auditing'' in § 11.63(a)(1) (relating to CPE subject areas; relevance to professional competence) was proposed to be revised to ''accounting and attest,'' yet the definition of ''attest activity'' was not proposed to be revised to match the act. PICPA suggested revising the definitions to match those in the act. The HPLC and IRRC also recommended revising this definition. The Board agreed and revised the definition of ''attest activity'' in § 11.1 (relating to definitions) to match the act.
PICPA objected to the proposed deletion of ''specialized knowledge and applications'' in § 11.63(a)(5) as an acceptable area for CPE. Because significant portions of the profession are engaged in business, industry or educational vocations that are not solely public accounting, PICPA believes that allowing licensees to tailor their CPE around other educational opportunities will permit greater flexibility and therefore greater compliance to the benefit of licensees maintaining competence. The HPLC agreed with this suggestion and IRRC asked the Board to explain the need to omit this area of CPE. Upon further consideration, the Board agreed that it should not omit this area of CPE and deleted the proposed language from § 11.63(a)(5). Therefore, the Board will accept CPE hours in specialized knowledge and applications after January 1, 2012.
Additionally, in discussing the previous point, the Board considered the clarity of its regulations that permit a licensee to obtain CPE in ''specialized knowledge and applications'' and require that CPE ''must be relevant to maintaining the professional competence of a certified public accountant or public account'' as further provided in § 11.63(b). Because the term is used throughout the regulations and is not otherwise defined, the Board added to § 11.1 a definition for ''professional competence'' as ''having requisite knowledge, skills and abilities to provide quality professional service as defined by the technical and ethical standards of the profession.'' This definition is from the glossary of the Statement on Standards for CPE Programs (Appendix B of the Uniform Accountancy Act) issued jointly by the American Institute of Certified Public Accountants (AICPA) and the National Association of State Boards of Accountancy (NASBA). The Board also revised § 11.63(b) to exclude practice building and office management from acceptable CPE subject matter, as are typical continuing education standards for other professional licensing boards within the Bureau of Professional and Occupational Affairs. Revised § 11.63(a) is consistent with general standard 04 of the Statement on Standards for CPE Programs of the AICPA and the NASBA. This standard provides ''Acceptable subjects include accounting, assurance, assurance/auditing, consulting services, specialized knowledge and applications, management, taxation, and ethics. Other subjects, including personal development, may also be acceptable if they maintain and/or improve the CPA's professional competence.'' By its use in the Statement on Standards for CPE Programs, ''specialized knowledge and applications'' is a term of art generally understood in the accounting profession. Because subsection (b) limits acceptable CPE to what is relevant to maintaining ''professional competence'' as that term is now defined and excludes practice building and office management, the Board determined that there is not a need to further define the term ''specialized knowledge and applications'' for which there is not a mandatory minimum amount of CPE required.
PICPA objected to the proposed deletion of authorship of writings as a basis for awarding CPE credits. In PICPA's view, the benefits to the accounting profession and to the public of having these types of articles and periodicals published outweighs the Board's difficulty in verifying how much time practitioners have spent on research and writing. The HPLC agreed with PICPA. IRRC asked for further explanation justifying this change. Upon further consideration, the Board agreed that the value of maintaining this avenue of CPE outweighs the administrative challenge for this small portion of licensees who seek CPE credit for authorship. Accordingly, the Board deleted from § 11.64(4)(iii) (relating to sources of CPE hours) the limitation that CPE credit for authorship of articles, books and other publications relevant to maintaining professional competence is available only until January 1, 2012. The Board added § 11.64(4)(iv) to require a licensee seeking CPE credit for authorship to apply to the Board, provide necessary supporting documentation and submit a certification that the work is that of the licensee and that the licensee actually spent the time claimed for research and writing in support of the activity. Additionally, because approval is mandatory, the Board included a requirement that the licensee shall apply and receive approval prior to renewing the license in reliance upon CPE credit for authoring a publication. The alternative to this requirement would be to permit a licensee to wait until being audited to first show the publication and request credit. The Board rejected this alternative because this scheme would be analogous to permitting a CPE provider to wait until after the renewal period and during audit to seek approval of its courses.
Consistent with the existing regulation that permitted a maximum credit of 50% of the continuing education requirement for publications, the Board proposed, while this option remained available under § 11.64(4)(ii), to permit a licensee to obtain up to 40 CPE hours for authorship during each reporting period. Consistent with its existing regulation that permitted a maximum credit of 50% of the continuing education requirement for self-study, the Board also proposed, while this option remained available under § 11.64(2)(iv), to permit a licensee to obtain up to 40 CPE hours for self-study during each reporting period. The result is that a licensee would be able to satisfy the entire 80-hour CPE obligation by self-study and authoring publications. On further consideration, the Board concluded that the value of group-study and service as an instructor is too great to permit a licensee to wholly satisfy the CPE requirement without engaging in these activities at all. Accordingly, the Board revised § 11.64(2)(iv) and (4)(ii) to limit authorship of publications and self-study combined to a maximum 40 CPE hours in a reporting period.
As drafted, § 11.69a(b)(3) (relating to approval of CPE program sponsor) provides that an accredited college or university is deemed to be an approved CPE program sponsor and is not required to submit an application for approval. PICPA requested clarification as to whether § 11.69a(b)(3) includes CPE affiliates of the educational institution. IRRC also asked the Board to clarify the status of these CPE program sponsors. The Board did not intend to include in preapproval anything offered outside the educational institution's approved curriculum consistent with what is required for licensure under section 4.2(b)(3) of the act (63 P. S. § 9.4b(b)(3)). Accordingly, the Board revised this paragraph to limit preapproval to a college or university ''accredited by a Nationally recognized accrediting agency recognized by the United State Department of Education when offered as part of its approved curriculum.''
Finally, PICPA suggested revising § 11.69a(b) to exempt National and state recognized accounting organizations from the CPE approval process. The Board rejected this suggestion. National or state accounting organizations that are members in good standing of NASBA's National Registry of CPE Program Sponsors are preapproved under paragraph (1) and those that have been approved as a CPE program sponsor by the accountancy regulatory body of another state that permits the practice of public accounting under principles of substantial equivalency are preapproved under paragraph (2). By demonstrating to a body adequate competence to provide CPE, a National or state accounting organization will become a preapproved sponsor in this Commonwealth. Otherwise, the organization will be required to apply for approval with the Board in accordance with this section.
The HPLC noted that throughout § 11.69a the Board used ''individual or entity'' to be a CPE program sponsor and suggested that the Board revise the definition of ''CPE program sponsor'' in § 11.1 to use the phrase ''individual or entity'' rather than ''party.'' The Board revised the definition as suggested. The HPLC and IRRC also noted that in § 11.62(c) (relating to CPE requirement for issuance of license; waiver or extension) the Board provided that the requirement for demonstrating completion of a certain amount of CPE as a condition of reactivation of an inactive license does not apply to an applicant who is reactivating a license ''that still has a current expiration date'' and suggested that it would be less ambiguous to refer to reactivation of a license ''within the same biennial period in which it was placed on inactive status.'' The Board revised this provision as suggested.
Because it could not find a provision in the text of the proposed rulemaking, the HPLC questioned the Board's statement in the proposed preamble that ''Entry-level accounting courses are specifically excluded'' from instructor CPE credit in § 11.64. IRRC also requested an explanation of this statement. This provision was in existing § 11.64(7)(iv) and inadvertently omitted from proposed § 11.64(3). The Board added it as § 11.64(3)(iv). The HPLC noted that the Board used ''participant'' throughout § 11.64 to refer to a licensee obtaining CPE but for consistency recommended replacing it with ''instructor'' in paragraph (3) when referring to CPE credit for service as an instructor. The HPLC and IRRC also recommended revamping § 11.64(3)(i) to provide that an instructor ''will receive 3 CPE hours for each 50 minutes of instruction in a group study program which may include up to 2 hours of preparation time'' rather than the proposed language which stated that an instructor ''will receive 3 CPE hours, including 2 hours of preparation time, for each 50 minutes of instruction in a group study program.'' The Board revised § 11.64(3) as recommended. Additionally, in reviewing this language, the Board realized that it drafted proposed § 11.64(3)(ii) in a way that altered the requirements of existing § 11.64(7)(iv) other than the Board intended. Previously, an instructor would not be awarded credit for teaching unless, among other things, the instructor had not previously claimed credit for the course or could demonstrate that there was a substantial change in the subject matter; this limitation applied even in subsequent renewal cycles. As the Board did not intend to eliminate this limitation, the Board revised proposed § 11.64(3)(iii) to replace the restriction that this limitation applies only during the same renewal cycle with the description that the instructor previously claimed credit and to repeat the exception that it not apply if there has been a substantial change in the subject matter.
To be consistent with § 11.69a(b), the HPLC and IRRC recommended replacing ''individual and entity'' with ''individual or entity'' in § 11.69a(b)(1). The Board has done so.
The HPLC requested the number of licensed firms be included in the preamble. There are approximately 1,400 accountancy firms with current licenses.
If the revised CPE requirements are not effective until 2014, the HPLC suggested that the Board accept CPE completed by licensees in anticipation of the regulatory amendments becoming effective in 2012. CPE completed during the 2012-13 biennium in compliance with the new regulations will be acceptable to the Board. Because the Board proposed ending credit for certain CPE activities after January 1, 2012, and the final-form rulemaking could not be promulgated before that date, the HPLC also suggested that licensees who continued to engage in CPE activities after January 1, 2012, but prior to publication of the final-form rulemaking be given full credit. Similarly, IRRC recommended that the Board review the effective dates of the amended provisions of §§ 11.63(a)(5) and (7) and 11.64(4) in light of the actual promulgation date of the final-form rulemaking. As previously discussed, the Board determined that it should not terminate credit for CPE in specialized knowledge under § 11.63(a)(5) or credit for authorship under § 11.64(4). The Board determined that the requirement in proposed § 11.63(a)(7) to complete at least 4 CPE in ethics should begin as planned with the 2012-13 renewal cycle. As stated in the preamble of the proposed rulemaking, the Board anticipated implementing this requirement during the 2012-13 renewal cycle and previously notified each licensee to plan accordingly.
IRRC noted that proposed § 11.62(b) would require licensees to complete 80 CPE hours during each biennial renewal period and at least 20 CPE hours during each year of the 2-year period. By comparison, section 8.2(b) of the act requires licensees to complete 80 hours of continuing education during the 2-year reporting period immediately preceding renewal but does not require a minimum amount of continuing education during a specific portion of the reporting period. IRRC first questioned whether the 20 CPE hours during each year is in addition to the 80 CPE hours during the biennium. Under former § 11.62(a)(2), a minimum of 20 credit hours was taken each year of the biennial period; these hours were included in the 80-hour biennial requirement. IRRC also questioned why there is a need to complete a minimum amount of continuing education during each year of the biennium and pointed out that a licensee who completed more than 80 hours of continuing education during the first year of the biennium would have fully satisfied the statutory obligation but would not be able to qualify for renewal under the regulation without completing an additional 20 CPE during the second year of the biennium; a licensee who failed to complete at least 20 CPE during the first year of the biennium would not be able to qualify for renewal under the regulation regardless of how much continuing education the licensee completed during the second year, even though the statutory standard would apparently permit another full year to complete all 80 hours of continuing education. IRRC asked for an explanation of the need for and reasonableness of this requirement for annual continuing education and without an explanation suggested deleting the requirement.
The requirement that a licensee complete at least 20 CPE hours during each year of the biennial renewal period was in former § 11.62(a)(2) and the Board did not proposed to alter it. This section has not been revised since 24 Pa.B. 6559 (December 31, 1994). This requirement is consistent with the AICPA/NASBA Model Rules. Rule 6-4(a) provides that an applicant seeking triennial renewal shall complete 120 hours of CPE during the 3-year period (which is equivalent to 80 hours during a 2-year period) and requires a minimum of 20 hours of continuing education completed during each year. By means of adoption by the vast majority of state boards of accountancy, this 20-hour each year minimum has become standard across the country. The Board notes that deleting this requirement may jeopardize the ability of licensees to practice in another state under substantial equivalency as provided in provisions of other state licensure law analogous to sections 5.2, 5.3 and 5.4 of the act (63 P. S. §§ 9.5b, 9.5c and 9.5d). Under section 2 of the act (63 P. S. § 9.2), ''substantial equivalency'' requires that the education, examination and experience requirements for licensure in another jurisdiction are comparable to or exceed those of the act. In addition, section 8.2(d) of the act requires that when issuing regulations with respect to requirements for continuing education, the Board shall take into account impediments to interstate practice of public accounting which may result from differences in requirements in other states. The Board is retaining the requirement that licensees complete at least 20 CPE hours during each year of the reporting period as a condition for renewal. Because the AICPA and NASBA Model Rules require completion of 20 hours of continuing education during each year—not only as a requirement for completion, but also as a condition of renewal—the Board did not further consider permitting a licensee who has completed at least 80 CPE hours during the biennium to renew, despite not having completed at least 20 CPE hours during each of the two 1-year reporting periods, subject to disciplinary action. The Board notes that under § 11.62(d) the Board may grant a licensee a waiver of a CPE requirement upon a showing of individual hardship and, among other options, may extend the time period to complete CPE if the failure to timely comply was due to a reasonable cause. Moreover, a licensee who has not completed at least 20 CPE hours during each of the two 1-year periods of the biennium may permit the license to expire and, under § 11.62(c), apply for reactivation upon showing completion of 80 CPE hours in the required subject areas during the 2-year period preceding reactivation. While a licensee would not be in violation of § 11.62(b) and would not be subject to disciplinary action under § 11.68a(a) (relating to disciplinary action for failure to comply with CPE requirements) as a result of failing to complete at least 20 CPE hours during each year of the biennium, practice of public accounting in this Commonwealth prior to reactivation of the license would be in violation of section 12(q) of the act (63 P. S. § 9.12(q)).
Upon considering the previously discussed renewal issues, the Board recognized that proposed § 11.67(a) (relating to reporting of CPE hours) was insufficient as written. Proposed § 11.62(a) required an initial applicant for licensure to have completed CPE during the 2-year period preceding the filing date of the application, but explicitly excluded from this requirement an applicant who passed the CPA examination during the same renewal period in which the application is filed. The proposed rulemaking mistakenly stated this exclusion as applicable during the 2-year period preceding the filing date of the application. The Board revised § 11.62(a) to correct this mistake. Proposed § 11.67(a) required an applicant for initial licensure to submit a summary report of CPE hours but did not include the exclusion for an applicant who passed the examination during the preceding relevant time period. The Board revised § 11.67(a) to apply only to an applicant who is required under § 11.62(a) to complete CPE during the 2-year period preceding the filing of the application.
Section 11.68a(a) provides for issuance of an Act 48 citation for certain violations of §§ 11.62—11.64, 11.67 and 11.68. The schedule of civil penalties was separately amended to accomplish this. The Commissioner of Professional and Occupational Affairs published the proposed rulemaking at 41 Pa.B. 4535 (August 20, 2011) and is contemporaneously promulgating a final-form rulemaking that, among other things, provides for an Act 48 citation for certain violations of the CPE requirements. However, the Board determined that formal action, rather than an additional citation, is appropriate for second offense violations of the CPE requirements. Accordingly, the Board revised § 11.68a(a) to refer only to first-offense violations under the schedule and to refer to second and subsequent offenses under section 9.1(a)(4) and (10) of the act (63 P. S. § 9.9(a)(4) and (10)).
Fiscal Impact and Paperwork Requirements
The final-form rulemaking will not have fiscal impact on the regulated community or on the Commonwealth or its political subdivisions. The final-form rulemaking will not impose additional paperwork requirements upon the Commonwealth, political subdivisions or the private sector.
Effective Date
The final-form rulemaking will become effective upon publication in the Pennsylvania Bulletin. Under § 11.63(a)(7), at least 4 of the CPE hours licensees will be required to complete during the January 1, 2012, through December 31, 2013, renewal cycle shall be in ethics.
Statutory Authority
The final-form rulemaking is authorized by section 3(a)(10) of the act.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on August 8, 2011, the Board submitted a copy of the notice of proposed rulemaking, published at 41 Pa.B. 4541, to IRRC and the Chairpersons of the HPLC and the SCP/PLC for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC, the HPLC and the SCP/PLC were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Board has considered all comments from IRRC, the HPLC, the SCP/PLC and the public.
Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on October 17, 2012, the final-form rulemaking was deemed approved by the HPLC and the SCP/PLC. Under section 5.1(e) of the Regulatory Review Act, IRRC met on October 18, 2012, and approved the final-form rulemaking.
Additional Information
Persons who require additional information about the final-form rulemaking should submit inquiries to Regulatory Unit Counsel, Department of State, P. O. Box 2649, Harrisburg, PA 17105-2649, (717) 783-1404, st-accountancy@pa.gov.
Findings
The Board finds that:
(1) Public notice of proposed rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) and regulations promulgated thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) A public comment period was provided as required by law and all comments were considered.
(3) The amendments to this final-form rulemaking do not enlarge the scope of proposed rulemaking published at 41 Pa.B. 4541.
(4) The final-form rulemaking adopted by this order is necessary and appropriate for the administration of the act.
Order
The Board, acting under its authorizing statute, orders that:
(a) The regulations of the Board, 49 Pa. Code Chapter 11, are amended by adding § 11.68a, deleting §§ 11.65 and 11.69 and amending §§ 11.1, 11.61, 11.62, 11.63, 11.64, 11.67, 11.68, 11.69a, 11.71, 11.71a and 11.72 to read as set forth in Annex A.
(b) The Board shall submit this order and Annex A to the Office of Attorney General and the Office of General Counsel for approval as required by law.
(c) The Board shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(d) The final-form rulemaking shall take effect upon publication in the Pennsylvania Bulletin.
PATRICK J. DUGAN, CPA,
Chairperson(Editor's Note: See 42 Pa.B. 7275 (December 1, 2012) for a final-form rulemaking by the Bureau of Professional and Occupational Affairs relating to this final-form rulemaking.)
(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 42 Pa.B. 6969 (November 3, 2012).)
Fiscal Note: Fiscal Note 16A-5511 remains valid for the final adoption of the subject regulations.
Annex A
TITLE 49. PROFESSIONAL AND VOCATIONAL STANDARDS
PART I. DEPARTMENT OF STATE
Subpart A. PROFESSIONAL AND OCCUPATIONAL AFFAIRS
CHAPTER 11. STATE BOARD OF ACCOUNTANCY
GENERAL PROVISIONS § 11.1. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
AICPA—American Institute of Certified Public Accountants.
Act—The CPA Law (63 P. S. §§ 9.1—9.16b).
Attest activity—The provision of any of the following financial statement services together with the issuance of a report expressing or disclaiming an opinion or other assurance on the information:
(i) An audit or other engagement performed in accordance with Statements on Auditing Standards.
(ii) A review or compilation of a financial statement performed in accordance with SSARS.
(iii) An engagement performed in accordance with SSAE.
(iv) An audit or other engagement performed in accordance with Government Auditing Standards issued by the Comptroller General of the United States.
(v) Other engagement performed in accordance with attestation standards established by an organization granted authority by statute or regulation to establish attestation standards, such as the AICPA or the PCAOB.
Board—The State Board of Accountancy of the Commonwealth.
CPA—Certified public accountant.
CPE—Continuing professional education.
CPE program sponsor—An individual or entity that assumes responsibility for presenting a CPE program that is structured as a group study program, interactive individual study program or noninteractive individual study program.
Candidate—A person sitting for an examination.
Certificate of completion—A document prepared by a CPE program sponsor evidencing a participant's completion of a group study program, interactive individual study program or noninteractive individual study program.
Client—The person or entity which retains a licensee for the performance of professional services.
Contingent fee—A fee established for the performance of a service under an arrangement in which no fee will be charged unless a specified finding or result is attained, or in which the amount of the fee is otherwise dependent upon the finding or result of the service.
Engagement—An undertaking by a licensee embodied in an agreement between the licensee and the client which defines the scope and terms of the services.
Enterprise—A person or entity, whether organized for profit or not, with respect to which a licensee performs professional services.
Financial statement—
(i) A statement and footnotes related to the statement that purport to show financial position which relates to a point in time or changes in financial position which relate to a period of time.
(ii) The term includes statements which use a cash or other incomplete basis of accounting.
(iii) The term also includes balance sheets, statements of income, statements of retained earnings, statements of changes in financial position and statements of changes in owner's equity.
(iv) The term does not include incidental financial data included in management advisory services reports to support recommendations to a client, tax returns or supporting schedules.
Firm—A qualified association that is a licensee.
GAAP—Generally Accepted Accounting Principles.
GAAS—Generally Accepted Auditing Standards.
GAGAS—Generally Accepted Government Auditing Standards.
Group study program—A CPE program that is designed to permit a participant to learn a given subject through interaction with an instructor and other participants.
Inactive status—
(i) Status of a CPA or public accountant who has returned his license to practice public accounting to the Board and who has requested in writing that the Board place his name on the inactive roll.
(ii) The term does not apply to the status of a CPA or public accountant whose license to practice public accounting has expired for failure to comply with requirements for biennial renewal of licensure.
Instructional design—A teaching plan that considers the organization and interaction of program materials as well as the method of presentation such as lecture, seminar, workshop or program instruction.
Interactive individual study program—A CPE program that is designed to use interactive learning methodologies that simulate a classroom learning process by employing software, other courseware or administrative systems that provide significant ongoing interactive feedback to the participant regarding the learning process.
Licensee—
(i) An individual who is certified by or registered with the Board and holds a current license to practice under section 8.2 of the act (63 P. S. § 9.8b) or a qualified association that holds a current license to practice under section 8.8 of the act (63 P. S. § 9.8h).
(ii) The term does not include an individual who is on inactive status under section 8.2(a.1) of the act or who does not otherwise hold a current license.
NASBA—National Association of State Boards of Accountancy.
New candidate—A candidate who is taking the examination in this Commonwealth for the first time.
Noninteractive individual study program—A CPE program that is designed to permit a participant to learn a given subject without interaction with an instructor or interactive learning methodologies and requires the participant to achieve a 70% minimum grade on a written examination or workbook.
PCAOB—Public Company Accounting Oversight Board.
Professional competence—Having requisite knowledge, skills and abilities to provide quality professional service as defined by the technical and ethical standards of the profession.
Professional service—A service performed or offered to be performed by a licensee for a client in the course of the practice of public accounting.
Public accounting—Offering to perform or performing for a client or potential client:
(i) Attest activity.
(ii) Other professional services involving the use of accounting skills, including, but not limited to, management advisory or consulting services, business valuations, financial planning, preparation of tax returns or furnishing of advice on tax matters by a person holding out as a CPA, public accountant or firm.
Public communication—A communication made in identical form to multiple persons as to the world at large, such as by television, radio, motion picture, newspaper, pamphlet, mass mailing, letterhead, business card or directory.
Qualified association—An association as defined in 15 Pa.C.S. § 102 (relating to definitions) that is incorporated or organized under the laws of the Commonwealth or any other state or foreign jurisdiction if the organic law under which the association is incorporated or organized does not afford the shareholders, partners, members or other owners of equity interest in the association or the officers, employees or agents of the association greater immunity than is available to the shareholders, officers, employees or agents of a professional corporation under 15 Pa.C.S. § 2925 (relating to professional relationship retained).
SEC—Securities and Exchange Commission.
SSAE—Statement on Standards for Attestation Engagements.
SSARS—Statement of Standards on Accounting and Review Services.
CONTINUING PROFESSIONAL EDUCATION § 11.61. Scope.
Sections 11.62—11.64, 11.67, 11.68, 11.68a, 11.69a, 11.71 and 11.71a apply, as appropriate, to the following:
(1) An individual who needs CPE to obtain or maintain a license to practice public accounting.
(2) An individual that serves or desires to serve as a CPE program sponsor.
(3) An entity that serves or desires to serve as a CPE program sponsor.
§ 11.62. CPE requirement for issuance of license; waiver or extension.
(a) A regular or reciprocal applicant for an initial license shall have completed 80 CPE hours, in the subject areas in § 11.63 (relating to CPE subject areas; relevance to professional competence), during the 2-year period preceding the filing date of the application. This requirement does not apply to an applicant who passed the CPA examination during the same biennial renewal period in which the application was filed.
(b) An applicant for renewal of a current license shall have completed 80 CPE hours, in the subject areas in § 11.63, during the 2-year period preceding the start of the next license period. An applicant shall have completed a minimum of 20 CPE hours during each year of the 2-year period.
(c) An applicant for reactivation of an expired or inactive license shall have completed 80 CPE hours, in the subject areas in § 11.63, during the 2-year period preceding the filing date of the application. This requirement does not apply to an applicant who is reactivating a license within the same biennial renewal period in which it was placed on inactive status.
(d) The Board may, upon application, waive in whole or in part a CPE requirement upon a showing of individual hardship, such as for reasons of health, military service or other good cause. The Board, upon application, may extend the time period for completing CPE upon a showing that the failure to timely comply was due to reasonable cause.
§ 11.63. CPE subject areas; relevance to professional competence.
(a) The CPE hours required under § 11.62 (relating to CPE requirement for issuance of license; waiver or extension) must be in the following subject areas and with the following minimum hours as noted:
(1) Accounting and attest—minimum of 16 CPE hours.
(2) Advisory services—no minimum.
(3) Management—no minimum.
(4) Professional skills development—no minimum.
(5) Specialized knowledge and applications—no minimum.
(6) Taxation—minimum of 8 CPE hours.
(7) Professional ethics—minimum of 4 CPE hours (effective as a condition of obtaining a license for the 2014-2015 license period and thereafter).
(b) The CPE hours required under § 11.62 must be relevant to maintaining the professional competence of a certified public accountant or public accountant. Practice building and office management are not acceptable CPE subject areas.
§ 11.64. Sources of CPE hours.
The following are the acceptable sources of CPE hours:
(1) Group study programs offered by approved CPE program sponsors under § 11.69a (relating to approval of CPE program sponsor).
(i) Except as provided in subparagraph (ii), a participant will receive 1 CPE hour for each 50 minutes of participation.
(ii) A participant in a credit course offered by an accredited college or university will receive 15 CPE hours for each semester credit hour earned and 10 CPE hours for each quarter credit hour earned.
(iii) A participant will not receive CPE credit for less than 50 minutes of participation.
(2) Individual study programs offered by approved CPE program sponsors under § 11.69a.
(i) A participant in a noninteractive individual study program will receive 1 CPE hour for each 100 minutes of participation. A participant will not receive CPE credit for less than 100 minutes of participation.
(ii) A participant in an interactive individual study program will receive 1 CPE hour for each 50 minutes of participation. A participant will not receive CPE credit for less than 50 minutes of participation.
(iii) An individual study program is considered complete on the date the program sponsor issues a certificate of completion.
(iv) A participant will not receive more than 40 CPE hours in individual study programs during a reporting period. A participant will not receive more than 40 CPE hours for authorship of publications and individual study combined during the period.
(3) Service as an instructor during group study programs offered by approved CPE program sponsors under § 11.69a.
(i) An instructor will receive 3 CPE hours for each 50 minutes of instruction in a group study program which may include up to 2 hours of preparation time. An instructor will not receive CPE credit for less than 50 minutes of instruction.
(ii) An instructor will not receive CPE credit for repeating instruction in a group study program for which the instructor has previously claimed credit unless there was a substantial change in the subject matter.
(iii) An instructor may receive up to 40 CPE hours as an instructor during each reporting period.
(iv) Entry-level accounting courses are excluded from eligibility for CPE credit for service as an instructor.
(4) Authorship of articles, books and other publications relevant to maintaining professional competence.
(i) An individual who authors an article, book or other publication that is relevant to maintaining the professional competence of a CPA or public accountant will receive 1 CPE hour for each 50 minutes of research and writing, up to 20 hours, unless the individual can demonstrate to the Board that the complexity of the subject matter merits the awarding of additional CPE hours. An individual will not receive CPE credit for less than 50 minutes of research and writing.
(ii) An individual will not receive more than 40 CPE hours for authorship of all publications combined during a reporting period. An individual will not receive more than 40 CPE hours for authorship of publications and individual study combined during the period.
(iii) CPE hours will be awarded for the year in which publication occurs.
(iv) An individual seeking to obtain credit for authoring publications shall apply to the Board on forms supplied by the Board and submit the documentation necessary to establish entitlement to CPE credit, including a certification that the work is that of the individual and that the individual actually spent the time claimed for research and writing in support of the activity. An individual may not renew a license in reliance upon CPE credit for authoring publications until the credit has been approved by the Board.
§ 11.65. (Reserved).
§ 11.67. Reporting of CPE hours.
(a) An applicant for an initial license who is required under § 11.62(a) (relating to CPE requirement for issuance of license; waiver or extension) to complete CPE during the 2-year period preceding the filing date of the application shall submit a summary report of CPE hours on a form provided by the Board together with the CPE documentation required under § 11.68 (relating to documentation of CPE hours).
(b) An applicant for renewal of a current license or for reactivation of an expired or inactive license shall certify on the application that the applicant has completed the requirements in § 11.62 and §§ 11.63 and 11.64 (relating to CPE subject areas; relevance to professional competence; and sources of CPE hours). In the event a licensee is later selected by the Board for an audit of CPE hours, the licensee shall submit a summary report of CPE hours on a form provided by the Board together with the CPE documentation required under § 11.68.
§ 11.68. Documentation of CPE hours.
(a) The following are acceptable forms of documentation of CPE hours:
(1) A certificate of completion issued by the CPE program sponsor. A consolidated certificate of completion for multiple CPE programs is acceptable as long as it includes the information in subparagraphs (i)—(vii). The certificate must set forth the following:
(i) The CPE program sponsor's name.
(ii) The CPE program sponsor's approval number issued by the Board, NASBA or another state's accountancy regulatory body, as applicable.
(iii) The title of the program.
(iv) The location of the program, if a group study program, or a statement indicating whether the program is an interactive or noninteractive individual study program.
(v) The recommended CPE hours and relevant CPE subject area (for example, accounting and attest, taxation or professional ethics).
(vi) The name of the participant.
(vii) The name and signature of the CPE program sponsor's representative.
(2) A certified academic transcript from an accredited college or university if the CPE hours claimed are in a course taken for credit at the college or university.
(3) If a certificate of completion from the CPE program sponsor is not available for a group study program, a participant may submit an attendance verification form, signed by the participant and containing the information in paragraph (1)(i)—(vi) together with copies of the program materials.
(4) A signed statement from the CPE program sponsor's representative, containing the information in paragraph (1)(i)—(vi), that verifies the participant's service as an instructor.
(5) A copy of each article, book or other publication for which an individual claims CPE hours as an author.
(b) An individual shall retain the documentation in subsection (a) for 5 years after the date of completion of each CPE program or the date of publication of each article, book or publication authored.
§ 11.68a. Disciplinary action for failure to comply with CPE requirements.
(a) Unless granted an extension or waiver by the Board under § 11.62(d) (relating to CPE requirement for issuance of license; waiver or extension), and except as provided in subsection (b), a licensee who fails to comply with §§ 11.62—11.64, 11.67 and 11.68 will be subject to disciplinary action in the case of a first offense under § 43b.10a (relating to schedule of civil penalties—accountants) or in the case of a second or subsequent offense under section 9.1(a)(4) and (10) of the act (63 P. S. § 9.9a(a)(4) and (10)).
(b) A licensee who knowingly provides false information on an application about compliance with CPE requirements will be subject to disciplinary action under section 9.1(a)(1)(iii) of the act.
(c) A licensee who is disciplined for failure to comply with CPE requirements shall make up a deficiency in CPE hours and submit documentation of the fact to the Board within 6 months after imposition of the disciplinary sanction. A licensee who fails to submit documentation of make-up CPE hours by the prescribed deadline will undergo suspension of the licensee's license and underlying certificate of CPA or public accountant registration until the documentation is submitted.
§ 11.69. (Reserved).
§ 11.69a. Approval of CPE program sponsor.
(a) Approval requirement. Except as provided in subsection (b), any individual or entity desiring to offer a program for CPE credit under this chapter shall apply to the Board for approval as a CPE program sponsor.
(b) Exemption from approval process. The following are deemed approved CPE program sponsors and are not required to submit applications for approval to the Board:
(1) An individual or entity that is a member in good standing of NASBA's National Registry of CPE Program Sponsors.
(2) An individual or entity that is approved as a CPE program sponsor by the accountancy regulatory body of a state that permits the practice of public accounting under principles of substantial equivalency.
(3) A college or university accredited by a Nationally recognized accrediting agency recognized by the United States Department of Education when offered as part of its approved curriculum.
(c) Contents of application for approval. An application for approval as a CPE program sponsor shall contain the following information:
(1) The name and address of the CPE program sponsor.
(2) The sources of CPE hours as specified in § 11.64 (relating to sources of CPE hours).
(3) A list of existing or planned program offerings, if known.
(4) The total number of credit hours requested for each program.
(5) The attendance certification method.
(6) The program objectives.
(7) The admission requirements.
(8) The program outlines.
(9) The instruction and evaluation methods.
(d) Sworn statements. Statements made in an application shall be sworn to be true and correct to the best of the applicant's knowledge.
(e) Board review of application for approval. An application will be reviewed by the Board's CPE Committee, which will make recommendations to the Board for approval or disapproval. If an application is disapproved, the Board will provide the applicant with written notification of the reasons for disapproval. An applicant may submit a revised application to address the Board's concerns. No Board member will review or vote upon an application in which he has a vested interest.
(f) Approval number. Upon approval by the Board, an applicant will be assigned a CPE program sponsor approval number.
(g) Biennial renewal of approval. An approved CPE program sponsor shall renew its approval by January 1 of each even-numbered year. A renewal application shall list the CPE program sponsor's planned program offerings for the upcoming renewal period.
§ 11.71. Responsibilities of CPE program sponsor.
In addition to meeting the requirements in § 11.69a (relating to approval of CPE program sponsor), a CPE program sponsor shall comply with the following:
(1) Program level of difficulty. A CPE program sponsor shall specify the level of knowledge to be imparted under the program. The levels of knowledge may be expressed in a variety of ways, all of which should be informative to potential participants. For example, a program may be described as having the objective of imparting technical knowledge at levels such as basic, intermediate, advanced or overview, which might be defined as follows:
(i) A basic level program teaches fundamental principles or skills to participants having no prior exposure to the subject area.
(ii) An intermediate level program builds on a basic level program in order to relate fundamental principles or skills to practical situations and extend them to a broader range of applications.
(iii) An advanced level program teaches participants to deal with complex situations.
(iv) An overview program enables participants to develop perspective as to how a subject area relates to the broader aspects of accounting or brings participants up-to-date on new developments in the subject area.
(2) Recommendation of education and experience prerequisites. A CPE program sponsor shall clearly identify what prerequisites are suggested for enrollment. If a prerequisite is not necessary, a statement to that effect shall be made. Prerequisites shall be specified in precise language so potential participants can readily ascertain whether the program would be beneficial to them or whether the program is above or below their level of knowledge or skill.
(3) Development of the program. A CPE program sponsor shall ensure that the programs are developed by individuals qualified in the subject matter and in instructional design. This subsection is not intended to require that any individual CPE program sponsor be both technically competent and competent in instructional design. Its purpose is to ensure that both types of competency are represented in the program's development, whether one or more persons are involved in that development. Mastery of the technical knowledge or skill in instructional design may be demonstrated by appropriate experience or educational credentials.
(4) Program review. A CPE program sponsor shall review the course materials annually to ensure that they are accurate and consistent with currently accepted standards relating to the program's subject matter. Between these reviews, errata sheets should be issued when appropriate, and obsolete material should be deleted. Between the time a new pronouncement is issued and the issuance of errata sheets or removal of obsolete materials, the instructor is responsible for informing participants of changes. If, for example, a new accounting standard is issued, a program will not be considered current unless the ramifications of the new standard have been incorporated into the materials or the instructor appropriately informs the participants of the new standard.
(5) Disclosure to prospective participants. A CPE program sponsor shall disclose in advance to prospective participants the objectives, prerequisites, experience level, content, required advanced preparation, teaching method and number of CPE hours involved in the program.
(6) Selection and review of instructors. A CPE program sponsor shall select and assign qualified instructors for the CPE program. A CPE program sponsor shall evaluate the performance of instructors at the conclusion of each program to determine their suitability for continuing to serve as instructors in the future.
(7) Number of participants and adequacy of physical facilities. A CPE program sponsor shall ensure that the number of participants and the physical facilities are consistent with the teaching methods to be utilized.Because the learning environment is affected by the number of participants and by the quality of physical facilities, a CPE program sponsor has an obligation to pay serious attention to both of these factors. The maximum number of participants for a case-oriented discussion program, for example, shall be less than for a lecture program. The seating arrangement is also very important. For discussion presentation, learning is enhanced as seating is arranged so that participants can easily see and converse with each other. If small group sessions are an integral part of the program format, appropriate facilities shall be made available to encourage communication with a small group.
(8) Program evaluation. A CPE program sponsor shall provide a program evaluation in accordance with the following:
(i) Evaluations shall be solicited from both the participants and instructors. The objective of evaluations is to encourage the CPE program sponsor to strive for increased program effectiveness. Programs should be evaluated to determine whether:
(A) Objectives have been met.
(B) Prerequisites were necessary or desirable.
(C) Facilities were satisfactory.
(D) Instructors were effective.
(E) Advanced preparation materials were satisfactory.
(F) The program content was timely and effective.
(ii) Evaluations may take the form of pretests for advanced preparation, posttests for effectiveness of the program, questionnaires completed at the end of the program or later and oral feedback to the instructor or CPE program sponsor. Instructors shall be informed of their performance, and the CPE program sponsor shall systematically review the evaluation process to ensure its effectiveness.
(9) Attendance records. A CPE program sponsor shall maintain and retain accurate records of attendance for a 5-year period.
(10) Course materials. A CPE program sponsor shall retain a written outline of course materials for a 5-year period.
(11) Certificate of completion. A CPE program sponsor shall provide a certificate of completion to each participant who satisfactorily completes a program. A certificate of completion must contain the information in § 11.68(a)(1) (relating to documentation of CPE hours).
(12) Promotional materials. A CPE program sponsor shall identify the subject area of a program under § 11.63 (relating to CPE subject areas; relevance to professional competence) in the program's promotional materials.
§ 11.71a. Offsite review of CPE program sponsor.
A CPE program sponsor shall be subject to an offsite review of its CPE programs to ensure compliance with this chapter. The review will involve an in-depth audit of all course materials, documents and records maintained by the CPE program sponsor under this chapter, including:
(1) The information in § 11.69a(c) (relating to approval of CPE program sponsor).
(2) The dates and locations of programs.
(3) The program schedules (that is, title of subject, instructor, time allotted, excluding breaks and lunches).
(4) The names, titles and degrees of instructors.
§ 11.72. Withdrawal of approval of CPE program sponsor.
(a) The Board, following notice and hearing under 2 Pa.C.S. §§ 501—508 (relating to practice and procedure of Commonwealth agencies) may withdraw the approval of a CPE program sponsor that the Board finds guilty of:
(1) Having acquired the Board's approval by misrepresentation.
(2) Failing to comply with § 11.69a or § 11.71 (relating to approval of CPE program sponsor; and responsibilities of CPE program sponsor).
(3) Refusing to provide information requested by the Board pursuant to an offsite review under § 11.71a (relating to offsite review of CPE program sponsor).
(4) Indicating in any manner that it has been approved as a CPE program sponsor prior to a CPE program sponsor approval number having been issued to it.
(b) The Board's withdrawal of a CPE program sponsor's approval will not affect the CPE hours earned by persons who completed programs of the sponsor prior to the withdrawal of its approval.
[Pa.B. Doc. No. 12-2312. Filed for public inspection November 30, 2012, 9:00 a.m.]
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