Advocating for California CPAs
Audit Standards a Hot Issue in Legislature
March 7, 2014—The auditing of cities, counties and other municipalities remains a hot issue in the Capitol. CalCPA has been working to ensure that the auditing and accounting standards remain consistent to those in current law. Some of the issues we’re keeping an eye on include:
Audit Firm Rotation:
Legislation has been introduced to create an oil severance tax, which would create revenue to form and fund the California Higher Education Endowment Corporation—an organization that would annually allocate funds to specified higher education, parks and social service programs. The bill calls for those receiving funding to be audited at least once every six years, with the audits occurring alternately between the three public, postsecondary education entities every two years. However, the bill also mandates that a new audit firm would have to be used every six years.
The Public Company Accounting Oversight Board and the Congressional Budget Office have both explored mandatory firm rotation and determined it would not meet the desired public policy goals.
CalCPA supports this conclusion. Mandatory firm rotation restricts an auditor’s ability to develop a cumulative body of knowledge, including the internal operations and external environment of the audited entity—especially for a specialized entity such as a governmental organization. This can increase audit costs and even lead to increased opportunities for fraud.
Moreover, CPAs and CPA firms already adhere to comprehensive professional standards, including an ethical duty and responsibility to objectivity—especially as it relates to conducting an audit. Additionally, any CPA firm that performs audit services must comply with a comprehensive peer review process overseen by the California Board of Accountancy on a regular basis.
Dissolution of Redevelopment Agencies:
Legislation has been introduced to modify Infrastructure Finance Districts to make them more attainable to local agencies as a way to finance needed public infrastructure projects. Part of the oversight requires regular independent audits. As introduced, the language for the auditing requirements is unclear and inconsistent with current law. CalCPA is working with the bill’s author to ensure that issue is addressed.
A similar proposal that would allow cities to form a community revitalization authority also contains audit language. However, the bill does not identify who will conduct the annual independent financial audits. As drafted, this legislation states that the revitalization authority shall contract for the independent financial audit, and that it shall be conducted in accordance with guidelines set by the California Controller.
While these audits are an important part of oversight of public funds, CalCPA would like to see language that clarifies that the audits must be conducted in accordance with Generally Accepted Government Auditing Standards by a CPA who is licensed by—and in good standing with—the CBA.
CalCPA continues to work with the Legislature and all interested parties to ensure that CPAs who perform municipal audits are not unfairly affected as these proposals move through the legislative process.
CPA Day at the Capitol 2014
As you prepare for CPA Day on January 22, 2014, we want to remind you to prepare for your meetings by reviewing important CPA Day resources. Please familiarize yourself with the following:
These CPA Day 2014 resources along with your meeting schedule will be included in the material packet that you will receive the morning of the event.
Registration begins 9:30 a.m. and the briefing will begin at 10 a.m. at the Sheraton Grand Hotel, 1230 J St. Dress attire for the day is “business”—and remember to bring plenty of business cards.
Thank you, and we look forward to seeing you in Sacramento.
Gov. Brown Signs AB 1412: Reinstating QSBS Exclusion
Oct. 4, 2013—Due to a great response from you and your colleagues, CalCPA has experienced another major legislative success. Gov. Brown has signed AB 1412 (Bocanegra & Gatto)—an important solution that corrects an unfair retroactive tax change by reinstating the long-standing Qualified Small Business Stock (QSBS) exclusion for Californians who reasonably relied on the law at the time they filed their tax return. More importantly, this legislative solution gives Californians peace of mind that reliance on our tax code is the rule, not the exception.
Following the governor's signing of the bill, the Franchise Tax Board has released QSBS guidance in the form of FAQs.
Gov. Brown Signs SB 823: License Requirements Extended
Oct. 2, 2013 — SB 823, the California Board of Accountancy sponsored bill that CalCPA supported, has been signed by Gov. Brown. As an urgency measure, this bill will take effect immediately. SB 823 extends the current licensure requirements for those who have passed all parts of the Uniform CPA Exam by the end of this year. The two-year grace period will assist candidates by allowing additional time to wrap up any additional licensure requirements they may need. After the two-year grace period, the candidate would have to satisfy the new licensure requirements that take effect Jan. 1, 2014. The bill also allows student-candidates enrolled in a five-year, combined master’s (or certificate)/bachelor’s program to sit for the Uniform CPA Exam prior to official receipt of the bachelor’s degree—as long as they have completed all the necessary requirements for the degree and the school is able to certify the student’s status.
Find more licensure information on our website:
Read previous posts.
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Stepping up for the Profession
Several California Congressional representatives, including CalCPA member John Campbell, co-signed a letter to U.S. Treasury Secretary Timothy Geithner expressing their concerns with the IRS tax return preparer registration proposal. Read their letter.