CBA's full plate: board seeking legislation on everything from licensing to fines.

• Author: Allen, Bruce C.
• Position: GovernmentRelations; California Board of Accountancy

As the California Board of Accountancy delivered its sunset review report, the Joint Legislative Sunset Review Committee urged legislation on a number of issues, including changes to discipline options, peer review and licensing. These issues will be amended into SB 1543, which extends the CBA sunset.

Enforcement

The Legislature has requested that the CBA develop recommendations related to its ability to discipline large firms.

Ian Thomas, CBA president, acknowledged in his presentation that "oversight of large firms presents considerable challenges in budgeting and funding for the extensive, ever-fluctuating investigative and legal resources required in pursuing large matters.

"These barriers are compounded by a cumbersome state contracting process and the consumption of significant internal staff time," he said.

"Confirming and proving 'audit failure' by a large firm is a rigorous undertaking and investigations of complex audit engagements can consume several years and cost millions of dollars."

To enhance its enforcement ability the CBA is recommending budgeting flexibility so it can access $2 million of its contingency funds during a budget year, if necessary to pursue complex enforcement cases.

Additionally, the CBA is seeking authority to encumber funds for specific investigative contracts for at least two years and be able to have nine months' operating budget. Currently, the CBA's reserves are limited to a sum that is no more than six months of their operating budget.

The CBA also seeks to fill positions eliminated due to vacancies or the state's hiring freeze so its enforcement program can be more effective.

Increased Fining Authority

Thomas urged the Legislature to expand the CBA's fining authority to provide additional levels of discipline for violations of the Accountancy Act.

The CBA's current disciplinary options include probation, suspension and revocation.

The CBA is proposing adding a two-tiered fining structure: up to $5,000 for the initial violation; $10,000 for subsequent violations. These fines could be imposed on both individuals and firms for violating any part of the Accountancy Act.

More egregious violations--criminal convictions, embezzlement, gross negligence, fiscal dishonesty and fraud--could subject an individual practitioner to a fine of up to $50,000 for an initial violation and $100,000 for repeated violations. Firms could be fined up to $1 million for the first violation and up to $5 million for subsequent...