DEPARTMENT OF LICENSING AND REGULATORY AFFAIRS

DIRECTOR'S OFFICE

ACCOUNTANCY – GENERAL RULES

Filed with the secretary of state on November 21, 2022

These rules take effect immediately upon filing with the secretary of state unless adopted

under section 33, 44, or 45a(9) of the administrative procedures act of 1969, 1969 PA

306, MCL 24.233, 24.244, or 24.245a. Rules adopted under these sections become

effective 7 days after filing with the secretary of state.

(By authority conferred on the department of licensing and regulatory affairs by sections

205, 308, 721, 725, 726, 728, and 729 of the occupational code, 1980 PA 299, MCL

339.205, 339.308, 339.721, 339.725, 339.726, 339.728, and 339.729, and Executive

Reorganization Order Nos. 1991-9, 1996-2, 2003-1, 2008-4, and 2011-4, MCL 338.3501,

445.2001, 445.2011, 445.2025, and 445.2030)

R 338.5101, R 338.5102, R 338.5104, R 338.5110a, R 338.5111, R 338.5115, R

338.5116, R 338.5139, R 338.5140, R 338.5210, R 338.5211, R 338.5215, R 338.5230, R

338.5401, R 338.5405, R 338.5460, R 338.5465, R 338.5475, R 338.5501, and R

338.5503 of the Michigan Administrative Code are amended, as follows:

PART 1. GENERAL PROVISIONS

R 338.5101 Definitions.

Rule 101. (1) As used in these rules:

(a) "Board" means the Michigan board of accountancy created under section 721 of the

code, MCL 339.721.

(b) "Code" means the occupational code, 1980 PA 299, MCL 339.101 to 339.2677.

(c) "Continuing education period" means all or part of a year beginning July 1 and

ending June 30.

(d) "Continuous instruction" means education time not including breakfast, lunch, or

dinner periods, coffee breaks, or any other breaks in the program.

(e) "Disclose" means to provide a written communication from a Certified Public

Accountant (CPA) or a CPA firm informing the client, before making a recommendation

or referral, that the CPA or CPA firm will receive a commission, referral fee, or

contingency fee from a third-party for recommendations or referrals of products or

services, or both.

(f) "Enterprise" means a person, persons, or entity for which an individual licensee, a

firm licensee, an individual with practice privileges, or an out-of-state firm performs

professional services.

March 23, 2022

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(g) "Financial statements" means statements and related footnotes that show financial

position, results of operations, and cash flows based on generally accepted accounting

principles or another comprehensive basis of accounting. The term does not include

incidental financial data included in management advisory services reports to support

recommendations to a client and does not include tax returns and supporting schedules of

tax returns.

(h) "Generally accepted accounting principles" means accounting principles issued by

the applicable nationally or internationally recognized professional standard setting

organization related to individual accounting engagements.

(i) "Generally accepted auditing standards" means the standards of professional

conduct, issued by the applicable nationally or internationally recognized professional

standard setting organization, related to individual audit engagements.

(j) “Individual with practice privileges” means an individual who practices in this state

under section 727a of the code, MCL 339.727a.

(k) “Nano-learning program” means a tutorial program designed to allow a participant

to learn a given subject in a 10-minute period with electronic media and without

interaction with a real-time instructor.

(l) “Out-of-state firm” means a firm that may provide certain services and use the title

“CPA firm” without obtaining a Michigan firm license under the conditions in section

728(4) and (5) of the code, MCL 339.728.

(m) "Professional engagement" means an agreement between a client and an individual

licensee, a firm licensee, an individual with practice privileges, or an out-of-state firm

relative to the performance of professional services.

(n) "Professional services" means any services performed or offered to be performed by

an individual licensee, a firm licensee, an individual with practice privileges, or an out-

of-state firm for a client in the course of the practice of public accounting, under section

720 of the code, MCL 339.720.

(o) "Qualifying hours" means continuing education hours that satisfy part 3 of these

rules.

(2) A term defined in the code has the same meaning when used in these rules.

R 338.5102 Standards of professional practice adopted by reference.

Rule 102. (1) The following standards are approved and adopted by reference:

(a) The standards issued by the American Institute of CPAs (AICPA), 220 Leigh Farm

Road, Durham, North Carolina, 27707, set forth in the publication “AICPA Professional

Standards” updated June 1, 2021, and any statements issued as of the effective date of

this rule, which are available at a cost of $255.00 from the institute’s website at

https://future.aicpa.org/cpe-learning/publication or at no cost from the institute’s website

at https://us.aicpa.org/research/standards.html.

(b) The standards issued by the Public Company Accounting Oversight Board

(PCAOB), 1666 K Street NW, Washington, District of Columbia, 20006, set forth in the

publication entitled “PCAOB Standards and Related Rules” 2021 edition, and any

updates issued as of the effective date of this rule, which are available at a cost of

$205.00 from the AICPA’s website at https://future.aicpa.org/cpe-learning/publication or

at no cost from the AICPA’s website at https://pcaobus.org/oversight/standards.

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(c) The auditing standards issued by the Government Accountability Office, 441 G. St.,

NW, Washington, District of Columbia, 20548, in the publication entitled "Government

Auditing Standards 2018 Revision" updated on April 14, 2021, which are available at no

cost on the Office’s website at https://www.gao.gov/yellowbook.

(d) The standards issued by the International Auditing and Assurance Standards Board

(IAASB), 529 5^thAvenue, New York, New York, 10017, in the publication entitled

“2020 Handbook of International Quality Control, Auditing, Review, Other Assurance,

and Related Services and Pronouncements” issued on September 14, 2021, and any

related pronouncements issued as of the effective date of this rule, which are available at

no cost from the IAASB's website at https://www.iaasb.org/standards-pronouncements.

(e) The accounting standards issued by the Financial Accounting Standards Board

(FASB), 401 Merritt 7, P.O. Box 5116, Norwalk, Connecticut, 06856, in the publication

entitled “FASB Accounting Standards Codification” as of June 24, 2021, and any updates

published as of the effective date of this rule, which are available at no cost from the

board’s website at https://asc.fasb.org.

(f) The accounting standards issued by the Governmental Accounting Standards Board

(GASB), 401 Merritt 7, P.O. Box 5116, Norwalk, Connecticut, 06856, in the publication

entitled “GASB Codification” as of December 31, 2020, and any pronouncements

published as of the effective date of this rule, which are available at no cost from the

board’s website at https://www.gasb.org/home.

(g) The accounting standards issued by the International Accounting Standards Board,

30 Cannon Street, London EC4M 6XH, United Kingdom, in the publication entitled

“2021 International Financial Reporting Standards IFRS® ” and any pronouncements

issued as of the effective date of this rule, which are available at a cost of £79.00 from the

board’s website at http://www.ifrs.org.

(h) The United States Securities and Exchange Commission (SEC) rules contained in

17 CFR chapter 2 and the SEC’s Interpretative Releases and Policy Statements issued as

of the effective date of this rule. The SEC rules may be obtained free of charge at

http://www.ecfr.gov. The SEC’s Interpretative Releases and Policy Statements may be

obtained free of charge at https://www.sec.gov.

(2) Copies of the standards adopted in this rule are available for inspection and

distribution at the cost of 10 cents per page from the Department of Licensing and

Regulatory Affairs, Bureau of Professional Licensing, 611 W. Ottawa Street, P.O. Box

30670, Lansing, Michigan, 48909.

(3) A licensee shall satisfy the applicable standards adopted in subrule (1) of this rule.

R 338.5104 Retention of documents.

Rule 104. (1) With the exception of documents related to a peer review, all individual

licensees, firm licensees, individuals with practice privileges, and out-of-state firms shall

keep sufficient documentation, in any form, about services performed while engaged in

the practice of public accounting, as well as evidence obtained and conclusions reached,

for a period of not less than 5 years.

(2) Documents related to a peer review must be kept in accordance with and satisfy the

AICPA's professional standards and retention policies under R 338.5102(1)(a) or until

final adjudication of a complaint related to a peer review, whichever is later.

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(3) Documentation must be consistent with that required by professional standards or

issued by the applicable nationally or internationally recognized professional standards

setting organizations.

PART 2. LICENSURE REQUIREMENTS

R 338.5110a Uniform CPA exam procedures.

Rule 110a. The following procedures apply to the uniform CPA exam:

(a) Applicants may take the required exam sections individually and in any order.

(b) Applicants shall pass all sections of the exam within a rolling 18-month period

beginning on the date that the first section is passed. If all sections are not passed within

the rolling 18-month period, then credit for any section passed outside the 18-month

period expires and the section must be retaken.

(c) The department may extend the rolling 18-month period under subdivision (b) of

this rule due to the sickness of the candidate or a member of the candidate’s immediate

family if substantiated by a doctor’s certificate or if the candidate provides the

department with proof verifying a death in the candidate’s immediate family, temporary

military service, or another good reason acceptable to the department. A candidate shall

make a request for an extension within 90 days of the date of the exam. If extended, an

applicant’s exam does not count as a failure to write the exam.

(d) The department or the entity contracted with the department to administer the exam

may allow a candidate to sit for the exam in another state if the candidate satisfies all the

requirements for sitting for the exam under these rules.

(e) The department grants a candidate credit for exam grades of 75 or higher earned in

another state if the candidate satisfies the educational requirements to sit for the exam and

the board decides the exam was equivalent to the exam provided by the department.

(f) An applicant may retake an exam section once the applicant’s grade for any earlier

attempt of the same exam section has been released.

R 338.5111 Exam scores.

Rule 111. (1) The minimum passing grade for each subject is 75.

(2) The department shall notify each candidate of the applicant’s grades within a

reasonable time, but not later than 120 days after completion of the exam.

(3) A candidate may appeal the grading of any paper to the department, in writing,

within 30 days after grades are released.

R 338.5115 Educational requirements for the uniform CPA exam; approved educational

institutions; adoption of accreditation standards by reference.

Rule 115. (1) To satisfy section 725(1)(b) and (2) of the code, MCL 339.725, an

individual shall provide proof verifying both the following requirements:

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(a) Completion of a curriculum required for a baccalaureate degree consisting of not

less than 120 semester hours at a higher education institution approved under subrule (3)

or (4) of this rule or considered substantially equivalent under subrule (5) of this rule.

(b) Completion of a concentration in accounting at a higher education institution

approved under subrule (3) or (4) of this rule or considered substantially equivalent under

subrule (5) of this rule, which includes all the accounting and general business subjects

under subrule (2) of this rule.

(2) A concentration in accounting must include all the following accounting and general

business subjects:

(a) Three semester hours in auditing.

(b) Twenty-four semester hours of general business subjects, other than accounting,

which may include study in any of the following subjects:

(i) Business communications.

(ii) Business ethics.

(iii) Business law.

(iv) Economics.

(v) Finance.

(vi) Management.

(vii) Marketing.

(viii) Information systems or technology.

(ix) Quantitative methods.

(x) Statistics.

(xi) Other subjects approved by the department.

(c) Twenty-one semester hours of accounting principles that must include study in each

of the following areas:

(i) Financial accounting and accounting theory.

(ii) Managerial accounting, including cost accounting.

(iii) Accounting systems and controls.

(iv) Taxation.

(v) Governmental/fund accounting.

(3) The standards for recognition of accrediting organizations developed and adopted by

the Council for Higher Education Accreditation (CHEA), One Dupont Circle NW, Suite

510, Washington, D.C. 20036, in the publication entitled “CHEA Standards and

Procedures for Recognition,” effective October 4, 2021, which are available at no cost on

the council’s website at https://www.chea.org, are approved and adopted by reference. If

a higher education institution is accredited by the accrediting body of the region in which

the institution is located and the accrediting body satisfies the recognition standards of

CHEA, then the institution is approved.

(4) The criteria for recognition and the recognition process for the secretary’s

recognition of accrediting agencies of the United States Department of Education, Office

of Postsecondary Education, 400 Maryland Avenue SW, Washington, D.C. 20202, in 34

CFR 602.10 to 602.39, effective July 1, 2020, which are available at no cost on the

department’s website at https://www2.ed.gov/about/offices/list/ope/index.html, are

approved and adopted by reference. If a higher education institution is accredited by the

accrediting body of the region in which the institution is located and the accrediting body

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satisfies the recognition criteria and process of the United States Department of

Education, then the institution is approved.

(5) An individual who attended an unaccredited higher education institution shall

establish that the applicant has completed educational requirements at a higher education

institution that satisfies accreditation requirements substantially equivalent to those

recognized in subrule (3) or (4) of this rule, by providing a credential evaluation

completed by either the National Association of State Boards of Accountancy (NASBA)

or a credential evaluation organization that is a current member of the National

Association of Credential Evaluation Services (NACES).

(6) Copies of the standards and criteria approved and adopted by reference in this rule

are available for inspection and distribution at a cost of 10 cents per page from the Board

of Accountancy, Department of Licensing and Regulatory Affairs, Bureau of Professional

Licensing, 611 W. Ottawa Street, P.O. Box 30670, Lansing, Michigan, 48909.

R 338.5116 Educational requirements for certificate of CPA.

Rule 116. (1) To satisfy section 725(1)(e) of the code, MCL 339.725, an individual

shall provide proof verifying all the following requirements:

(a) Completion of not less than 150 semester hours at a higher education institution

approved under R 338.5115(3) or (4) or considered substantially equivalent under R

338.5115(5).

(b) Completion of a baccalaureate degree or higher degree from a higher education

institution approved under R 338.5115(3) or (4) or considered substantially equivalent

under R 338.5115(5).

(c) Completion of a concentration in accounting under R 338.5115(1)(b) and R

338.5115(2) at a higher education institution approved under R 338.5113(3) or (4) or

considered substantially equivalent under R 338.5115(5).

(2) A person may earn credit only once for an accounting or general business topic. If

the department decides that 2 courses are duplicative, then only the semester hours of the

first course are counted toward the semester hour requirement.

R 338.5139 Practice privilege.

Rule 139. An individual shall not, as a condition of qualification for the practice

privilege granted under section 727a of the code, MCL 339.727a, be required to satisfy

the continuing professional education requirements of this state provided that the

individual satisfies the continuing professional education requirements of the state of the

individual’s principal place of business.

R 338.5140 Permit for temporary practice.

Rule 140. (1) An accountant who does not qualify for practice privileges under section

727a of the code, MCL 339.727a or who does not hold a license to practice public

accounting in this state, shall obtain a permit and pay the fee for each engagement in this

state by the accountant, or on behalf of the accountant’s firm, who does not hold a license

to practice public accountancy in this state. The applicant shall hold a license as a CPA of

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another state, or hold a title from a foreign country, recognized by the board as

comparable to the Michigan certificate of CPA and shall be practicing public

accountancy under the certificate or license in the grantor state or country.

(2) If approved by the department, the term of the permit begins on the date approved

unless otherwise specified and must be for a specified period but must not be for more

than 1 year.

(3) The temporary practice shall be performed by, or under the direct supervision of, a

licensed CPA, an individual with practice privileges under section 727a of the code,

MCL 339.727a, or the holder of a title from a foreign country who is recognized under

subrule (1) of this rule.

(4) A temporary permit is not required if the work relates to a Michigan-based division

or subsidiary of an entity, if the parent entity is located in another state or foreign country

and is a client of the CPA, firm, or foreign accountant, and if a separate presentation of

financial statements with a related independent auditor's report or review report, or an

attestation regarding the reliability of a representation or estimate, is not made for the

division or subsidiary on a stand-alone basis.

(5) A temporary permit is not required if the work is to be performed through the

applicant's employer who presently holds a license to practice public accountancy in this

state.

(6) A temporary permit issued to an accountant also constitutes a temporary permit for

the accountant’s firm, if the accountant’s firm is not presently licensed in this state.

(7) If another jurisdiction charges a fee for providing an affidavit or certificate of

professional standing for deciding whether the applicant is qualified to practice public

accountancy temporarily in this state, the applicant shall pay the fee.

PART 3. CONTINUING EDUCATION

R 338.5210 License renewals; continuing education requirements; applicability;

continuing education waiver; reciprocity.

Rule 210. (1) This part applies to applications for renewal of an accountancy license

under sections 411 and 729 of the code, MCL 339.411 and 339.729. An applicant for

renewal shall provide the required fee and a completed application on a form provided by

the department. Both of the following standards apply:

(a) Under section 729(1) of the code, MCL 339.729, an applicant for renewal who is a

nonresident licensee as that term is defined in section 720(1)(g) of the code, MCL

339.720, is considered to have met the requirements under this part if the applicant

satisfies all the following requirements:

(i) Provides the required fee and a completed application on a form provided by the

department.

(ii) The state in which the applicant’s principal place of business is located requires

continuing education for renewal of that state’s accountancy license.

(iii) Meets the continuing education requirements of the state in which the applicant’s

principal place of business is located.

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(b) If audited, the applicant shall provide a copy of the license that was renewed by the

state in which the applicant’s principal place of business is located.

(2) Submission of an application for renewal constitutes the applicant’s certification of

compliance with the requirements of this rule. Both of the following standards apply:

(a) An applicant shall keep documentation required by R 338.5215 as proof verifying

satisfaction of the requirements under this rule for 4 years after the date of applying for

license renewal.

(b) A licensee is subject to audit under this part and may have to provide the

documentation as described by R 338.5215 upon request of the department.

(3) A request for a continuing education waiver under section 204(2) of the code, MCL

339.204, must be received by the department before the expiration date of the license.

R 338.5211 Renewal of license with insufficient qualifying hours allowed

under certain circumstances; waiver of requirement for additional hours.

Rule 211. (1) A licensee who does not earn sufficient qualifying hours during the

continuing education period may be allowed to renew a license upon reporting 80

qualifying hours and an additional 4 hours of continuing education credit for each month

of time needed to remove the deficiency. The additional 4 hours of continuing education

credit for each month of time needed to remove the deficiency shall not apply toward the

qualifying hours of continuing education credit required in a continuing education period

for the renewal of a license.

(2) The department may waive the requirement for additional hours upon a showing by

the licensee that the additional hours would present an undue hardship on the licensee.

R 338.5215 Acceptable continuing education; requirements; limitations.

Rule 215. (1) The continuing education hours required for renewal must satisfy the

following requirements:

Activity and Proof of Completion

Number of Continuing

Education Hours Earned

for the Activity

(a) Attendance in a group program that satisfies all the

following requirements:

Fifty minutes of

continuous instruction

equals 1 continuing

education hour.

- The subject matter of the program satisfies R

338.5255.

- The program is conducted by an instructor or

discussion leader whose background, training,

Additional credit is

granted after the first 50

education, or experience makes it appropriate for the minutes for continuous

instructor or discussion leader to lead a discussion on instruction in the

the subject matter.

following amounts:

- The sponsor of the program takes individual

attendance.

One-half credit (0.5

credit) for every

additional 25 minutes.

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- The sponsor of the program issues to each attendee One-fifth credit (0.2

a program outline and a written certification of the

attendee’s hours of attendance.

credit) for every

additional 10 minutes.

- The sponsor of the program keeps written records

of individual attendance and the program outline for

4 years.

If audited, a licensee shall provide a copy of a letter

or certificate of completion showing the licensee’s

name, total continuing education hours earned,

sponsor name and contact information, course title,

course field of study, date offered or completed, and

type of instruction or delivery method used.

(b) Completion of an individual nano-learning program

that satisfies all the following requirements:

Credit is awarded as 1/5

credit (0.2 credit) for each

nano-learning program

completed.

- The subject matter of the program satisfies R

338.5255.

- The program is an educational course designed for

nano-learning delivery.

A nano-learning course

cannot be combined with

- The program uses instructional methods that define another nano-learning

a minimum of 1 learning objective.

course.

- The program guides the participant through a

program of learning and provides proof verifying a

A combined maximum of

participant’s satisfactory completion of the program. 20 continuing education

- The sponsor requires the participant to successfully hours may be earned

complete a qualified assessment with a passing grade under this activity and

of 100% before issuing credit for the course.

activity (f) during each

- The sponsor of the program issues the participants a continuing education

written certification of the participants’ completion

of the program and a program outline.

period.

- The sponsor of the program keeps written records

of the participant’s completion of the program and

the program outline for 4 years.

If audited, the licensee shall provide a copy of a letter

or certificate of completion provided by the program

sponsor verifying the licensee’s name, number of

continuing education hours earned, sponsor name

and contact information, course title, course field of

study, date completed, and type of instruction or

delivery method used.

(c) Passing a noncredit academic course that satisfies

both of the following requirements:

Each 50 minutes of

continuous instruction

equals 1 continuing

education hour.

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- The subject matter of the course satisfies R

338.5255.

- The course is offered by an educational institution

that satisfies R 338.5115.

If audited, the licensee shall provide a letter from the

institution confirming the name and course number

of the course completed, number of classroom hours

attended, and the date of satisfactory course

completion.

(d) Passing a for-credit academic course that satisfies

both of the following requirements:

Fifteen continuing

education hours are

granted for each academic

credit hour.

- The subject matter of the course satisfies R

338.5255.

- The course is offered by an educational institution

that satisfies R 338.5115.

If audited, the licensee shall provide a copy of an

official transcript or a letter from the institution

confirming the name and course number of the

course completed, credit hours earned, and date of

satisfactory course completion.

(e) Classroom work as a teacher, instructor, speaker, or

lecturer that is part of an academic course of which

Three continuing

education hours are

the subject matter satisfies R 338.5255 and is offered granted for every 50

at an educational institution that satisfies R 338.5115 minutes of continuous

or conducting a group program that satisfies the

requirements under activity (a) as a teacher,

instructor, lecturer, speaker, or seminar discussion

leader.

instruction.

A maximum of 20

continuing education

hours may be earned

during each continuing

If audited, the licensee shall provide a copy of the

confirmation letter provided by the program sponsor education period.

or the institution verifying the licensee’s name,

number of hours of classroom work or hours spent

conducting the group program, course title, course

field of study, and dates of the presentation or

instruction.

(f) Completion of an individual self-study program that Twenty-five minutes of

satisfies all the following requirements:

continuous instruction

equals ½ credit (0.5

credit) of 1 continuing

education hour.

- The subject matter of the program satisfies R

338.5255.

- The program is an educational course designed for

self-study.

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- The sponsor of the program issues the participants a One-fifth credit (0.2

written certification of the participant’s completion

of the program and a program outline.

- The sponsor of the program keeps written records

of the participant’s completion of the program and

the program outline for 4 years.

credit) of 1 continuing

education hour is granted

for every additional 10

minutes of continuous

instruction after the first

25 minutes of continuous

If audited, the licensee shall provide a copy of a letter instruction.

or certificate of completion provided by the program

sponsor verifying the licensee’s name, number of

continuing education hours earned, sponsor name

and contact information, course title, course field of

study, date completed, and type of instruction or

delivery method used.

A combined maximum of

20 continuing education

hours may be earned

under this activity and

activity (b) during each

continuing education

period.

(g) A course in professional ethics that satisfies the

Continuing education

requirements of activity (a), (b), (c), (d), (e), or (f) is hours are granted in an

approved if the subject matter of the course satisfies

R 338.5255(2).

amount allowed under the

type of activity for which

the course qualifies.

If audited, the licensee shall provide a copy of a letter

or certificate of completion provided by the program

sponsor verifying the licensee’s name, number of

continuing education hours earned, sponsor name

and contact information, course title, course field of

study, date completed, and type of instruction or

delivery method used.

(h) Completion of a course in Michigan statutes and

rules applicable to public accountancy that satisfies

all the following requirements:

Fifty minutes of

continuous instruction

equals 1 continuing

education hour.

- The content of the course is created by the

Michigan Association of Certified Public

Accountants.

- The course provider issues the participants a written

certification of the participant’s completion of the

course and a course outline.

- The sponsor of the program keeps written records

of the participant’s completion of the course and the

course outline for 4 years.

If audited, the licensee shall provide a copy of a letter

or certificate of completion provided by the program

sponsor verifying the licensee’s name, number of

continuing education hours earned, sponsor name

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and contact information, course title, course field of

study, date completed, and type of instruction or

delivery method used.

(2) Continuing education hours are not granted for a program or activity that has

substantially equivalent content of a program or activity for which the applicant has

already earned continuing education hours during the continuing education period.

R 338.5230 Relicensure; continuing education.

Rule 230. (1) An applicant for relicensure whose license has lapsed for less than 3 years

after the expiration date of the last license may be relicensed under section 411(3) of the

code, MCL 339.411, if the applicant satisfies both of the following requirements:

(a) Provides the required fee and a completed application on a form provided by the

department.

(b) Provides proof verifying the completion of 40 hours of continuing education within

the 12 months immediately preceding the date of filing the relicensure application.

However, if the continuing education hours provided with the application are deficient,

the application will be held by the department and the applicant shall provide proof

verifying the completion of the deficient hours within 1 year after the date of filing the

relicensure application. The 40 hours must satisfy all the following requirements:

(i) Satisfy the requirements of R 338.5215.

(ii) Eight of the 40 hours are in auditing and accounting.

(iii) Two of the 40 hours are in professional ethics.

(iv) One of the 2 hours is in professional ethics that satisfies the requirements under R

338.5215(1)(h).

(2) An applicant whose license has been lapsed for 3 or more years after the expiration

date of the last license may be relicensed under section 411(4) of the code, MCL 339.411,

if the applicant satisfies all the following requirements:

(a) Provides the required fee and a completed application on a form provided by the

department.

(b) Establishes that the applicant holds a valid and unrevoked certificate as a CPA that

was issued under section 725 or 726 of the code, MCL 339.725 or 339.726.

(c) Provides proof verifying the completion of 40 hours of continuing education within

the 12 months immediately preceding the date of filing the relicensure application.

However, if the continuing education hours provided with the application are deficient,

the applicant has 1 year after the date of filing the application to provide proof verifying

the completion of the deficient hours. The 40 hours must satisfy all the following

requirements:

(i) Satisfy the requirements of R 338.5215.

(ii) Eight of the 40 hours are in auditing and accounting.

(iii) Two of the 40 hours are in professional ethics.

(iv) One of the 2 hours is in professional ethics that satisfies the requirements under R

338.5215(1)(h).

(3) The continuing education hours required for the continuing education period of the

year in which the license is granted under this rule are prorated starting with the month

following the date of relicensure.

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(4) The department shall not calculate the period of a lapsed license based on a current

or lapsed registration. A registrant whose license has lapsed for less than 3 years shall

satisfy the requirements under subrule (1) of this rule. A registrant whose license has

lapsed for 3 years or more shall satisfy the requirements under subrule (2) of this rule.

PART 4. PROFESSIONAL CONDUCT

R 338.5401 Responsibility for conduct of supervised persons.

Rule 401. (1) The department may hold an individual licensee, a firm licensee, an

individual with practice privileges, or an out-of-state firm responsible for compliance

with the rules of professional conduct by all persons under their supervision. If the

licensee is a firm, the department shall hold the firm, including an out-of-state firm,

responsible for compliance with the rules of professional conduct by all the firm’s

officers, employees, partners, and principals.

(2) An individual licensee, a firm licensee, and individual with practice privileges, or an

out-of-state firm, shall not allow others to conduct on its behalf acts which, if conducted

by the individual licensee, firm licensee, individual with practice privileges, or out-of-

state firm, would constitute a violation of the rules of professional conduct.

R 338.5405 Independence rule; adoption by reference.

Rule 405. An individual licensee, a firm licensee, an individual with practice

privileges, or an out-of-state firm may perform attest services as that term is defined in

section 720 of the code, MCL 339.720, of an enterprise only if the individual licensee,

firm licensee, individual with practice privileges, or out of-state firm is independent from

the enterprise. The standards adopted in R 338.5102(1) shall be used to decide if the

individual or firm is independent from the enterprise.

R 338.5460 Contingent fees.

Rule 460. (1) A contingent fee, as that term is defined in section 703(4) of the code,

MCL 339.730, is a fee paid by a client to an individual licensee, a firm licensee, an

individual with practice privileges, or an out-of-state firm.

(2) An individual licensee, firm licensee, an individual with practice privileges, or an

out-of-state firm who is paid or expects to be paid a contingent fee by a client shall

disclose that fact to the client.

(3) As used in section 730(4) of the code, MCL 339.730, the term "tax matters" relates

to the preparation of an original or amended tax return or claim for tax refund and

includes giving advice on events that occurred before the time the advice is given if the

advice is directly relevant to determining the existence, character, or amount of a

schedule, entry, or other portion of a return of claim for refund.

(4) As provided in section 730(4) of the code, MCL 339.730, a fee is considered

determined, based on the findings of a governmental agency, if the individual licensee,

firm licensee, individual with practice privileges, or out-of-state firm can show a

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reasonable expectation at the time of a fee arrangement of substantive consideration by

the agency with respect to the client. An expectation of substantive consideration is not

considered reasonable for preparation of original tax returns.

R 338.5465 Acts constituting discreditable conduct.

Rule 465. Any of the following acts by an individual licensee, firm licensee, an

individual with practice privileges, or an out-of-state firm, constitutes conduct that is

discreditable to the accounting profession:

(a) Using deceptive representations in connection with services performed.

(b) Representing services are of a particular standard when they are not.

(c) Failing to perform, on a prompt basis, services in accordance with the conditions,

terms, or prerequisites of a public communication or any quotation.

(d) Misrepresenting facts or not disclosing relevant facts.

(e) Creating false or unjustified expectations of favorable results.

(f) Implying abilities not supported by valid educational or professional attainments or

licensing recognition.

(g) Implying the ability to influence improperly any court, tribunal, or other public

body or official.

(h) Making any other representation or implication that is false, deceptive, or

misleading.

(i) Employing or engaging a person to perform a discreditable act.

(j) Engaging in a trade practice prohibited by law.

(k) Retaining documents constituting the original books and records of a client after a

demand has been made for their return.

(l) Failing to respond, within a reasonable time, to inquiries of the board or the board’s

authorized representatives relative to the administration of the code.

(m) Providing false or misleading information on the qualifying experience of an

applicant for CPA.

(n) Stating or implying that the individual licensee, firm licensee, individual with

practice privileges, or out-of-state firm has received formal recognition as a specialist in

any aspect of the practice of public accountancy if the individual licensee, firm licensee,

individual with practice privileges, or out-of-state firm has not received the recognition.

(o) Representing that professional services can or will be competently performed for a

stated fee when this is not the case, or making representations with respect to fees for

professional services that do not disclose all variables which may reasonably be expected

to affect the fees that will in fact be charged.

R 338.5475 Payment or acceptance of commissions; "commission" defined.

Rule 475. (1) As used in section 731 of the code, MCL 339.731, "commission" means

any consideration paid to an individual licensee, a firm licensee, an individual with

practice privileges, or an out-of-state firm by a third-party in connection with a

recommendation or referral of a person to the third-party.

(2) As provided in section 731(3) of the code, MCL 339.731, a referral fee is not a

commission when received or paid by an individual licensee, a firm licensee, an

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individual with practice privileges, or an out-of-state firm for recommending or referring

a client to another individual licensee, firm licensee, individual with practice privileges,

or out-of-state firm for a service involving the practice of public accounting.

(3) An individual licensee, a firm licensee, an individual with practice privileges, or an

out-of-state firm who is paid or expects to be paid a commission or a referral fee shall

disclose that fact to the client.

R 338.5501 Peer review.

Rule 501. (1) Each firm or sole practitioner required to take part in a peer review

program under section 729(2) of the code, MCL 339.729, shall enroll in the program of a

qualified sponsoring organization within 1 year of the earlier of the following:

(a) The firm or solo practitioner’s initial licensing date.

(b) The performance of services that require a peer review.

(2) Proof verifying a peer review shall not have to be provided to the department until

the second renewal following initial licensure or the performance of services requiring a

peer review.

(3) The department shall accept, as proof verifying compliance with section 729(2) of

the code, MCL 339.729, the electronic submission of information from the facilitated

state board access (FSBA) website.

(4) Qualified sponsoring organizations include the AICPA peer review program, and

other entities that adhere to the peer review standards defined in R 338.5102(1)(a) as

decided by the board. With respect to an out-of-state firm required to obtain a license

under section 728 of the code, MCL 339.728, a peer review sponsoring organization

approved by another state in which that firm is licensed is presumed to be qualified in this

state, with respect to that firm.

(5) A licensee subject to peer review shall not be required to become a member of any

sponsoring organization.

(6) Out-of-state firms required to obtain a peer review under section 728(5) of the code,

MCL 339.728, may, instead of enrolling in a program sponsored by an organization

described in subrule (3) of this rule, satisfy the peer review requirement applicable in the

state where that firm is licensed, verified proof of which shall be given to the department

upon the department’s request.

R 338.5503 Peer review standards; change in sponsoring organization; deficient peer

review reports; documentation.

Rule 503. (1) If a firm is merged, otherwise combined, dissolved, or separated, the

sponsoring organization shall decide which firm is considered the succeeding firm. The

succeeding firm shall keep its peer review status and the review due date.

(2) A firm choosing to change to another sponsoring organization may do so provided

that the firm authorizes the previous sponsoring organization to communicate to the

succeeding sponsoring organization any outstanding corrective actions related to the

firm's most recent review.

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(3) The department may rely on a failed peer review report or a second consecutive pass

with deficiencies peer review report as prima facie evidence of a violation of professional

standards.

(4) Each peer review and reviewer must satisfy the applicable review standards in place

at the time of the review. The following standards apply:

(a) Documents related to a peer review must be kept and satisfy the AICPA's retention

policies under R 338.5102(1)(a), or until final adjudication of a complaint related to a

peer review, whichever is later.

(b) The documents described in subdivision (a) of this subrule shall be available for

inspection by the department during regular business hours with reasonable notice.