WASHINGTON STATE REGISTER

WSR 01-15-087

PROPOSED RULES

BOARD OF ACCOUNTANCY

[ Filed July 18, 2001, 10:56 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 01-11-076.

WAC 4-25-400 What is the authority for and the purpose of the board's rules?

WAC 4-25-410 Definitions.

WAC 4-25- 510 What is the board's meeting schedule and how are officers elected?

WAC 4-25-520 What public records does the board maintain?

WAC 4-25-530 Fees.

WAC 4-25-540 What are brief adjudicative proceedings?

WAC 4-25-550 Do I need to notify the board if I change my address?

WAC 4-25-551 Must I respond to inquiries from the board?

WAC 4-25-600 Repeal Rules of professional conduct -- Preamble.

WAC 4-25-610 Principles of conduct.

WAC 4-25-620 When must I comply with the rules of conduct requiring integrity and objectivity?

WAC 4-25-622 Independence.

WAC 4-25-626 What restrictions govern commissions, referral, and contingent fees?

WAC 4-25-630 Competence.

WAC 4-25-631 With which rules, regulations and professional standards must a CPA comply?

WAC 4-25-640 Clients' confidential information.

WAC 4-25-650 Acts discreditable.

WAC 4-25-660 What are the limitations on advertising and other forms of solicitation?

WAC 4-25-661 What firm names must be approved by the board and what firm names are prohibited?

WAC 4-25-710 CPA certificate -- Education requirements.

WAC 4-25-720 CPA examination--Application.

WAC 4-25-721 What does the board consider to be cheating on the CPA examination, what actions may the board take if cheating is suspected, and what sanctions may the board impose if cheating occurs?

WAC 4-25-730 What are the experience requirements in order to obtain a CPA license?

WAC 4-25-735 What rules must a certificateholder comply with and how does a certificateholder apply for licensure?

WAC 4-25-745 How do I apply for an initial CPA license and/or certificate?

WAC 4-25-746 How do I apply for a Washington state CPA license and/or certificate if I hold a valid CPA certificate, license or permit in another state?

WAC 4-25-750 What are the CPA firm licensing requirements?

WAC 4-25-752 New How do I apply to register as a resident nonlicensee owner of a licensed firm?

WAC 4-25-755 Repeal Temporary permits.

WAC 4-25-756 New How do I apply for an initial permit to practice and with which rules must a permit holder comply?

WAC 4-25-781 What are the rules governing reciprocity for accountants from foreign countries?

WAC 4-25-782 How do I apply for an initial Washington state license and/or certificate through foreign reciprocity?

WAC 4-25-783 How do I renew a Washington CPA certificate and/or license granted through foreign reciprocity?

WAC 4-25-790 How do I renew my CPA license and/or certificate?

WAC 4-25-791 If I hold a certificate under the reasonable cause exemption to the CPE requirements, how do I apply to return to my previous status as a licensee or a certificate holder?

WAC 4-25-792 How do I apply for reinstatement of a lapsed CPA license and/or certificate?

WAC 4-25-793 New If I hold a license or a certificate as a retiree, how do I apply to return to my previous status as a licensee or a certificateholder?

WAC 4-25-795 How do I apply for reinstatement of a revoked or suspended license and/or certificate?

WAC 4-25-820 Quality assurance review.

WAC 4-25-830 What are the CPE requirements?

WAC 4-25-831 What are the program standards for CPE?

WAC 4-25-832 How do I report my CPE to the board?

WAC 4-25-833 What documentation must I retain to support my eligibility for CPE credits?

WAC 4-25-910 What are the bases for the board to impose discipline?

Purpose: To adopt, amend, or repeal rules to implement the revisions to chapter 18.04 RCW passed through the 2001 legislative session (E2SSB 5593).

Statutory Authority for Adoption:

(b) Statutory authority for adoption Statute being implemented:

WAC 4-25-400 and 4-25-410 RCW 18.04.055 RCW 18.04.055(16)

WAC 4-25-510 RCW 18.04.055 and 42.30.070 RCW 42.30.070

WAC 4-25-520 RCW 18.04.055 and 42.17.260 RCW 42.17.260

WAC 4-25-530 RCW 18.04.055, 18.04.065, 18.04.105(3), 18.04.195(7), 18.04.205(4), 18.04.215(8), and 18.04.350(2) RCW 18.04.055, 18.04.065, 18.04.105(3), 18.04.195(7), 18.04.205(4), 18.04.215(8), and 18.04.350(2)

WAC 4-25-540 RCW 18.04.055(1), 34.05.220, and 34.05.482 RCW 18.04.055(1) and 34.05.482

WAC 4-25-550 and 4-25-551 RCW 18.04.055(16) RCW 18.04.055(16)

WAC 4-25-600, 4-25-610, 4-25-620, 4-25-622, 4-25-626, 4-25-630, 4-25-631, 4-25-640, 4-25-650, and 4-25-660 RCW 18.04.055(2) RCW 18.04.055(2)

WAC 4-25-661 RCW 18.04.055(8) RCW 18.04.055(8)

WAC 4-25-710 RCW 18.04.055(5) and 18.04.105(1) RCW 18.04.055(5) and 18.04.105(1)

WAC 4-25-720 RCW 18.04.055(5) and 18.04.105(2) RCW 18.04.055(5) and 18.04.105(2)

WAC 4-25-721 RCW 18.04.055 RCW 18.04.055

WAC 4-25-730 RCW 18.04.055(11) and 18.04.105 (1)(d) RCW 18.04.055(11) and 18.04.105 (1)(d)

WAC 4-25-735 RCW 18.04.055(12) and 18.04.105(4) RCW 18.04.055(12) and 18.04.105(4)

WAC 4-25-745 RCW 18.04.055, 18.04.105(1), and 18.04.215(1) RCW 18.04.055, 18.04.105(1), and 18.04.215(1)

WAC 4-25-746 RCW 18.04.180 and 18.04.215(6) RCW 18.04.180 and 18.04.215(6)

WAC 4-25-750 RCW 18.04.055(8), 18.04.195, and 18.04.205 RCW 18.04.055(8), 18.04.195, and 18.04.205

WAC 4-25-752 RCW 18.04.055(13) and 18.04.195(8) RCW 18.04.055(13) and 18.04.195(8)

WAC 4-25-755 RCW 18.04.055 and 18.04.350(2) RCW 18.04.055 and 18.04.350(2)

WAC 4-25-756 RCW 18.04.350(2) RCW 18.04.350(2)

WAC 4-25-781 and 4-25-782 RCW 18.04.183 RCW 18.04.183

WAC 4-25-783 RCW 18.04.183 and 18.04.215(2) RCW 18.04.183 and 18.04.215(2)

WAC 4-25-790, 4-25-791, and 4-25-792 RCW 18.04.215 (2) and (4) RCW 18.04.215 (2) and (4)

WAC 4-25-793 RCW 18.04.215(7) RCW 18.04.215(7)

WAC 4-25-795 RCW 18.04.215(2), 18.04.335, and 34.05.220 RCW 18.04.215(2), 18.04.335, and 34.05.220

WAC 4-25-820 RCW 18.04.055(9) RCW 18.04.055(9)

WAC 4-25-830, 4-25-831, 832, and 4-25-833 RCW 18.04.055(7), 18.04.215(5) RCW 18.04.055(7), 18.04.215(5)

WAC 4-25-910 RCW 18.04.055(11), 18.04.295, and 18.04.305 RCW 18.04.055(11), 18.04.295, and 18.04.305

Statute Being Implemented: See Statutory Authority above.

Summary: The amendments and new rules include public protection provisions, qualifications to be a licensee, regulation of certified public accountants (CPAs); ownership of CPA firms; assurance that CPAs from Washington state are substantially equivalent with CPAs in other states; assurance that CPAs from other states and countries have met qualifications that are substantially equivalent to the CPA qualifications of this state; and regulation of the activities of persons holding licenses, certificates (including a new inactive certificateholder status), and non-CPA owners of CPA firms.

Reasons Supporting Proposal: E2SSB 5593 that passed through the 2001 legislative session significantly revised the Public Accountancy Act (chapter 18.04 RCW). The Board of Accountancy needs to revise all of its rules for statutory authority and adopt, amend, or repeal rules to implement the revisions to chapter 18.04 RCW.

The Changes to Fees: (1) The board currently has approximately a $900,000 fund balance. Without a significant increase in fees, within the next two years the fund balance will be substantially depleted and the agency will need to begin cutting activities (consumer alerts, investigations). If activities are not cut, by the end of next biennium the agency would have a deficit fund balance position. The board needs to maintain an adequate fund balance to:

Provide adequate reserves for emergency appropriation requests.

Pay for extensive or costly investigations and enforcement or defense issues requiring significant attorney general costs.

Cover unanticipated litigation costs ordered by a court.

Compensate for an unanticipated or sudden drop in the number of licensees.

(2) The new statute gives the board a two-year exemption to the provisions of Initiative 601 (the fiscal growth factor); however, the fee increases approximate the amount allowable if the board had increased fees annually pursuant to the limit of Initiative 601.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Dana M. McInturff, CPA, 711 South Capitol Way, #400, Olympia, (360) 586-0163.

Name of Proponent: Board of Accountancy, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: The board's goal with all of its rule proposals is to:

Promote clarity.

Ensure effective communication.

Ensure fairness in interpretation and application of the rules.

Promote efficiencies through minimizing gray areas.

Specifically:

WAC 4-25-400 Advises the reader of the authority given to the board by the legislature through chapter 18.04 RCW (the Public Accountancy Act). This authority includes the enactment of rules. This rule is a preamble to those rules and lists the general subjects included in chapter 4-25 WAC.

WAC 4-25-410 Defines terms used throughout the board's rules to provide clarity for users.

WAC 4-25- 510 Advises the public of:
(1) The dates and times the board will hold its regular and annual meetings.
(2) The election of officers at the annual meeting.
(3) When the newly elected officers will assume their duties.
(4) Who has the authority to call meetings of the board.
(5) The board's compliance with the Administrative Procedure Act.

WAC 4-25-520 Notifies the public of the records available for inspection and copying for informational purposes.

WAC 4-25-530 RCW 18.04.065 directs the board to "set its fees at a level adequate to pay the costs of administering this chapter" (that is, chapter 18.04 RCW, the Public Accountancy Act).

WAC 4-25-540 Chapter 34.05 RCW (Administrative Procedure Act) allows agencies to adopt brief adjudicative proceedings to resolve some limited administrative issues. The board uses brief adjudicative proceedings to provide a clear process to persons to appeal staff actions denying applications.

WAC 4-25-550 WAC 4-25-550 requires CPAs, CPA firms, and resident nonlicensee firm owners to notify the agency of any change in address. With a current address on file, the agency will be able to contact the CPA, CPA firm, or resident nonlicensee firm owner for regulatory purposes.

WAC 4-25-551 Requires CPAs, CPA firms, and resident nonlicensee firm owners to respond to a board inquiry in writing within twenty days of the date the inquiry is posted in the United States mail. With cooperation from the CPAs, CPA firms, and resident nonlicensee firm owners the board can effectively administer chapter 18.04 RCW.

WAC 4-25-600 Repeal The rule is too vague to be enforceable therefore this rule is recommended for repeal.

WAC 4-25-610, 4-25-620, 4-25-622, 4-25-630, 4-25-631, and 4-25-650 Advises Washington CPAs of the standards of conduct and when they must comply with these standards. These standards are needed to establish and maintain high standards of competence and ethics to address the need to protect the public.

WAC 4-25-626 In order to protect the public interest, this rule prohibits licensees from being compensated in a manner which tends to bias or give the appearance of tending to bias the results of their attest services. However, to permit Washington CPAs to practice public accounting on a level playing field with other CPAs nationwide, this rule is aligned with the Uniform Accountancy Act (UAA), to follow the national trend of allowing compensation in the form of commissions, referral fees, and contingent fees, and to address the profession's desire to allow commissions and contingent fees with disclosure. In order to ensure the public is sufficiently informed the rule requires all CPAs accepting commissions, referral fees, and contingent fees to disclose in writing and in advance of client acceptance the method of calculating the fee and the CPA's role as the client's advisor.

WAC 4-25-640 Incorporates parts of statute (RCW 18.04.390 and 18.04.405) into the board's rules of professional conduct. The rule prohibits Washington CPAs from disclosing any confidential client information without the consent of the client; clarifies when the rule does not affect a CPA's disclosure of client information, and outlines a CPA's obligations with respect to the records of a client in a clear format. This standard of professional conduct is needed to protect the public by ensuring privacy and record accessibility.

WAC 4-25-660 "Advertising and other forms of solicitation" is a rule of professional conduct necessary to establish and maintain high standards of competence and ethics of certified public accountants (CPAs) to protect the public interest especially in the area of advertising and solicitation.

WAC 4-25-661 "Improper firm names" is a rule of professional conduct necessary to govern sole proprietors, partnerships, and corporations practicing public accounting concerning their names to protect the public from being misled.

WAC 4-25-710 Outlines the educational requirements for individuals to qualify to apply for the CPA examination and ultimately the CPA license, including requirements regarding education obtained outside of the United States, accreditation standards, and an alternative to accreditation. Candidates for the CPA exam need clear concise requirements to ensure fair treatment of all candidates. Ensures candidates will have the necessary foundation and obtain acceptable competence in an increasingly complex business environment to eventually become a licensed CPA. This rule continues to be aligned with the Uniform Accountancy Act (UAA) therefore assuring that Washington CPAs are substantially equivalent with CPAs in other states.

WAC 4-25-720 Outlines the requirements for individuals making application for the CPA exam such as how to file an application, the application due date, timing for completion and documentation of the education requirements, when exam admission notices will be mailed, the passing grade, conditional credit, proctoring, and the completion of an ethics exam.

WAC 4-25-721 This rule provides CPA exam candidates with a listing of what the board considers to be cheating, what actions the board may take if cheating is suspected, and what sanctions the board may impose if cheating occurs.

WAC 4-25-730 Licensed CPAs are statutorily given the exclusive right to perform audit, review, and compilation services. In exchange for this valuable right, CPAs are expected to have a certain level of mature expertise prior to offering unsupervised services to the general public. Washington state statute mandates that CPAs demonstrate one year of public accounting experience and meeting competency requirements. The profession and the public expect CPAs to have a focused, relevant and meaningful apprenticeship period to perfect skills and abilities.

WAC 4-25-735 Establishes the requirements for certificateholders to qualify and apply for a license.

WAC 4-25-745 Sets forth the procedures applicants for an initial license must follow in a short clear manner; notifies the applicant of the board's definition of a "complete" application and where the board will send notification when the application is complete; sets the expiration of the license on June 30 of the third calendar year following initial licensure; notifies applicants of the prohibition against using the CPA title by persons not properly licensed.

WAC 4-25-746 Sets the procedures applicants for a Washington CPA license by reciprocity must follow in a short clear manner; notifies the applicant of the board's definition of a "complete" application and where the board will send notification when the application is complete; sets the expiration of the license certificate on June 30 of the third calendar year following licensure in Washington state; restates RCW 18.04.215(6) that allows CPAs licensed in another state to practice in Washington state from the date of filing a "complete" application with the board.

WAC 4-25-750 RCW 18.04.205(3) directs the board to prescribe the procedures to be followed to register and maintain offices established for the practice of public accounting in Washington state. RCW 18.04.195 requires CPA firms to obtain, and renew, licenses to practice public accounting.

WAC 4-25-752
New
Establishes the requirements for resident nonlicensee owner applying to be a registered nonlicensee owner and defined which rules the nonlicensee owner must comply with.

WAC 4-25-755
Repeal
Due to changes in statute incidental practice is no longer permitted making this rule obsolete.

WAC 4-25-756 New Establishes the requirements for individuals, whose principal place of business is not in Washington, to apply for the privilege to practice in Washington state.

WAC 4-25-781, 4-25-782 and 4-25-783 RCW 18.04.183 directs the board to grant a license as a CPA to a holder of a permit, license, or certificate issued by a foreign country's board, agency or institute. The rule implements the statute listing the qualifications the board will accept before issuing an initial CPA license to an accountant from a foreign country, the requirements for renewal, and the procedures the board will take to investigate and discipline CPAs licensed based in part on a foreign accounting credential.

WAC 4-25-790 Sets the procedures for the renewal of a certificate/license/permit/resident nonlicensee firm owner registration in a short clear manner eliminating confusion; notifies the applicant that the board will send a renewal application in January to the last address the CPA provided to the board; notifies the applicant of the board's definition of a "complete" application and the due date of filing; sets the expiration of the certificate/license/permit/resident nonlicensee firm owner registration to June 30 of the third calendar year following the renewal; notifies the applicant that failure to file a complete application by the due date will result in late fees; notifies the applicant that failure to file a complete application prior to the expiration of their certificate/license/permit/resident nonlicensee firm owner registration will result in the lapse of their certificate/license and loss of the right to use the CPA title or be a owner of a CPA firm.

WAC 4-25-791 Sets the procedures CPAs must follow to return to a previous status as a licensee.

WAC 4-25-792 In a short, clear manner that eliminates confusion, this rule sets the procedures CPAs must follow to apply for the reinstatement of their lapsed license and/or certificate.

WAC 4-25-793 New Establishes the process for a retiree to "reactivate" their certificate or license.

WAC 4-25-795 Sets the procedures persons or firms whose certificate/license/permit/resident nonlicensee firm owner registration has been revoked or suspended must follow in order to apply for modification of a suspension or revocation order or to apply for reinstatement.

WAC 4-25-820 In order to protect the public from financial information that does not meet set standards, this rule establishes the process of monitoring the attest work of licensees (including CPA firms). CPA firms offering attest (audit, review, or compilation) services must comply with set standards. Every three years the CPA firm must either submit reports to financial statements for board review or demonstrate participation in a board approved peer review program. Set the actions the board may take if it is determined that a report is substandard or seriously questionable with respect to applicable professional standards.

WAC 4-25-830 RCW 18.04.215(5) authorizes the board to set the rules for continuing professional education to maintain or improve the professional competency of licenses, certificateholders, and resident nonlicensee firm owners as a condition to maintaining their certificate/license/permit/resident nonlicensee firm owner registration; accomplishes a heightened awareness of the board's rules, especially as they pertain to ethics, through required continuing professional education.

WAC 4-25-831 Outlines the standards continuing professional education (CPE) courses must meet.

WAC 4-25-832 Outlines how certificateholders/licensee/permitholders/resident nonlicensee firm owners report their completed CPE to the board.

WAC 4-25-833 Notifies certificateholders/licensee/permitholders/resident nonlicensee firm owners that they are responsible for documenting their entitlement of CPE credit claimed and what the board will accept as documentation.

WAC 4-25-910 RCW 18.04.295 and 18.04.305 authorize the board to impose discipline against Washington CPAs, CPA firms, permit holders, or resident nonlicensee firm owners. Using the clear rule-writing technique that eliminates confusion, this rule lists specific examples of prohibited acts that constitute grounds for discipline.

Proposal Changes the Following Existing Rules:

WAC 4-25-400 Adds firm owners to the description of the board's authority.
Adds five bulleted items to the description of the purpose of the act. The additional language paraphrases revisions to the "purpose" section of the statute.
Clarifies the listing of the subject areas addressed by the board's rules to include permits, registration of resident nonlicensee firm owners, etc.

WAC 4-25-410 Adds the definition of "active individual participant."

Adds the definition of "affiliated entity." Having the definition align with (anticipated) national standards will support an understanding of, and compliance with, the board's rule.

Removes ambiguous language from the definition of "attest" services.

Adds permit holders to the listing of individuals permitted to perform attest services.

Aligns the definition of "certificate" to the new statute.

Adds the definition of "certificateholder" from the new statute.

Adds relationships with firm owners, affiliated entities, and owners of affiliated entities to circumstances creating a "client."

Adds the CPA's firm, CPA firms and firm owners to the criteria defining a "commission."

Includes permit holders in the definition of "CPA" and reworded the definition to clarify that under the new act licensees no longer hold a certificate (they hold just a license).

Adds the notion that CPA firms and firm owners (in addition to CPAs) perform professional services for "enterprises."

Aligns the definition of "firm" with the act.

Establishes the meaning of "firm owner" because that term is used in the rules.

Adds permit holders to the definition of whom may practice public accounting under the definition of "holding out."

Adds the definition of "inactive" from the new statute and added clarifying language that certificateholders cannot hold out.

Adds the definition of "license" (note the definition refers to both an individual and a firm license.

Clarifies that both a natural person and a firm can be a "licensee."

Adds the definition of "manager" because the term is used in the rules.

Adds the abbreviation for National Association of State Boards of Accountancy.

Adds the definition of "natural person" because the term is used in the rules (referring to nonlicensee firm owners).

Adds the definition of "nonlicensee owner" because the term is used in the rules.

Moves the definition of "quality review" to "peer review" to reflect verbiage changes resulting from the new statute.

Adds the definition of "permit," "permit to practice" and "permit holder" because the terms are used in the rule.

Adds the definition of "principal place of business" because the term is used in the rules.

Adds the definition of "representing oneself" because the term is used in the rules.

Adds the definition of "state" because the term is used in the rules.

WAC 4-25- 510 Increased the number of board members to nine to align the rule with changes in the act.

WAC 4-25-520 Due to provisions in the new act, the board will maintain public records on permit holders and registered resident nonlicensee firm owners.

WAC 4-25-530 Adjusts fees to reflect the need to increase agency revenues to cover (a) the agency's increased spending authority resulting from the new statute and (b) the anticipated reduction in revenue from:

A reduction in new applicants, particularly from foreign candidates, because the board will no longer be issuing certificates;

A one-time significant reduction during the initial transition period, because new applicants will need to acquire a year of experience prior to licensure of any kind;

An initial reduction in the number of renewals because some certificateholders will elect to allow their certificate to lapse rather than either using the title CPA-Inactive, or obtaining the experience and paying a higher licensing fee;

A reduction in total renewals due to the above.

Increases exam fees to reflect the increase in the AICPA's charges for the examination.

Aligns certificateholder, licensee, permit holder and firm owner application and renewal fees so that each CPA and CPA firm owner in Washington state contributes equally to paying for the regulation of public accountancy in Washington state. Additionally, parity among the fees establishes a fair and equitable charge for the cost of regulating accountancy in Washington state. The agency will perform basically the same administrative activities for licensees, certificateholders, permit holders and firm owners. All individuals and within these four regulated groups come under the board's enforcement authority and action.

Reinstatement fee and late fee were both adjusted to reflect the workload involved.

QAR fee adjusted to reflect anticipated increase in number of field reviews performed (increase would cover cost of field review for all firms identified as performing substandard work).

Fees were adjusted to cover an anticipated need for increased funding to cover investigation and enforcement costs because (a) within the last six months the number of investigations has dramatically increased (thirty-three total investigations during 2000; thirty-three investigations to date in 2001) -the trend is expected to continue and (b) the consumer alert/public awareness program that is just beginning is anticipated to trigger a significant increase in complaints and investigations.

WAC 4-25-540 Added the provision that the board's procedures are governed by the uniform procedural rules codified in chapter 10-08 WAC. (Based on the prosecuting attorney general's recommendation.)
Added the new types of applications (resulting from the new act) that will come under the BAP provisions.
Separated the language for certificate applications, renewals, and reinstatements from the language for license applications, renewals, and reinstatements. (Under the old law licensees held both a certificate and a license; under the new law licensees will only hold a license.)

WAC 4-25-550 Added nonlicensees firm owners to the rules requiring notification of address changes. Note: Licensees, certificateholders and permit holders are included in the definition of CPA.

WAC 4-25-551 Added nonlicensee firm owners to the rules requiring a written response to board inquiry. Note: Licensees, permit holders and certificateholders are included in the definition of CPA.

WAC 4-25-600
Repeal
Based on the board's April 26, 2001, decision that the rule was too vague to be enforceable this rule is recommended for repeal.

WAC 4-25-610 Adds that nonlicensee firm owners must comply with the principles of conduct. Note: Licensees, certificateholders and permit holders are included in the definition of CPA.

Clarifies that CPA firms must comply with the principles.

To clarify the current requirements, changes the words "shall" to "must."

WAC 4-25-620 Adds that nonlicensee firm owners must comply with requirements concerning integrity and objectivity. Note: Licensees, certificateholders and permit holders are included in the definition of CPA.

Clarifies that CPA firms must comply with the rule.

To clarify the current requirements, changes the words "shall" to "must."

WAC 4-25-622 Adds nonlicensee firm owners, affiliated entities, and owners of affiliated entities to the example of relationships that impair independence.

Clarifies that CPA firms must comply with the rule.

Changes all references to "CPA" to "licensee" making this rule applicable to licensed CPAs, CPA firms and permit holders. Excludes certificateholders from the provisions of this rule by using the term "licensee."

To clarify the current requirements, changes the words "shall" to "must."

WAC 4-25-626 Adds nonlicensee firm owners, affiliated entities, and owners of affiliated entities to the example of relationships that result in a prohibition against accepting a commission/referral/contingent fee.

Removes the definition of contingent fee because it was added to WAC 4-25-410 Definitions.

To clarify the current requirements, changes the words "shall" to "must."

WAC 4-25-630 Adds nonlicensee firm owners to the requirement to be competent.

Clarifies that CPA firms must meet the competency requirement.

To clarify the current requirements, changes the words "shall" to "must."

WAC 4-25-631 Adds nonlicensee firm owners to the requirement to comply with standards.

Clarifies that CPA firms must comply with standards.

The term "CPA" includes licensees, certificateholders, and permit holders.

Removes the language "including subsequent amendments" language which makes the rule too vague and could make the rule difficult to enforce.

Clarifies the current requirement that CPA firms and CPAs must comply with rules and regulations promulgated by the SEC.

WAC 4-25-640 Moves the definition of client to the first paragraph and made it applicable to the entire rule.

Adds firm owners to those required to comply with the rule.

Changes all references to "CPA" to "licensee" making this rule applicable to licensed CPAs, CPA firms and permit holders. Excludes certificateholders from the provisions of this rule by using the term "licensee."

To clarify the current requirements, changes the words "shall" to "must."

WAC 4-25-650 Adds firm owners.

Clarifies that CPA firms must comply with this rule.

To clarify the current requirements, changes the words "shall" to "must."

WAC 4-25-660 Adds firm owners to those that must comply with the rule.

Corrects language by tying the notification requirement to a "web site" rather than "Internet site."

Adds the requirement that CPA firms must place notification of holding a Washington state license on their web site.

Adds the requirement that certificateholders using the CPA title must state on their web site that they are an "Inactive CPA," that they do not hold a license to practice public accounting, and they cannot offer accounting, attest, tax services, etc.

Adds the requirement that firm owners must disclose on their web site that they are either licensed or registered (nonlicensee owners) with the board.

To clarify the current requirements, changes the words "shall" to "must."

WAC 4-25-661 Consistent with changes in statute, eliminates the prohibition against using "& Associates" unless there is more than one CPA at the firm.

Adds language prohibiting specialty designations, educational attainments, etc., that are not supported in fact.

Adds language from the new statute prohibiting licensees from operating under an alias or DBA.

To clarify the current requirements, changes the words "shall" to "must."

WAC 4-25-710 Eliminates the pre-July 1, 2000 education requirement.

Moves the definition of "accounting concentration" to the "education requirements" sections.

WAC 4-25-720 Eliminates the statement that the board will refund a portion of examination fees because refunds are made by the contractor.

Incorporates the exam conditioning requirements into the rule. (The conditioning requirements were eliminated from statute. Note, this revision does not change the conditioning requirements it simply places the existing requirements into the rule.)

Clarifies the current ethics examination requirements.

Clarifies the current requirement for candidates to complete a form in order to utilize the one hundred twenty day provision.

WAC 4-25-721 Adds that cheating on the CPA exam demonstrates a lack of good character. This ties directly to the requirements for licensure in the statute.

Removes fines and cost recovery from the list of sanctions the board may impose on candidates for the CPA license.

WAC 4-25-730 Adds the provision in the new statute allowing individuals holding a certificate at June 30, 2001, and applying for licensure before June 30, 2004, to use any prior experience.

Adds verbiage from the statute regarding the specific types of services that must be performed to meet the experience requirement.

Adds the new statutory provision that all certificateholders must obtained one hundred twenty hours of CPE within the previous three years in order to apply for a license.

Eliminates the previous subsection (4) requiring individuals holding a certificate for four or more years to obtain one hundred twenty hours of CPE to qualify for licensure (superseded by the new requirement that all certificateholders must meet the one hundred twenty CPE hour requirement for licensure).

WAC 4-25-745 Eliminated the ability to apply for a certificate.

Listed in the rule the requirements for licensure.

Adjusted the definition of what services must be performed in a CPA firm to align with the new statute.

Eliminated the requirement to have a notarized signature.

WAC 4-25-746 Added the requirement (from statute) that the other state of licensure must grant reciprocity provisions to Washington's CPAs.

Clarified the requirements for licensure as stated in statute.

Added the notation that a CPA may practice as soon as the license application is filed with the board.

Added the notation that individuals obtaining a Washington license via interstate reciprocity must notify the board within thirty days if the license issued by the other jurisdictions has lapsed or become invalid.

Eliminated the requirement to have a notarized signature.

WAC 4-25-750 Added the provision (from statute) allowing for nonlicensee owners.

Added the requirement (from statute) for the principal partner and the principal manager to be licensee.

Added the requirements (from statute) for a nonlicensee owner to be a natural person, meet good character requirements, comply with board rules, and be an active participant in the firm or affiliated entity.

Added the requirement for a resident nonlicensee owner to register with the board.

Clarified what is considered an amendment.

WAC 4-25-755
Repeal
Due to changes in statute incidental practice is no longer permitted making this rule obsolete.

WAC 4-25-781 Adds the notification requirements from statute.

WAC 4-25-782 Clarifies that the CPA may only practice in Washington state upon receiving their Washington state license.

Eliminates the requirement to have a notarized signature.

WAC 4-25-783 Identifies that a renewal form will be mailed to the CPA.

Clarifies that in order to renew the individual must certify that s/he compiled with the board's CPE requirements.

WAC 4-25-790 Adds renewing permits and resident nonlicensee owner registrations to the "how do I renew" rule.

Clarifies that a licensee may not renew as a certificateholder.

Clarifies that in order to renew the individual must certify that they met the board's CPE requirements.

WAC 4-25-791 Tailors this rule so that it applies to certificateholders who want to return to their previous status as a licensee.

WAC 4-25-792 Extends the reinstatement rule to include permits and resident nonlicensee owner registrations.

WAC 4-25-795 Extends the reinstatement of a revoked or suspended license or certificate to include permits and resident nonlicensee owner registrations.

WAC 4-25-820 Adds that a firm required to submit to peer review may be assessed the cost of the peer review.

WAC 4-25-830 Changes the CPE requirement for certificateholders to a four hour course in ethics every three years.

Adds the CPE requirement for resident nonlicensee firm owners to obtain a four hour course in ethics every three years.

Adds that permit holders are exempt from the CPE requirements.

Changed the title "reasonable cause exemption" to "renewal following retirement" consistent with changes in statute.

Consistent with the new statute, requires certificateholders applying for a license to obtain one hundred twenty hours of CPE including a four hour course in ethics and limited to twenty-four hours in nontechnical subjects.

Adds resident nonlicensee firm owners to the provisions allowing for a CPE extension request.

WAC 4-25-831 Moves negotiation and dispute resolution to technical subjects (based on multiple comments from CPAs).

Adds the provision for allowing CPE to be earned in 1/2 hour increment after the first full hour has been earned.

Adds a provision and clarification regarding credential examinations.

WAC 4-25-832 Adds provisions for nonlicensee owners.

WAC 4-25-833 Adds the requirement for the attendee's name to be on the certificate of completion.

Changes the record retention requirement for CPE supporting documentation from five years after the completion of the course to three years after the end of the CPE reporting period.

WAC 4-25-910 Adds the new provisions (from the new statute) pertaining to permit holders, nonlicensee firm owners, full restitution, and fines (up to $10,000).

Adds failure to comply with an order of the board as a prohibited act.

No small business economic impact statement has been prepared under chapter 19.85 RCW. The proposed rule will not have more than minor economic impact on business.

RCW 34.05.328 does not apply to this rule adoption. The Board of Accountancy is not one of the agencies required to submit to the requirements of RCW 34.05.328.

Hearing Location: Wyndham Garden Hotel - SeaTac, 18118 Pacific Highway South, SeaTac, WA, on August 24, 2001, at 9:00 a.m.; at the Heathman Lodge, 7801 N.E. Greenwood Drive, Vancouver, WA 98662, on September 11, 2001, at 9:00 a.m.; and at the Doubletree Hotel - Spokane City Center, 322 North Spokane Falls Court, Spokane, WA 99201, on September 21, 2001, at 9:00 a.m.

Assistance for Persons with Disabilities: Contact Cheryl Sexton by August 17, 2001, TDD (800) 833-6384, or (360) 664-9194.

Submit Written Comments to: Dana M. McInturff, CPA, Executive Director, Washington State Board of Accountancy, P.O. Box 9131, Olympia, WA 98507-9131, fax (360) 664-9190, by August 20, 2001.

Date of Intended Adoption: September 21, 2001.

July 18, 2001

Dana M. McInturff, CPA

Executive Director

OTS-4963.1

AMENDATORY SECTION(Amending WSR 00-11-067, filed 5/15/00, effective 6/30/00)

WAC 4-25-400 What is the authority for and the purpose of the board's rules? The Public Accountancy Act (Act), chapter 18.04 RCW, establishes the board as the licensing and disciplinary agency for certified public accountants (CPA) ((~~and~~)), CPA firms, and owners of CPA firms. The Act authorizes the board to promulgate rules to carry out the purpose of the Act, which include:

Protecting the public interest; ((~~and~~))

Enhancing the reliability of information used for guidance in financial transactions or for accounting for or assessing financial status or performance;

Establishing one set of qualifications to be a licensee;

Assuring that CPAs practicing in Washington have substantially equivalent qualifications to those practicing in other states;

Regulating ownership of CPA firms;

Publishing consumer alerts and public protection information regarding persons and firms who violate the Act or board rules; and

Providing general consumer protection information to the public.

The board's rules, contained in chapter 4-25 WAC, encompass these subjects:

Definitions;

Administration of the board;

Ethics and prohibited practices;

((~~Certifying and licensing~~)) Entry and renewal requirements;

Continuing competency; and

Regulation and enforcement.

[Statutory Authority: RCW 18.04.055. 00-11-067, 4-25-400, filed 5/15/00, effective 6/30/00; 93-12-063, 4-25-400, filed 5/27/93, effective 7/1/93.]

OTS-4964.2

AMENDATORY SECTION(Amending WSR 01-11-124, filed 5/22/01, effective 6/30/01)

WAC 4-25-410 Definitions. For purposes of these rules the following terms have the meanings indicated unless a different meaning is otherwise clearly provided in these rules:

(1) "Act" means the Public Accountancy Act codified as chapter 18.04 RCW.

(2) "Active individual participant" means a natural person whose primary occupation is direct control, management, and direction of the licensee or affiliated entity's business, including the selection and supervision of procedures, the reporting of results, the performance of services for clients and participating in its operations to the extent necessary to assure compliance with the Act. An individual whose primary source of income from the business entity is provided as a result of passive investment is not an active individual participant.

(3) "Affiliated entity" means any entity, entities or persons that directly or indirectly through one or more relationships influences or controls, is influenced or controlled by, or is under common influence or control with other entities or persons. This definition includes, but is not limited to, parents, subsidiaries, investors or investees, coinvestors, dual employment or management in joint ventures or brother-sister entities.

(4) "Attest services" are services performed by a licensee in accordance with:

(a) Statements on Auditing Standards and related Auditing Interpretations issued by the American Institute of Certified Public Accountants (AICPA) ((~~including subsequent amendments~~));

(b) Statements on Standards for Accounting and Review Services and related Accounting and Review Services Interpretations issued by the AICPA ((~~including subsequent amendments~~)); and

(c) Statements on Standards for Attestation Engagements and related Attestation Engagements Interpretations issued by the AICPA ((~~including subsequent amendments~~)).

((~~(3)~~)) (5) "Audit," "review," and "compilation" are terms reserved for use by licensees and permit holders under the Act.

((~~(4)~~)) (6) "Board" means the board of accountancy created by RCW 18.04.035.

((~~(5)~~)) (7) "Certificate" means a certificate as a ((~~certified public accountant~~)) CPA issued under the Act((~~, or a corresponding certificate issued by another state or foreign jurisdiction that is recognized in accordance with the reciprocity provisions of the act~~)) prior to July 1, 2001.

((~~(6)~~)) (8) "Certificateholder" means a person who held a valid certificate on July 1, 2001, but did not hold a valid Washington state license to practice public accounting on that date.

(9) "Client" means the person or entity that retains a ((~~certified public accountant (CPA), or the~~)) CPA(('s)) firm ((~~or organization~~)), a CPA, the CPA's firm, or a firm owner, an affiliated entity, or the owner of an affiliated entity through other than an employer/employee relationship.

((~~(7)~~)) (10) "Commissions and referral fees" are compensation arrangements where:

(a) The primary contractual relationship for the product or service is not between the client and the CPA firm, the CPA, the CPA's firm, or a firm owner;

(b) The CPA firm, the CPA, the CPA's firm, or a firm owner is not primarily responsible to the client for the performance or reliability of the product or service;

(d) A third party instead of the client pays the CPA firm, the CPA, the CPA's firm, or a firm owner for the products or services.

((~~(8)~~)) (11) "Contingent fees" are fees established for the performance of any service pursuant to 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 such service.

((~~(9)~~)) (12) "CPA" or "certified public accountant" means a person holding a CPA certificate ((~~under this act~~)) or a CPA license including a person holding a permit to practice pursuant to RCW 18.04.350(2).

((~~(10)~~)) (13) "CPA-Inactive" means the person was issued a certificate under the Act prior to July 1, 2001, but has not met the current requirements for a license and does not practice public accounting.

(14) "CPE" means continuing professional education (see also "Interactive ((~~CPE~~)) self-study program").

((~~(11)~~)) (15) "Enterprise" means any person or entity, whether organized for profit or not, with respect to which a CPA firm, a CPA, a CPA's firm, or a firm owner performs professional services.

((~~(12)~~)) (16) "Firm" means ((~~an entity licensed under the provisions of this chapter~~)) a limited liability company formed under chapter 25.15 RCW, a sole proprietorship, a corporation, or a partnership.

((~~(13)~~)) (17) "Firm owner" means a licensee or nonlicensee owner of a firm licensed by the board.

(18) "Generally accepted accounting principles" (GAAP) is an accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. It includes not only broad guidelines of general application, but also detailed practices and procedures. Those conventions, rules, and procedures provide a standard by which to measure financial presentations.

((~~(14)~~)) (19) "Generally accepted auditing standards" (GAAS) are guidelines and procedures, promulgated by the AICPA, for conducting individual audits of historical financial statements.

((~~(15)~~)) (20) "Holding out" means any representation to the public by the use of restricted titles as set forth in the Act by a person or firm that the person or firm ((~~is a certified public accountant~~)) holds a license or a permit under the Act and that the person or firm offers to perform any professional services to the public as a ((~~certified public accountant~~)) licensee or a permit holder. "Holding out" shall not affect ((~~or limit a person not required to hold a certificate under this chapter or~~)) a person or firm not required to hold a license or a permit under ((~~this chapter~~)) the Act from engaging in practices identified in the Act.

((~~(16)~~)) (21) "Inactive" means the certificate is in an inactive status because the individual, who held a certificate before July 1, 2001, has not met the current requirements for licensure. Individuals holding an inactive certificate may not practice public accounting.

(22) "Interactive self-study program" means a CPE program designed to use learning methodologies that simulate a classroom learning process by employing software or administrative systems that provide significant ongoing interactive feedback to learners regarding their learning progress.

((~~(17)~~)) (23) "License" means the holder of a license to practice public accounting issued to an individual or a firm under the Act.

(24) "Licensee" means ((~~the holder of a valid~~)) a natural person or a firm holding a license issued under the provisions of ((~~this~~)) the Act.

((~~(18)~~)) (25) "Manager" means a manager of a limited liability company licensed as a firm under the Act.

(26) "NASBA" means the National Association of State Boards of Accountancy.

(27) "Natural person" means a living, human being.

(28) "Nonlicensee owner" means a CPA firm owner who is not licensed in any state to practice public accountancy.

(29) "Peer review" means a study, appraisal, or review of one or more aspects of the attest work of a licensee, by a licensee(s) who is not affiliated with the licensee reviewed, including any internal review or inspection intended to comply with quality control policies and procedures but not including a "quality assurance review."

(30) "Permit," "permit to practice" or "permitholder" means the individual holding the permit:

Has a principal place of business outside of Washington state;

Is licensed to practice public accounting in another state;

Has been granted by the board privileges to practice public accountancy in Washington state under the authority of RCW 18.04.350(2); and

Must comply with the Act and all board rules applicable to Washington state licensees.

(31) "Principal place of business" means a single fixed location designated by the individual from which the individual directs, controls, and coordinates the majority of his or her business activities.

(32) "Public practice" or the "practice of public accounting" means performing or offering to perform by a person or firm holding out to the public as a licensee, for a client or potential client, one or more kinds of services involving the use of accounting or auditing skills, including the issuance of "audit reports," "review reports," "compilation reports," or "attestation reports" on financial statements, or one or more kinds of management advisory, or consulting services, or the preparation of tax returns, or the furnishing of advice on tax matters.

((~~(19)~~)) (33) "Quality assurance review or QAR" ((~~(QAR)~~)) is the process, established by and conducted at the direction of the board, of study, appraisal, or review of one or more aspects of the ((~~professional~~)) attest work of a licensee ((~~or firm~~)), by a licensee(s) who is not affiliated with the licensee ((~~or firm~~)) being reviewed.

(((20) "Quality review" means a study, appraisal, or review of one or more aspects of the professional work of a licensee or firm, by a licensee(s) who is not affiliated with the licensee or firm being reviewed, including a peer review, or any internal review or inspection intended to comply with quality control policies and procedures but not including a "quality assurance review."

~~(21)~~)) (34) "Reciprocity" means board recognition of licenses, certificates or other professional accounting credentials that the board will rely upon in full or partial satisfaction of ((~~CPA certification or~~)) licensing requirements.

((~~(22)~~)) (35) "Referral fees" see definition of "commissions and referral fees" in subsection ((~~(7)~~)) (10) of this section.

((~~(23)~~)) (36) "Reports on financial statements" means any reports or opinions prepared by licensees, based on services performed in accordance with generally accepted auditing standards, standards for attestation engagements, or standards for accounting and review services, as to whether the presentation of information used for guidance in financial transactions or for accounting for or assessing the status or performance of commercial and noncommercial enterprises, whether public, private, or governmental, conforms with generally accepted accounting principles or other comprehensive bases of accounting. The term does not include:

(a) Incidental financial data included in management advisory services reports to support recommendations to a client; or

(b) Services referenced in the Act which may be provided by persons not holding a license.

((~~(24)~~)) (37) "Representing onesel

WAC 4-25-400	What is the authority for and the purpose of the board's rules?
WAC 4-25-410	Definitions.
WAC 4-25- 510	What is the board's meeting schedule and how are officers elected?
WAC 4-25-520	What public records does the board maintain?
WAC 4-25-530	Fees.
WAC 4-25-540	What are brief adjudicative proceedings?
WAC 4-25-550	Do I need to notify the board if I change my address?
WAC 4-25-551	Must I respond to inquiries from the board?
WAC 4-25-600 Repeal	Rules of professional conduct -- Preamble.
WAC 4-25-610	Principles of conduct.
WAC 4-25-620	When must I comply with the rules of conduct requiring integrity and objectivity?
WAC 4-25-622	Independence.
WAC 4-25-626	What restrictions govern commissions, referral, and contingent fees?
WAC 4-25-630	Competence.
WAC 4-25-631	With which rules, regulations and professional standards must a CPA comply?
WAC 4-25-640	Clients' confidential information.
WAC 4-25-650	Acts discreditable.
WAC 4-25-660	What are the limitations on advertising and other forms of solicitation?
WAC 4-25-661	What firm names must be approved by the board and what firm names are prohibited?
WAC 4-25-710	CPA certificate -- Education requirements.
WAC 4-25-720	CPA examination--Application.
WAC 4-25-721	What does the board consider to be cheating on the CPA examination, what actions may the board take if cheating is suspected, and what sanctions may the board impose if cheating occurs?
WAC 4-25-730	What are the experience requirements in order to obtain a CPA license?
WAC 4-25-735	What rules must a certificateholder comply with and how does a certificateholder apply for licensure?
WAC 4-25-745	How do I apply for an initial CPA license and/or certificate?
WAC 4-25-746	How do I apply for a Washington state CPA license and/or certificate if I hold a valid CPA certificate, license or permit in another state?
WAC 4-25-750	What are the CPA firm licensing requirements?
WAC 4-25-752 New	How do I apply to register as a resident nonlicensee owner of a licensed firm?
WAC 4-25-755 Repeal	Temporary permits.
WAC 4-25-756 New	How do I apply for an initial permit to practice and with which rules must a permit holder comply?
WAC 4-25-781	What are the rules governing reciprocity for accountants from foreign countries?
WAC 4-25-782	How do I apply for an initial Washington state license and/or certificate through foreign reciprocity?
WAC 4-25-783	How do I renew a Washington CPA certificate and/or license granted through foreign reciprocity?
WAC 4-25-790	How do I renew my CPA license and/or certificate?
WAC 4-25-791	If I hold a certificate under the reasonable cause exemption to the CPE requirements, how do I apply to return to my previous status as a licensee or a certificate holder?
WAC 4-25-792	How do I apply for reinstatement of a lapsed CPA license and/or certificate?
WAC 4-25-793 New	If I hold a license or a certificate as a retiree, how do I apply to return to my previous status as a licensee or a certificateholder?
WAC 4-25-795	How do I apply for reinstatement of a revoked or suspended license and/or certificate?
WAC 4-25-820	Quality assurance review.
WAC 4-25-830	What are the CPE requirements?
WAC 4-25-831	What are the program standards for CPE?
WAC 4-25-832	How do I report my CPE to the board?
WAC 4-25-833	What documentation must I retain to support my eligibility for CPE credits?
WAC 4-25-910	What are the bases for the board to impose discipline?

	(b) Statutory authority for adoption	Statute being implemented:
WAC 4-25-400 and 4-25-410	RCW 18.04.055	RCW 18.04.055(16)
WAC 4-25-510	RCW 18.04.055 and 42.30.070	RCW 42.30.070
WAC 4-25-520	RCW 18.04.055 and 42.17.260	RCW 42.17.260
WAC 4-25-530	RCW 18.04.055, 18.04.065, 18.04.105(3), 18.04.195(7), 18.04.205(4), 18.04.215(8), and 18.04.350(2)	RCW 18.04.055, 18.04.065, 18.04.105(3), 18.04.195(7), 18.04.205(4), 18.04.215(8), and 18.04.350(2)
WAC 4-25-540	RCW 18.04.055(1), 34.05.220, and 34.05.482	RCW 18.04.055(1) and 34.05.482
WAC 4-25-550 and 4-25-551	RCW 18.04.055(16)	RCW 18.04.055(16)
WAC 4-25-600, 4-25-610, 4-25-620, 4-25-622, 4-25-626, 4-25-630, 4-25-631, 4-25-640, 4-25-650, and 4-25-660	RCW 18.04.055(2)	RCW 18.04.055(2)
WAC 4-25-661	RCW 18.04.055(8)	RCW 18.04.055(8)
WAC 4-25-710	RCW 18.04.055(5) and 18.04.105(1)	RCW 18.04.055(5) and 18.04.105(1)
WAC 4-25-720	RCW 18.04.055(5) and 18.04.105(2)	RCW 18.04.055(5) and 18.04.105(2)
WAC 4-25-721	RCW 18.04.055	RCW 18.04.055
WAC 4-25-730	RCW 18.04.055(11) and 18.04.105 (1)(d)	RCW 18.04.055(11) and 18.04.105 (1)(d)
WAC 4-25-735	RCW 18.04.055(12) and 18.04.105(4)	RCW 18.04.055(12) and 18.04.105(4)
WAC 4-25-745	RCW 18.04.055, 18.04.105(1), and 18.04.215(1)	RCW 18.04.055, 18.04.105(1), and 18.04.215(1)
WAC 4-25-746	RCW 18.04.180 and 18.04.215(6)	RCW 18.04.180 and 18.04.215(6)
WAC 4-25-750	RCW 18.04.055(8), 18.04.195, and 18.04.205	RCW 18.04.055(8), 18.04.195, and 18.04.205
WAC 4-25-752	RCW 18.04.055(13) and 18.04.195(8)	RCW 18.04.055(13) and 18.04.195(8)
WAC 4-25-755	RCW 18.04.055 and 18.04.350(2)	RCW 18.04.055 and 18.04.350(2)
WAC 4-25-756	RCW 18.04.350(2)	RCW 18.04.350(2)
WAC 4-25-781 and 4-25-782	RCW 18.04.183	RCW 18.04.183
WAC 4-25-783	RCW 18.04.183 and 18.04.215(2)	RCW 18.04.183 and 18.04.215(2)
WAC 4-25-790, 4-25-791, and 4-25-792	RCW 18.04.215 (2) and (4)	RCW 18.04.215 (2) and (4)
WAC 4-25-793	RCW 18.04.215(7)	RCW 18.04.215(7)
WAC 4-25-795	RCW 18.04.215(2), 18.04.335, and 34.05.220	RCW 18.04.215(2), 18.04.335, and 34.05.220
WAC 4-25-820	RCW 18.04.055(9)	RCW 18.04.055(9)
WAC 4-25-830, 4-25-831, 832, and 4-25-833	RCW 18.04.055(7), 18.04.215(5)	RCW 18.04.055(7), 18.04.215(5)
WAC 4-25-910	RCW 18.04.055(11), 18.04.295, and 18.04.305	RCW 18.04.055(11), 18.04.295, and 18.04.305

	Provide adequate reserves for emergency appropriation requests.
	Pay for extensive or costly investigations and enforcement or defense issues requiring significant attorney general costs.
	Cover unanticipated litigation costs ordered by a court.
	Compensate for an unanticipated or sudden drop in the number of licensees.

	Promote clarity.
	Ensure effective communication.
	Ensure fairness in interpretation and application of the rules.
	Promote efficiencies through minimizing gray areas.

WAC 4-25-400	Advises the reader of the authority given to the board by the legislature through chapter 18.04 RCW (the Public Accountancy Act). This authority includes the enactment of rules. This rule is a preamble to those rules and lists the general subjects included in chapter 4-25 WAC.
WAC 4-25-410	Defines terms used throughout the board's rules to provide clarity for users.
WAC 4-25- 510	Advises the public of: (1) The dates and times the board will hold its regular and annual meetings. (2) The election of officers at the annual meeting. (3) When the newly elected officers will assume their duties. (4) Who has the authority to call meetings of the board. (5) The board's compliance with the Administrative Procedure Act.
WAC 4-25-520	Notifies the public of the records available for inspection and copying for informational purposes.
WAC 4-25-530	RCW 18.04.065 directs the board to "set its fees at a level adequate to pay the costs of administering this chapter" (that is, chapter 18.04 RCW, the Public Accountancy Act).
WAC 4-25-540	Chapter 34.05 RCW (Administrative Procedure Act) allows agencies to adopt brief adjudicative proceedings to resolve some limited administrative issues. The board uses brief adjudicative proceedings to provide a clear process to persons to appeal staff actions denying applications.
WAC 4-25-550	WAC 4-25-550 requires CPAs, CPA firms, and resident nonlicensee firm owners to notify the agency of any change in address. With a current address on file, the agency will be able to contact the CPA, CPA firm, or resident nonlicensee firm owner for regulatory purposes.
WAC 4-25-551	Requires CPAs, CPA firms, and resident nonlicensee firm owners to respond to a board inquiry in writing within twenty days of the date the inquiry is posted in the United States mail. With cooperation from the CPAs, CPA firms, and resident nonlicensee firm owners the board can effectively administer chapter 18.04 RCW.
WAC 4-25-600 Repeal	The rule is too vague to be enforceable therefore this rule is recommended for repeal.
WAC 4-25-610, 4-25-620, 4-25-622, 4-25-630, 4-25-631, and 4-25-650	Advises Washington CPAs of the standards of conduct and when they must comply with these standards. These standards are needed to establish and maintain high standards of competence and ethics to address the need to protect the public.
WAC 4-25-626	In order to protect the public interest, this rule prohibits licensees from being compensated in a manner which tends to bias or give the appearance of tending to bias the results of their attest services. However, to permit Washington CPAs to practice public accounting on a level playing field with other CPAs nationwide, this rule is aligned with the Uniform Accountancy Act (UAA), to follow the national trend of allowing compensation in the form of commissions, referral fees, and contingent fees, and to address the profession's desire to allow commissions and contingent fees with disclosure. In order to ensure the public is sufficiently informed the rule requires all CPAs accepting commissions, referral fees, and contingent fees to disclose in writing and in advance of client acceptance the method of calculating the fee and the CPA's role as the client's advisor.
WAC 4-25-640	Incorporates parts of statute (RCW 18.04.390 and 18.04.405) into the board's rules of professional conduct. The rule prohibits Washington CPAs from disclosing any confidential client information without the consent of the client; clarifies when the rule does not affect a CPA's disclosure of client information, and outlines a CPA's obligations with respect to the records of a client in a clear format. This standard of professional conduct is needed to protect the public by ensuring privacy and record accessibility.
WAC 4-25-660	"Advertising and other forms of solicitation" is a rule of professional conduct necessary to establish and maintain high standards of competence and ethics of certified public accountants (CPAs) to protect the public interest especially in the area of advertising and solicitation.
WAC 4-25-661	"Improper firm names" is a rule of professional conduct necessary to govern sole proprietors, partnerships, and corporations practicing public accounting concerning their names to protect the public from being misled.
WAC 4-25-710	Outlines the educational requirements for individuals to qualify to apply for the CPA examination and ultimately the CPA license, including requirements regarding education obtained outside of the United States, accreditation standards, and an alternative to accreditation. Candidates for the CPA exam need clear concise requirements to ensure fair treatment of all candidates. Ensures candidates will have the necessary foundation and obtain acceptable competence in an increasingly complex business environment to eventually become a licensed CPA. This rule continues to be aligned with the Uniform Accountancy Act (UAA) therefore assuring that Washington CPAs are substantially equivalent with CPAs in other states.
WAC 4-25-720	Outlines the requirements for individuals making application for the CPA exam such as how to file an application, the application due date, timing for completion and documentation of the education requirements, when exam admission notices will be mailed, the passing grade, conditional credit, proctoring, and the completion of an ethics exam.
WAC 4-25-721	This rule provides CPA exam candidates with a listing of what the board considers to be cheating, what actions the board may take if cheating is suspected, and what sanctions the board may impose if cheating occurs.
WAC 4-25-730	Licensed CPAs are statutorily given the exclusive right to perform audit, review, and compilation services. In exchange for this valuable right, CPAs are expected to have a certain level of mature expertise prior to offering unsupervised services to the general public. Washington state statute mandates that CPAs demonstrate one year of public accounting experience and meeting competency requirements. The profession and the public expect CPAs to have a focused, relevant and meaningful apprenticeship period to perfect skills and abilities.
WAC 4-25-735	Establishes the requirements for certificateholders to qualify and apply for a license.
WAC 4-25-745	Sets forth the procedures applicants for an initial license must follow in a short clear manner; notifies the applicant of the board's definition of a "complete" application and where the board will send notification when the application is complete; sets the expiration of the license on June 30 of the third calendar year following initial licensure; notifies applicants of the prohibition against using the CPA title by persons not properly licensed.
WAC 4-25-746	Sets the procedures applicants for a Washington CPA license by reciprocity must follow in a short clear manner; notifies the applicant of the board's definition of a "complete" application and where the board will send notification when the application is complete; sets the expiration of the license certificate on June 30 of the third calendar year following licensure in Washington state; restates RCW 18.04.215(6) that allows CPAs licensed in another state to practice in Washington state from the date of filing a "complete" application with the board.
WAC 4-25-750	RCW 18.04.205(3) directs the board to prescribe the procedures to be followed to register and maintain offices established for the practice of public accounting in Washington state. RCW 18.04.195 requires CPA firms to obtain, and renew, licenses to practice public accounting.
WAC 4-25-752 New	Establishes the requirements for resident nonlicensee owner applying to be a registered nonlicensee owner and defined which rules the nonlicensee owner must comply with.
WAC 4-25-755 Repeal	Due to changes in statute incidental practice is no longer permitted making this rule obsolete.
WAC 4-25-756 New	Establishes the requirements for individuals, whose principal place of business is not in Washington, to apply for the privilege to practice in Washington state.
WAC 4-25-781, 4-25-782 and 4-25-783	RCW 18.04.183 directs the board to grant a license as a CPA to a holder of a permit, license, or certificate issued by a foreign country's board, agency or institute. The rule implements the statute listing the qualifications the board will accept before issuing an initial CPA license to an accountant from a foreign country, the requirements for renewal, and the procedures the board will take to investigate and discipline CPAs licensed based in part on a foreign accounting credential.
WAC 4-25-790	Sets the procedures for the renewal of a certificate/license/permit/resident nonlicensee firm owner registration in a short clear manner eliminating confusion; notifies the applicant that the board will send a renewal application in January to the last address the CPA provided to the board; notifies the applicant of the board's definition of a "complete" application and the due date of filing; sets the expiration of the certificate/license/permit/resident nonlicensee firm owner registration to June 30 of the third calendar year following the renewal; notifies the applicant that failure to file a complete application by the due date will result in late fees; notifies the applicant that failure to file a complete application prior to the expiration of their certificate/license/permit/resident nonlicensee firm owner registration will result in the lapse of their certificate/license and loss of the right to use the CPA title or be a owner of a CPA firm.
WAC 4-25-791	Sets the procedures CPAs must follow to return to a previous status as a licensee.
WAC 4-25-792	In a short, clear manner that eliminates confusion, this rule sets the procedures CPAs must follow to apply for the reinstatement of their lapsed license and/or certificate.
WAC 4-25-793 New	Establishes the process for a retiree to "reactivate" their certificate or license.
WAC 4-25-795	Sets the procedures persons or firms whose certificate/license/permit/resident nonlicensee firm owner registration has been revoked or suspended must follow in order to apply for modification of a suspension or revocation order or to apply for reinstatement.
WAC 4-25-820	In order to protect the public from financial information that does not meet set standards, this rule establishes the process of monitoring the attest work of licensees (including CPA firms). CPA firms offering attest (audit, review, or compilation) services must comply with set standards. Every three years the CPA firm must either submit reports to financial statements for board review or demonstrate participation in a board approved peer review program. Set the actions the board may take if it is determined that a report is substandard or seriously questionable with respect to applicable professional standards.
WAC 4-25-830	RCW 18.04.215(5) authorizes the board to set the rules for continuing professional education to maintain or improve the professional competency of licenses, certificateholders, and resident nonlicensee firm owners as a condition to maintaining their certificate/license/permit/resident nonlicensee firm owner registration; accomplishes a heightened awareness of the board's rules, especially as they pertain to ethics, through required continuing professional education.
WAC 4-25-831	Outlines the standards continuing professional education (CPE) courses must meet.
WAC 4-25-832	Outlines how certificateholders/licensee/permitholders/resident nonlicensee firm owners report their completed CPE to the board.
WAC 4-25-833	Notifies certificateholders/licensee/permitholders/resident nonlicensee firm owners that they are responsible for documenting their entitlement of CPE credit claimed and what the board will accept as documentation.
WAC 4-25-910	RCW 18.04.295 and 18.04.305 authorize the board to impose discipline against Washington CPAs, CPA firms, permit holders, or resident nonlicensee firm owners. Using the clear rule-writing technique that eliminates confusion, this rule lists specific examples of prohibited acts that constitute grounds for discipline.

WAC 4-25-400	Adds firm owners to the description of the board's authority. Adds five bulleted items to the description of the purpose of the act. The additional language paraphrases revisions to the "purpose" section of the statute. Clarifies the listing of the subject areas addressed by the board's rules to include permits, registration of resident nonlicensee firm owners, etc.
WAC 4-25-410	Adds the definition of "active individual participant."
	Adds the definition of "affiliated entity." Having the definition align with (anticipated) national standards will support an understanding of, and compliance with, the board's rule.
	Removes ambiguous language from the definition of "attest" services.
	Adds permit holders to the listing of individuals permitted to perform attest services.
	Aligns the definition of "certificate" to the new statute.
	Adds the definition of "certificateholder" from the new statute.
	Adds relationships with firm owners, affiliated entities, and owners of affiliated entities to circumstances creating a "client."
	Adds the CPA's firm, CPA firms and firm owners to the criteria defining a "commission."
	Includes permit holders in the definition of "CPA" and reworded the definition to clarify that under the new act licensees no longer hold a certificate (they hold just a license).
	Adds the notion that CPA firms and firm owners (in addition to CPAs) perform professional services for "enterprises."
	Aligns the definition of "firm" with the act.
	Establishes the meaning of "firm owner" because that term is used in the rules.
	Adds permit holders to the definition of whom may practice public accounting under the definition of "holding out."
	Adds the definition of "inactive" from the new statute and added clarifying language that certificateholders cannot hold out.
	Adds the definition of "license" (note the definition refers to both an individual and a firm license.
	Clarifies that both a natural person and a firm can be a "licensee."
	Adds the definition of "manager" because the term is used in the rules.
	Adds the abbreviation for National Association of State Boards of Accountancy.
	Adds the definition of "natural person" because the term is used in the rules (referring to nonlicensee firm owners).
	Adds the definition of "nonlicensee owner" because the term is used in the rules.
	Moves the definition of "quality review" to "peer review" to reflect verbiage changes resulting from the new statute.
	Adds the definition of "permit," "permit to practice" and "permit holder" because the terms are used in the rule.
	Adds the definition of "principal place of business" because the term is used in the rules.
	Adds the definition of "representing oneself" because the term is used in the rules.
	Adds the definition of "state" because the term is used in the rules.
WAC 4-25- 510	Increased the number of board members to nine to align the rule with changes in the act.
WAC 4-25-520	Due to provisions in the new act, the board will maintain public records on permit holders and registered resident nonlicensee firm owners.
WAC 4-25-530	Adjusts fees to reflect the need to increase agency revenues to cover (a) the agency's increased spending authority resulting from the new statute and (b) the anticipated reduction in revenue from:
	A reduction in new applicants, particularly from foreign candidates, because the board will no longer be issuing certificates;
	A one-time significant reduction during the initial transition period, because new applicants will need to acquire a year of experience prior to licensure of any kind;
	An initial reduction in the number of renewals because some certificateholders will elect to allow their certificate to lapse rather than either using the title CPA-Inactive, or obtaining the experience and paying a higher licensing fee;
	A reduction in total renewals due to the above.
	Increases exam fees to reflect the increase in the AICPA's charges for the examination.
	Aligns certificateholder, licensee, permit holder and firm owner application and renewal fees so that each CPA and CPA firm owner in Washington state contributes equally to paying for the regulation of public accountancy in Washington state. Additionally, parity among the fees establishes a fair and equitable charge for the cost of regulating accountancy in Washington state. The agency will perform basically the same administrative activities for licensees, certificateholders, permit holders and firm owners. All individuals and within these four regulated groups come under the board's enforcement authority and action.
	Reinstatement fee and late fee were both adjusted to reflect the workload involved.
	QAR fee adjusted to reflect anticipated increase in number of field reviews performed (increase would cover cost of field review for all firms identified as performing substandard work).
	Fees were adjusted to cover an anticipated need for increased funding to cover investigation and enforcement costs because (a) within the last six months the number of investigations has dramatically increased (thirty-three total investigations during 2000; thirty-three investigations to date in 2001) -the trend is expected to continue and (b) the consumer alert/public awareness program that is just beginning is anticipated to trigger a significant increase in complaints and investigations.
WAC 4-25-540	Added the provision that the board's procedures are governed by the uniform procedural rules codified in chapter 10-08 WAC. (Based on the prosecuting attorney general's recommendation.) Added the new types of applications (resulting from the new act) that will come under the BAP provisions. Separated the language for certificate applications, renewals, and reinstatements from the language for license applications, renewals, and reinstatements. (Under the old law licensees held both a certificate and a license; under the new law licensees will only hold a license.)
WAC 4-25-550	Added nonlicensees firm owners to the rules requiring notification of address changes. Note: Licensees, certificateholders and permit holders are included in the definition of CPA.
WAC 4-25-551	Added nonlicensee firm owners to the rules requiring a written response to board inquiry. Note: Licensees, permit holders and certificateholders are included in the definition of CPA.
WAC 4-25-600 Repeal	Based on the board's April 26, 2001, decision that the rule was too vague to be enforceable this rule is recommended for repeal.
WAC 4-25-610	Adds that nonlicensee firm owners must comply with the principles of conduct. Note: Licensees, certificateholders and permit holders are included in the definition of CPA.
	Clarifies that CPA firms must comply with the principles.
	To clarify the current requirements, changes the words "shall" to "must."
WAC 4-25-620	Adds that nonlicensee firm owners must comply with requirements concerning integrity and objectivity. Note: Licensees, certificateholders and permit holders are included in the definition of CPA.
	Clarifies that CPA firms must comply with the rule.
	To clarify the current requirements, changes the words "shall" to "must."
WAC 4-25-622	Adds nonlicensee firm owners, affiliated entities, and owners of affiliated entities to the example of relationships that impair independence.
	Clarifies that CPA firms must comply with the rule.
	Changes all references to "CPA" to "licensee" making this rule applicable to licensed CPAs, CPA firms and permit holders. Excludes certificateholders from the provisions of this rule by using the term "licensee."
	To clarify the current requirements, changes the words "shall" to "must."
WAC 4-25-626	Adds nonlicensee firm owners, affiliated entities, and owners of affiliated entities to the example of relationships that result in a prohibition against accepting a commission/referral/contingent fee.
	Removes the definition of contingent fee because it was added to WAC 4-25-410 Definitions.
	To clarify the current requirements, changes the words "shall" to "must."
WAC 4-25-630	Adds nonlicensee firm owners to the requirement to be competent.
	Clarifies that CPA firms must meet the competency requirement.
	To clarify the current requirements, changes the words "shall" to "must."
WAC 4-25-631	Adds nonlicensee firm owners to the requirement to comply with standards.
	Clarifies that CPA firms must comply with standards.
	The term "CPA" includes licensees, certificateholders, and permit holders.
	Removes the language "including subsequent amendments" language which makes the rule too vague and could make the rule difficult to enforce.
	Clarifies the current requirement that CPA firms and CPAs must comply with rules and regulations promulgated by the SEC.
WAC 4-25-640	Moves the definition of client to the first paragraph and made it applicable to the entire rule.
	Adds firm owners to those required to comply with the rule.
	Changes all references to "CPA" to "licensee" making this rule applicable to licensed CPAs, CPA firms and permit holders. Excludes certificateholders from the provisions of this rule by using the term "licensee."
	To clarify the current requirements, changes the words "shall" to "must."
WAC 4-25-650	Adds firm owners.
	Clarifies that CPA firms must comply with this rule.
	To clarify the current requirements, changes the words "shall" to "must."
WAC 4-25-660	Adds firm owners to those that must comply with the rule.
	Corrects language by tying the notification requirement to a "web site" rather than "Internet site."
	Adds the requirement that CPA firms must place notification of holding a Washington state license on their web site.
	Adds the requirement that certificateholders using the CPA title must state on their web site that they are an "Inactive CPA," that they do not hold a license to practice public accounting, and they cannot offer accounting, attest, tax services, etc.
	Adds the requirement that firm owners must disclose on their web site that they are either licensed or registered (nonlicensee owners) with the board.
	To clarify the current requirements, changes the words "shall" to "must."
WAC 4-25-661	Consistent with changes in statute, eliminates the prohibition against using "& Associates" unless there is more than one CPA at the firm.
	Adds language prohibiting specialty designations, educational attainments, etc., that are not supported in fact.
	Adds language from the new statute prohibiting licensees from operating under an alias or DBA.
	To clarify the current requirements, changes the words "shall" to "must."
WAC 4-25-710	Eliminates the pre-July 1, 2000 education requirement.
	Moves the definition of "accounting concentration" to the "education requirements" sections.
WAC 4-25-720	Eliminates the statement that the board will refund a portion of examination fees because refunds are made by the contractor.
	Incorporates the exam conditioning requirements into the rule. (The conditioning requirements were eliminated from statute. Note, this revision does not change the conditioning requirements it simply places the existing requirements into the rule.)
	Clarifies the current ethics examination requirements.
	Clarifies the current requirement for candidates to complete a form in order to utilize the one hundred twenty day provision.
WAC 4-25-721	Adds that cheating on the CPA exam demonstrates a lack of good character. This ties directly to the requirements for licensure in the statute.
	Removes fines and cost recovery from the list of sanctions the board may impose on candidates for the CPA license.
WAC 4-25-730	Adds the provision in the new statute allowing individuals holding a certificate at June 30, 2001, and applying for licensure before June 30, 2004, to use any prior experience.
	Adds verbiage from the statute regarding the specific types of services that must be performed to meet the experience requirement.
	Adds the new statutory provision that all certificateholders must obtained one hundred twenty hours of CPE within the previous three years in order to apply for a license.
	Eliminates the previous subsection (4) requiring individuals holding a certificate for four or more years to obtain one hundred twenty hours of CPE to qualify for licensure (superseded by the new requirement that all certificateholders must meet the one hundred twenty CPE hour requirement for licensure).
WAC 4-25-745	Eliminated the ability to apply for a certificate.
	Listed in the rule the requirements for licensure.
	Adjusted the definition of what services must be performed in a CPA firm to align with the new statute.
	Eliminated the requirement to have a notarized signature.
WAC 4-25-746	Added the requirement (from statute) that the other state of licensure must grant reciprocity provisions to Washington's CPAs.
	Clarified the requirements for licensure as stated in statute.
	Added the notation that a CPA may practice as soon as the license application is filed with the board.
	Added the notation that individuals obtaining a Washington license via interstate reciprocity must notify the board within thirty days if the license issued by the other jurisdictions has lapsed or become invalid.
	Eliminated the requirement to have a notarized signature.
WAC 4-25-750	Added the provision (from statute) allowing for nonlicensee owners.
	Added the requirement (from statute) for the principal partner and the principal manager to be licensee.
	Added the requirements (from statute) for a nonlicensee owner to be a natural person, meet good character requirements, comply with board rules, and be an active participant in the firm or affiliated entity.
	Added the requirement for a resident nonlicensee owner to register with the board.
	Clarified what is considered an amendment.
WAC 4-25-755 Repeal	Due to changes in statute incidental practice is no longer permitted making this rule obsolete.
WAC 4-25-781	Adds the notification requirements from statute.
WAC 4-25-782	Clarifies that the CPA may only practice in Washington state upon receiving their Washington state license.
	Eliminates the requirement to have a notarized signature.
WAC 4-25-783	Identifies that a renewal form will be mailed to the CPA.
	Clarifies that in order to renew the individual must certify that s/he compiled with the board's CPE requirements.
WAC 4-25-790	Adds renewing permits and resident nonlicensee owner registrations to the "how do I renew" rule.
	Clarifies that a licensee may not renew as a certificateholder.
	Clarifies that in order to renew the individual must certify that they met the board's CPE requirements.
WAC 4-25-791	Tailors this rule so that it applies to certificateholders who want to return to their previous status as a licensee.
WAC 4-25-792	Extends the reinstatement rule to include permits and resident nonlicensee owner registrations.
WAC 4-25-795	Extends the reinstatement of a revoked or suspended license or certificate to include permits and resident nonlicensee owner registrations.
WAC 4-25-820	Adds that a firm required to submit to peer review may be assessed the cost of the peer review.
WAC 4-25-830	Changes the CPE requirement for certificateholders to a four hour course in ethics every three years.
	Adds the CPE requirement for resident nonlicensee firm owners to obtain a four hour course in ethics every three years.
	Adds that permit holders are exempt from the CPE requirements.
	Changed the title "reasonable cause exemption" to "renewal following retirement" consistent with changes in statute.
	Consistent with the new statute, requires certificateholders applying for a license to obtain one hundred twenty hours of CPE including a four hour course in ethics and limited to twenty-four hours in nontechnical subjects.
	Adds resident nonlicensee firm owners to the provisions allowing for a CPE extension request.
WAC 4-25-831	Moves negotiation and dispute resolution to technical subjects (based on multiple comments from CPAs).
	Adds the provision for allowing CPE to be earned in 1/2 hour increment after the first full hour has been earned.
	Adds a provision and clarification regarding credential examinations.
WAC 4-25-832	Adds provisions for nonlicensee owners.
WAC 4-25-833	Adds the requirement for the attendee's name to be on the certificate of completion.
	Changes the record retention requirement for CPE supporting documentation from five years after the completion of the course to three years after the end of the CPE reporting period.
WAC 4-25-910	Adds the new provisions (from the new statute) pertaining to permit holders, nonlicensee firm owners, full restitution, and fines (up to $10,000).
	Adds failure to comply with an order of the board as a prohibited act.