PROPOSED RULES
Original Notice.
Preproposal statement of inquiry was filed as WSR 02-04-063.
Title of Rule: WAC 4-25-640 Clients' confidential information.
Purpose: To include firm owners in the confidentiality requirements and, while requiring CPAs maintain information as confidential, ensure a client-relationship is not established by way of preengagement discussions with prospective clients.
Statutory Authority for Adoption: RCW 18.04.055(2).
Statute Being Implemented: RCW 18.04.055(2).
Summary: Prohibits CPAs, CPA firms, CPA firm owners, and employees of CPAs or CPA firms from disclosing any confidential client information without the consent of the client; requires CPAs, CPA firms, and CPA firm owners to return to clients original records and any working papers that constitute part of the client's records and are not otherwise available to the client.
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 this rule to implement the revisions to chapter 18.04 RCW.
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: Washington State 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 is to:
| • | Promote clarity. |
| • | Ensure effective communication. |
| • | Ensure fairness in interpretation and application of the rules. |
| • | Promote efficiencies through minimizing gray areas. |
Proposal Changes the Following Existing Rules:
| • | 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 word "shall" to "must." |
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 October 25, 2002, at 9:00 a.m.
Assistance for Persons with Disabilities: Contact Cheryl Sexton by October 18, 2002, 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) 664-9194, by October 22, 2002.
Date of Intended Adoption: October 25, 2002.
August 8, 2002
Dana M. McInturff, CPA
Executive Director
OTS-4976.3
AMENDATORY SECTION(Amending WSR 93-22-046, filed 10/28/93,
effective 11/28/93)
WAC 4-25-640
Clients' confidential information.
(1) The
term "client" as used throughout this section includes former and
current clients. For purposes of this section, a client
relationship has been formed when confidential information has
been disclosed by a prospective client in an initial interview to
obtain or provide professional services.
(2) Confidential client communication. ((The term "client"
as used throughout this section shall include a former, current,
or prospective client.)) A licensee ((or any partner, officer,
shareholder)), firm owner, or employee of a licensee ((shall))
must not without the consent of the client or the heirs,
successors or personal representatives of the client disclose any
confidential communication or information pertaining to the
client obtained in the course of performing professional
services.
This rule does not:
(a) Affect in any way a licensee's, firm owner's, or
employee's obligation to comply with a ((validly)) lawfully
issued subpoena or summons ((enforceable by order of a court));
((or))
(b) Prohibit disclosures in the course of a quality review
of a licensee's ((professional)) attest services; ((or))
(c) Preclude a licensee, firm owner, or employee from
responding to any inquiry made by the board or any investigative
or disciplinary body established by law or formally recognized
by the board. However, a licensee ((or any partner, officer,
shareholder)), firm owner, or employee of a licensee ((shall))
must not disclose or use to their own advantage any confidential
client information that comes to their attention in carrying out
their official responsibilities; or
(d) Preclude a review of client information in conjunction with a prospective purchase, sale, or merger of all or part of a CPA's practice.
(((2))) (3) Client records. ((A licensee shall)) Licensees
and firm owners must furnish to ((his or her)) their client or
heirs, successors or personal representatives, upon request and
reasonable notice:
(a) A copy of the licensee's or firm owner's working papers, including electronic documents, to the extent that such working papers include records that would ordinarily constitute part of the client's records and are not otherwise available to the client; and
(b) Any accounting or other records belonging to, or obtained from or on behalf of, the client, that the licensee or firm owner removed from the client's premises or received for the client's account, including electronic documents; but the licensee or firm owner may make and retain copies of such documents of the client when they form the basis for work done by the licensee or firm owner.
Licensees and firm owners must not refuse to return client records, including electronic documents, pending client payment of outstanding fees.
[Statutory Authority: RCW 18.40.055. 93-22-046, § 4-25-640, filed 10/28/93, effective 11/28/93.]