Date of Adoption: October 31, 2003.
Purpose: To promote the dependability of information used for guidance in financial transactions or for accounting for or assessing the status or performance of commercial and noncommercial enterprises and protect the public interest by requiring that persons who hold themselves out as licensed CPAs or certificateholders conduct themselves in a competent, ethical, and professional manner.
Citation of Existing Rules Affected by this Order: Amending WAC 4-25-622 When must a CPA or CPA firm be independent?
Statutory Authority for Adoption: RCW 18.04.055(2).
Adopted under notice filed as WSR 03-17-060 on August 18, 2003.
Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.
Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.
Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 1, Repealed 0.
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 1, Repealed 0.
Number of Sections Adopted Using Negotiated Rule Making:
Pilot Rule Making:
or Other Alternative Rule Making:
Effective Date of Rule: December 31, 2003.
November 17, 2003
Dana M. McInturff, CPA
AMENDATORY SECTION(Amending WSR 98-12-049, filed 5/29/98, effective 6/29/98)
WAC 4-25-622 ((
Independence.)) When must a CPA or CPA
firm be independent?
(( (1) A CPA in public practice must be
independent in the performance of the following:
(a) An audit or review of a financial statement; or
(b) A compilation of historical or prospective financial statement when the CPA's report does not disclose a lack of independence; or
(c) Other attest engagements when required by board rules or other professional standards such as the statements of standards for attestation engagements.
(2) The following specific acts are examples of impairment of independence. The board does not intend this listing to be all inclusive.
(a) During the period of a professional engagement, or at the time of expressing an opinion, a CPA or a CPA's firm:
(i) Had or was committed to acquire any direct or material indirect financial interest in the enterprise.
(ii) Was a trustee of any trust or executor or administrator of any estate if such trust or estate had or was committed to acquire any direct or material indirect financial interest in the enterprise.
(iii) Had any joint closely-held business investment with the enterprise or with any officer, director, or principal stockholder thereof which was material in relation to the CPA's net worth or the net worth of the CPA's firm.
(iv) Had any loan to or from the enterprise or any officer, director, or principal stockholder of the enterprise except under certain circumstances for home mortgages, other secured loans, loans not material to the CPA's net worth, and various personal loans.
(b) During the period covered by the financial statements, during the period of the professional engagement or at the time of expressing an opinion, the CPA or a CPA's firm:
(i) Was connected with the enterprise as a promoter, underwriter, or voting trustee, a director or officer or in any capacity equivalent to that of a member of management or of an employee; or
(ii) Was a trustee for any pension or profit-sharing trust of the enterprise.)) When performing attest services, CPAs and CPA firms are responsible for maintaining independence so that attest opinions, reports, conclusions, and judgments will be impartial and viewed as impartial by parties expected to rely on the attest report. CPAs and CPA firms are required:
• To comply with all applicable independence rules, regulations, and the AICPA code of conduct as referenced in and required by WAC 4-25-631; and
• To decline attest engagements where the CPA or CPA firm has a relationship that could lead a reasonable and foreseeable user to conclude that the CPA or CPA firm is not independent.
Independence is not required when performing a compilation engagement provided the CPA's report discloses a lack of independence.
[Statutory Authority: RCW 18.04.055(2). 98-12-049, § 4-25-622, filed 5/29/98, effective 6/29/98. Statutory Authority: RCW 18.40.055. 93-22-046, § 4-25-622, filed 10/28/93, effective 11/28/93.]