WSR 07-14-036

PERMANENT RULES

BOARD OF ACCOUNTANCY


[ Filed June 26, 2007, 3:02 p.m. , effective July 27, 2007 ]


Effective Date of Rule: Thirty-one days after filing.

Purpose: The board is charged with protection of the public interest and ensuring the integrity and dependability of financial information as it relates to the licensure of CPAs and CPA firms 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. The purpose of the QAR program is to monitor licensees' compliance with attest standards.

Citation of Existing Rules Affected by this Order: Amending WAC 4-25-820 What are the requirements for participating in quality assurance review (QAR)?

Statutory Authority for Adoption: RCW 18.04.055(9).

Adopted under notice filed as WSR 07-10-079 on May 1, 2007.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 1, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 1, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 1, Repealed 0.

Date Adopted: June 15, 2007.

Richard C. Sweeney

Executive Director

OTS-9740.2


AMENDATORY SECTION(Amending WSR 05-01-135, filed 12/16/04, effective 1/31/05)

WAC 4-25-820   What are the requirements for participating in quality assurance review (QAR)?   (1) Purpose. The Washington state board of accountancy is charged with protection of the public interest and ensuring the ((integrity)) dependability of ((financial)) information ((as it relates to the licensure of CPAs and CPA firms)) 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. The purpose of the QAR program is to monitor licensees' compliance with attest standards.

(2) Structure and implementation.

(a) The board will annually appoint a quality assurance review committee to perform the following functions:

(i) Review of financial statements and the reports of licensees thereon to assess their compliance with applicable professional standards;

(ii) Review of licensees' reports and information covered by those reports for conformity with applicable professional standards;

(iii) Improvement of reporting practices of licensees through education and rehabilitative measures; and

(((iii) Referral of cases requiring further investigation to the board; and))

(iv) Such other functions as the board may assign to the committee.

(b) Once every three years the board will require each licensed firm to participate in the board's quality assurance review program. Participating firms will be notified by the board in January of the reporting requirement, and participating firms will be required to submit a quality assurance review status form, along with the appropriate fee, by the following April 30th. Failure to submit a complete quality assurance review status form postmarked by the April 30th due date, will result in the assessment of late fees. The board may waive late fees based on individual hardship including, but not limited to, financial hardship, critical illness, or active military deployment.

(c) Each participating firm shall submit, for each of its offices, ((a compilation report, a review report, and an audit report)) one licensee report and the information covered by that report, for each of the following types of service or any other service the board determines:

Compilation report on historical financial statements;

Review report on historical financial statements;

Audit report on historical financial statements;

Agreed-upon procedures;

Forecasts;

Internal controls;

Performance audits; and

Projections.

A firm shall select these reports from all reports prepared during the twelve months preceding the date of board request or, if no reports have been issued within the last twelve months, from all reports during the preceding three years.

If reports issued by all offices of a firm are reviewed and issued in a controlled, centralized process, only one ((of)) each of the type of licensee reports, including the information covered by the reports, specified above need be submitted by the firm as a whole.

(d) The board may exempt from the requirement of (c) of this subsection any firm ((which)) that has participated in a board-approved peer review program within the three years immediately preceding the date of board request.

(e) Firms requesting exemption must submit a copy of an unmodified report, letter of comments, response to letter of comments, if applicable, and letter of acceptance from the reviewing organization. Firms that receive modified peer review reports may request exemption, but must submit copies of such reports and related correspondence, at the discretion of the board, for consideration on an individual basis.

(((e))) (f) Any documents submitted in accordance with (c) of this subsection may have the name of the client, the client's address, and other identifying factors omitted, provided that the omission does not render the type or nature of the entity undeterminable. Dates may not be omitted.

(((f))) (g) Reports submitted to the committee pursuant to (c) of this subsection and comments of reviewers, the committee and the board on such reports or workpapers relating thereto, shall also be preserved in confidence except to the extent that they are communicated by the board to the licensees who issued the reports or disclosure is required under administrative procedure rules or by direction of a court of law.

(((g))) (h) The committee's review of ((financial statements and)) the licensee reports ((of the licensees thereon)) and other information covered by those reports shall be directed toward the following:

(i) Presentation of the financial statements covered by the licensee reports and/or other information covered by those reports in conformity with ((generally accepted accounting principles or other comprehensive basis of accounting, if)) applicable professional standards for presentation and disclosure;

(ii) Compliance by licensees with ((generally accepted auditing)) applicable reporting standards; and

(iii) ((Compliance by licensees with other professional standards; and

(iv))) Compliance by licensees with the rules of the board and other regulations relating to the practice of public accounting.

(((h))) (i) If the board determines that a report and/or other information covered by the report referred to the board by the committee is substandard or seriously questionable with respect to applicable professional standards, the board may take one or more of the following actions:

(i) Send the licensee a letter of comment detailing the perceived deficiencies and require the licensee to develop quality control procedures to ensure that similar occurrences will not occur in the future;

(ii) Require any licensee who had responsibility for issuance of a report, or who substantially participated in preparation of the report and/or related workpapers, to successfully complete specific courses or types of continuing education as specified by the board;

(iii) Require that the licensee responsible for a substandard report submit all or specified categories of its reports to a preissuance review in a manner and for a duration prescribed by the board. The cost of the preissuance review will be at the firm's expense;

(iv) Require the licensee responsible for a substandard report to submit to a peer review conducted in accordance with standards acceptable to the board. The cost of the peer review will be at the licensee's expense;

(v) Require the licensee responsible for substandard work to submit to on-site field review or other investigative procedures of work product and practices by board representatives in order to assess the degree or pervasiveness of substandard work. The board may assess the costs of such field review or procedures to the licensee if the results of such investigative efforts substantiate the existence of substandard work product;

(vi) Initiate an investigation pursuant to RCW 18.04.295, 18.04.305, and/or 18.04.320.

(((i))) (j) The board may solicit and review ((financial statements and related reports of licensees)) licensee reports and/or other information covered by the reports from clients, public agencies, banks, and other users of ((financial statements. In gathering information about the attest work of licensees, the board may make use of investigators)) such information.

[Statutory Authority: RCW 18.04.055(9). 05-01-135, 4-25-820, filed 12/16/04, effective 1/31/05; 02-04-064, 4-25-820, filed 1/31/02, effective 3/15/02. Statutory Authority: RCW 18.04.055. 94-02-071, 4-25-820, filed 1/4/94, effective 2/4/94.]

Washington State Code Reviser's Office