Preproposal statement of inquiry was filed as WSR 00-19-010.
Title of Rule: WAC 4-25-622 Independence.
Purpose: To identify when a CPA in public practice must be independent.
Statutory Authority for Adoption: RCW 18.04.055(2).
Statute Being Implemented: RCW 18.04.055(2).
Summary: Requires a CPA in public practice to be independent when performing an audit, review, certain compilation, or other attest services and lists specific acts as examples of impairment of independence in a clear format.
Reasons Supporting Proposal: Clearly identifying when a CPA must be independent and examples of specific acts that would impair a CPA's independence ensures fairness in interpretation and application of the rule for CPAs and addresses the legislative directive to protect the public.
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 rule requires Washington CPAs to be independent when performing an audit, review, certain compilations, or other attest services and lists specific acts as examples of impairment of independence. This standard is needed to establish and maintain high standard of ethics to address the need to protect the public. The goal of the amendment is to promote clarity; ensure effective communication; ensure fairness in interpretation and application of the rule; and promote efficiencies through minimizing gray areas.
Proposal Changes the Following Existing Rules: The amendment: (1) Changes the title of the rule to "When must I be independent?"; (2) changes all references to "CPA" to "licensee"; (3) requires independence when a CPA performs other attest "services" rather than other attest "engagements when required by board rules or other professional standards"; and (4) is written in a clear rule-writing format.
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: Capitol Court Building, 110 Capitol Way South, 11th and Capitol Way, Room 135, Olympia, WA, on April 27, 2001, at 9:30 a.m.
Assistance for Persons with Disabilities: Contact Cheryl Sexton by April 20, 2001, TDD (800) 833-6384, or (360) 664-9194.
Submit Written Comments to: Dana M. McInturff, P.O. Box 9131, Olympia, WA 98507-9131, fax (360) 664-9190, by April 26, 2001.
Date of Intended Adoption: April 27, 2001.
March 15, 2001
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 I be independent?
(1) If you are a CPA in public practice, you 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)) licensee'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)) services.
(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)) licensee 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)) licensee's net worth or the net worth of the (( CPA's))
(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)) licensee'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)) licensee or (( a CPA's))
(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.
[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.]