SENATE BILL REPORT

HB 1208

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Summary of Bill

Allows the Board of Accountancy to adopt rules governing firms providing public accounting services.
Removes certain provisions requiring a license or registration if a firm with an office in this state uses the title CPA or CPA firm.
Require firms with offices in this state to hold a license if it performs or offers to perform attest services.
Requires entities, that perform or offer to perform attest or compilation services and are required to be licensed, to license as a firm every three years.
Limits the uses of the inactive designation.

Background: Under the Public Accountancy Act (Act), both accountants and accounting firms must be licensed to hold themselves out as CPAs. The Board of Accountancy (Board) issues licenses, adopts rules, conducts investigations, administers an examination, and implements the laws of the Act.

CPAs and CPA firms perform services that must meet certain professional standards. The Board conducts a quality assurance review (QAR) program to review the work of licensees and out-of-state CPAs with practice privileges in Washington. In general, out-of-state CPAs and CPA firms licensed in their home state may perform attest and compilation services in Washington, subject to certain requirements.

Attest services include:

any audit or other engagement to be performed in accordance with the Statements on Auditing Standards;
any review of a financial statement to be provided in accordance with the Statements on Standards for Accounting and Review Services;
any examination of prospective financial information to be performed in accordance with the Statements on Standards for Attestation Engagements; and
any engagement to be performed in accordance with the Public Company Accounting Oversight Board Auditing Standards.

Compilation services are services that are performed in accordance with Statements on Standards for Accounting and Review Services that is presenting in the form of financial statements, information that is the representation of management without undertaking to express any assurance on the statements.

Summary of Bill: The Board may adopt rules governing firms providing public accounting services.

Certain provisions are removed requiring a CPA license or registration if a firm with an office in this state uses the title CPA or CPA firm. Firms with offices in this state must hold a license if it performs or offers to perform attest services. Entities, that perform or offer to perform attest or compilation services and are required to be licensed, must license as a firm every three years.

No individual, except as a firm employee or owner performing or offering to perform attest or compilation services, may use the designations of certified public accountant-inactive or CPA-inactive.

Staff Summary of Public Testimony: PRO: This bill is a clean up bill and simplifies the code. The Board got together to determine whether a firm has to have a license in certain circumstances. The intent of the bill is simple. It allows firms that do not provide attest services to have flexibility on whether they will hold a firm license. Having a firm license takes substantial administrative time and support. Many small firms would benefit from this change. CPAs must still hold their individual licenses; comply with the laws and rules; and be subject to disciplinary authority. State and federal laws still provide public protection.