WSR 98-01-232

PROPOSED RULES

BOARD OF ACCOUNTANCY

[Filed December 24, 1997, 12:00 p.m.]

Original Notice.

Preproposal statement of inquiry was filed as WSR 97-22-079.

Title of Rule: WAC 4-25-631 Compliance with standards.

Purpose: Amend rule to clarify that, where conflicts exist between a board rule and a professional standard, board rule prevails.

Statutory Authority for Adoption: RCW 18.04.055(6).

Statute Being Implemented: RCW 18.04.055(6).

Summary: The rule requires Washington certified public accountants (CPAs) to comply with the pertinent accounting principles, professional standards, regulations, releases and rules promulgated by the "appropriate bodies" for each endeavor undertaken.

Reasons Supporting Proposal: The existing rule requires Washington certified public accountants (CPAs) to comply with the pertinent accounting principles, professional standards, regulations, releases and rules promulgated by the "appropriate bodies" for each endeavor undertaken. Board rules and professional standards conflict in some ares such as compensation. Amendment to the rule will clarify that, where conflicts exist between a board rule and a professional standard, board rule prevails. The goal of the amendment is to:

Promote clarity.

Ensure effective communication.

Ensure fairness in interpretation and application of the rule.

Promote efficiencies through minimizing gray areas.

Address the need to protect the public through regulation of the practice of public accountancy and enhancing the reliability of information.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Dana M. McInturff, CPA, 210 East Union, Suite A, Olympia, (360) 664-9194.

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: Compliance with standards is a rule of professional conduct necessary to establish and maintain high standards of competence and ethics of certified public accountants (CPAs) to protect the public interest.

Proposal Changes the Following Existing Rules: Clarifies that, where conflicts exist between a board rule and a professional standard, board rule prevails.

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: Bank of California Building, 900 4th Avenue, 24th Floor, Attorney General Training Center, Seattle, WA, on Thursday, January 29, 1998, at 9:30 a.m.

Assistance for Persons with Disabilities: Contact Cheryl Sexton by January 26, 1998, 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 January 28, 1998.

Date of Intended Adoption: January 29, 1998.

December 23, 1997

Dana M. McInturff, CPA

Executive Director

AMENDATORY SECTION (Amending WSR 93-22-046, filed 10/28/93, effective 11/28/93)

WAC 4-25-631 Compliance with standards. A certified public accountant shall exercise due care and professional judgment in order to comply with the pertinent accounting principles, professional standards, regulations, releases and rules (hereinafter referred to as "standards") promulgated by the "appropriate bodies" for each endeavor undertaken. A certified public accountant shall be knowledgeable of federal, state and local law pertinent to the endeavor. If professional standards differ from board rule, board rules prevail.

Such "appropriate bodies" include, but are not limited to, the Securities and Exchange Commission; the Financial Accounting Standards Board; the Governmental Accounting Standards Board; ((the American Institute of Certified Public Accountants;)) the Internal Revenue Service; federal, state, and local audit, regulatory and tax agencies; the American Institute of Certified Public Accountants; and recognized educational and industry institutions.

Such "standards" include, but are not limited to:

(1) Regulation SX and the accounting series releases of the Securities and Exchange Commission;

(2) Generally accepted accounting principles and other comprehensive bases of accounting;

(3) Generally accepted auditing, review, compilation, attestation, consulting and peer review standards;

(4) Generally accepted government accounting standards;

(5) Consensus opinions of "appropriate bodies'" such as Emerging Issues Task Forces;

(6) Circular 230 of the IRS and "appropriate bodies'" guidance with respect to responsibilities in tax practice;

(7) Rules governing practice before regulatory agencies; and

(8) Guidance found in industry publications and textbooks and articles published by recognized accounting professionals or societies.