Original Notice.

Preproposal statement of inquiry was filed as WSR 99-23-063.

Title of Rule: WAC 4-25-910 Bases for imposing discipline.

Purpose: To clearly prescribe the bases for the board to impose discipline against Washington CPAs and CPA firms.

Statutory Authority for Adoption: RCW 18.04.055(11), 18.04.295, and 18.04.305.

Statute Being Implemented: RCW 18.04.055(11), 18.04.295, and 18.04.305.

Summary: Lists specific examples of prohibited acts that constitute grounds for board discipline authorized by RCW 18.04.295 and 18.04.305.

Reasons Supporting Proposal: To ensure CPAs and CPA firms are fully informed, promote clarity, ensure effective communication, ensure fairness in interpretation and application of the rules, and promote efficiencies through minimizing gray areas.

Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Dana M. McInturff, CPA, 210 East Union, Suite A, 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: RCW 18.04.295 and 18.04.305 authorize the board to impose discipline against Washington CPAs and CPA firms. Using the clear rule-writing technique that eliminates confusion, this rule lists specific examples of prohibited acts that constitute grounds for discipline.

Proposal Changes the Following Existing Rules: Amendment of the rule will:

1. Present the rule in a clear concise format.

2. Present the rule in simplified, easier to understand, language.

3. Add orders of foreign jurisdictions to the listing of causes of prima facie evidence that a CPA has engaged in dishonesty, fraud, or negligence.

4. Add causes for discipline found in statute not in the current rule to ensure CPAs and CPA firms are fully informed.

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: Wyndham Garden Hotel -- SeaTac, 18118 Pacific Highway South, SeaTac, WA 98188, on April 28, 2000, at 9:30 a.m.

Assistance for Persons with Disabilities: Contact Cheryl Sexton by April 21, 2000, 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, 2000.

Date of Intended Adoption: April 28, 2000.

February 29, 2000

Dana M. McInturff, CPA

Executive Director

OTS-3849.2

AMENDATORY SECTION(Amending WSR 94-23-070, filed 11/15/94, effective 12/16/94)

WAC 4-25-910
((Bases for imposing discipline.)) What are the bases for the board to impose discipline?

RCW 18.04.295 ((specifies sanctions the board may impose based on a listing of general causes)) authorizes the board to revoke, suspend, refuse to renew a license and/or certificate, impose a fine not to exceed one thousand dollars, and recover investigative and legal costs for the specific acts listed below.

The following are specific ((acts are)) examples of prohibited ((activities)) acts that constitute grounds for discipline under RCW 18.04.295 and 18.04.305.      The board does not intend this listing to be all inclusive.

(1) Fraud or deceit in obtaining a CPA license and/or certificate ((as a certified public accountant, or in obtaining a license, within the meaning of RCW 18.04.295(1), includes but is not limited to)).

(2) Making a false or misleading statement in support of another's application for ((certificate or)) a license and/or certificate.

(((2)(a))) (3) Dishonesty, fraud, or negligence while representing oneself as a CPA((, within the meaning of RCW 18.04.295(2), includes)) including but ((is)) not limited to:

(((i))) (a) Practicing public accountancy in ((this)) Washington state prior to obtaining a license;

(((ii))) (b) Making misleading, deceptive, or untrue representations;

(((iii))) (c) Engaging in acts of fiscal dishonesty;

(((iv))) (d) Purposefully, knowingly, or negligently failing to file a report or record, or filing a false report or record, required by local, state, or federal law;

(((v))) (e) Unlawfully selling unregistered securities;

(((vi))) (f) Unlawfully acting as an unregistered securities salesperson or broker-dealer;

(((vii))) (g) Discharging a trustee's duties in a negligent manner or breaching one's fiduciary duties; or

(((viii))) (h) Withdrawing or liquidating, as fees earned, funds received by a CPA from a client as a deposit or retainer when the client contests the amount of fees earned, until such time as the dispute is resolved.

(((b))) (4) The following shall be prima facie evidence that a ((certified public accountant)) CPA has engaged in dishonesty, fraud, or negligence while representing himself or herself as a CPA:

(((i))) (a) An order of a court of competent jurisdiction finding the CPA to have committed an act of negligence, fraud, or dishonesty or other act reflecting adversely on a CPA's fitness to represent himself or herself as a CPA((.));

(((ii))) (b) An order of a federal, state, ((or)) local or foreign jurisdiction regulatory body finding the CPA to have committed an act of negligence, fraud, or dishonesty or other act reflecting adversely on a CPA's fitness to represent himself or herself as a CPA;

(c) Cancellation, revocation, suspension, or refusal to renew the right to practice as a CPA by any other state for any cause other than failure to pay a fee or to meet the requirements of continuing education in the other state; or

(d) Suspension or revocation of the right to practice before any state or federal agency.

(5) Conviction of a crime or an act constituting a crime under: Federal law; the laws of Washington state; or the laws of another state, and which, if committed within this state, would have constituted a crime under the laws of this state.

(((3))) (6) A conflict of interest((, within the meaning of RCW 18.04.055(2), includes but is not limited to)) such as:

(a) Self dealing as a trustee, including, but not limited to:

(i) Investing trust funds in entities controlled by or related to the trustee;

(ii) Borrowing from trust funds, with or without disclosure; and

(iii) Employing persons ((or entities related to the trustee)) related to the trustee or entities in which the trust has a beneficial interest to provide services to the trust (unless specifically authorized by the trust creation document)((;)).

(b) Borrowing funds from ((any)) a client unless the client is in the business of making loans of the type obtained by the ((licensee)) certificateholder and the loan terms are not more favorable than loans extended to other persons of similar credit worthiness.

(((4))) (7) A violation of ((a rule of professional conduct promulgated by the board, within the meaning of RCW 18.04.295(4), includes but is not limited to:)) the Public Accountancy Act or failure to comply with a board rule contained in chapter 4-25 WAC.

(((a))) (8) Violation of one or more of the rules of professional conduct included in chapter 4-25 WAC((;

(b) Violation of one or more of the administrative rules included in chapter 4-25 WAC;

(c))) or concealing another's violation of the Public Accountancy Act or board rules.

(9) Failure to cooperate with the board by failing to:

(a) Furnish any papers or documents requested or ordered to produce by the board;

(b) Furnish in writing a full and complete explanation related to a complaint as requested by the board;

(c) Respond to an inquiry of the board;

(d) Respond to subpoenas issued by the board, whether or not the recipient of the subpoena is the accused in the proceeding.

(10) A CPA's adjudication as mentally incompetent is prima facie evidence that the CPA lacks the professional competence required by the rules of professional conduct.

[Statutory Authority: RCW 18.04.055 and 18.04.295.      94-23-070, § 4-25-910, filed 11/15/94, effective 12/16/94.]

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