Source: http://lawfilesext.leg.wa.gov/law/wsr/2010/24/10-24-039.htm
Timestamp: 2020-07-11 12:25:49
Document Index: 88942385

Matched Legal Cases: ['§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4', '§ 4']

WSR 10-24-039
[ Filed November 23, 2010, 12:32 p.m. ]
Supplemental Notice to WSR 10-18-090.
Title of Rule and Other Identifying Information:
• Amend and decodify WAC 4-25-640 What are the requirements concerning records and clients confidential information?
• New WAC 4-30-051 What are the requirements concerning client records, including response to requests by clients and former clients for records?
• Amend and decodify WAC 4-25-670 What enforcement actions must be reported to the board?
Hearing Location(s): Washington State Criminal Justice Training Commission, Classroom # C-220, 19010 First Avenue South, Burien, WA 98148, on January 27, 2011, at 9:00 a.m.
Date of Intended Adoption: January 27, 2011.
Submit Written Comments to: Cheryl M. Sexton, Rules Coordinator, P.O. Box 9131, Olympia, WA 98507-9131, e-mail cheryls@cpaboard.wa.gov, fax (360) 664-9190, by January 18, 2011.
Assistance for Persons with Disabilities: Contact Cheryl Sexton by January 20, 2011, TTY (800) 833-6384 or (360) 664-9194.
WAC Section: The Suggested Revision: New WAC Section: Grouping
4-25-640 • Renumbered to support regrouping into like functions;
• Separated into two rules - WAC 4-30-050 for the handling of client records that the credential person holds and safeguards and WAC 4-20-051 that identifies which of those records belong to the client.
Revisions to original proposal heard October 29, 2010: None. 4-30-050 Ethics and Prohibited Practices
New • Provides definitions for terms related to client records for purposes of this section and WAC 4-25-050 to clarify which records belong to the client and which records belong to the credentialed person.
• Clarifies the credentialed person's responsibilities concerning the return of client records.
• Expands the rule to include requirements regarding electronic records.
• Conforms rule to AICPA Rule 501.
Changes to original proposal heard October 29, 2010:
• Subsection (1)(a) - deleted "or prepared by" Reason: To conform to the wording of AICPA Rule 501. This wording also created some confusion relating to client prepared analytical schedules that should be considered proprietary.
• Subsection (1)(c) - included", closing, combining or consolidating" after "adjusting" in the second sentence. Deleted "depreciation and amortization schedules, schedules supporting general ledger accounts, and other schedules supporting data in a report or tax return" in the second sentence. Added "that are" prior to "produced" in the second sentence. Reason: To conform to the wording of Rule 501. The additional schedules were previously included to help provide clarification. They did not produce that result.
• Subsection (1)(d) - deleted "and" prior to the word "analysis" and added "," after analysis, and replace [replaced] "other proprietary programs prepared by" with "schedules prepared by the client at the request of the." Reason: To conform to the wording of Rule 501. The other terminology was previously included to help provide clarification. It did not produce the desired result.
• Subsection (2)(a) - changed the word "should" to "must." Reason: Although AICPA Rule 501 states that such records "should" be returned to the client, current WAC 4-25-640 states in subsection (5) that such records "must" be returned to the client. Conforming to Rule 501 would delete the protection currently provided to Washington citizens under the existing WAC and would not be in the public interest.
• Subsection (2)(b) - changed the word "should" to "must." Reason: See above. 4-30-051 Ethics and Prohibited Practices
• Subsection (2)(c) - changed the word "should" to "must." Reason: See above.
• Subsection (4) - renumbered as (d) under subsection (2). Also deleted "in technologically based electronic formats (or technologically based electronic systems protected by copyright)" and replaced "every" with "a" prior to the word "reasonable" and deleted "technologically based electronic" in the first sentence. Also deleted the second sentence. Reason: Licensees found the references to electronic format and the definition of "reasonable" in the second sentence to be confusing. The remaining language in this section provides a clearer attempt to demonstrate the intent of the rule in protecting the public interest from punitive transition costs and allow them to prepare future reports prepared on a basis consistent with prior years.
• Subsection (5) - renumbered to subsection (4). Also replaced "client records" with "records indicated in (1)(a), (1)(b) and (1)(c)." Reason: The use of the term "client records" inadvertently created a new term that was not defined. This change makes it clear which previously defined records are being referenced.
• Subsection (6) - deleted. Reason: Wording in the Subsection was in conflict with other sections of the proposed WAC. It also created confusion with respect to which records are subject to client access.
• Subsection (7) - renumbered as subsection (5). Reason: Changes to prior subsections.
• Subsection (8) - renumbered as subsection (6). Reason: Changes to prior subsections.
• Subsection (9) - renumbered as subsection (7). Reason: Changes to prior subsections.
• Subsection (7)(b) - renumbered as (7)(c). Reason: See next change below.
• New Subsection (7)(b) - Added "Provide the requested records in any format usable by the client." Reason: This language is included in Rule 501. Adding it to the WAC conforms the WAC to AICPA Rule 501.
• Subsection (10) - renumbered as subsection (8). Reason: Changes to prior subsections.
• Subsection (11) - renumbered as subsection (9). Reason: Changes to prior subsections.
• Subsection (12) - renumbered as subsection (10). Reason: Changes to prior subsections.
4-25-670 • Renumbered to support regrouping into like functions.
• Group with other rules related to board administration.
• Adds clarifying language to subsection (1).
Revisions to original proposal heard October 29, 2010:
• Deletes subsection (2) to remove any perception of preferential treatment to multiple owner firms. Subsection (3) remains to ensure the reader understands that CPA firms are responsible to report enforcement actions against a firm and individual CPAs are responsible to report enforcement actions against the individual. 4-30-036 Board Administration
• Reflect concerns expressed by stakeholders.
Reasons Supporting Proposal: The board previously received written and oral testimony on these proposals. After considering the testimony, the board revised the original proposals to reflect the comments received. The board is now presenting those revisions for public comment.
The board's goal with all of its rule proposals is to:
Statutory Authority for Adoption: For WAC 4-25-640 and 4-30-051 is RCW 18.04.055(2), 18.04.390 (4)(b), 18.04.405(1); and for WAC 4-25-670 is RCW 18.04.195 (13)(b), 18.04.215 (9)(b).
Statute Being Implemented: For WAC 4-25-640 and 4-30-051 is RCW 18.04.055(2), 18.04.390 (4)(b), 18.04.405(1); and for WAC 4-25-670 is RCW 18.04.195 (13)(b), 18.04.215 (9)(b).
Name of Proponent: Primarily the Washington state board of accountancy, governmental.
Name of Agency Personnel Responsible for Drafting, Implementation and Enforcement: Richard C. Sweeney, CPA, Olympia, Washington, (360) 586-0163.
No small business economic impact statement has been prepared under chapter 19.85 RCW. The proposed rule(s) will not have more than minor economic impact on business.
November 23, 2011 [2010]
OTS-3785.2
WAC 4-25-640 What are the requirements concerning records and clients confidential information? (1) Client: The term "client" as used throughout ((this section)) WAC 4-30-050 and 4-30-051 includes former and current clients. For purposes of this section, a client relationship has been formed when confidential information has been disclosed by a prospective client in an initial interview to obtain or provide professional services.
(2) ((Property of the licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner: In the absence of an express agreement between a licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner and the client to the contrary, all statements, records, schedules, working papers, and memoranda made by a licensee incident to or in the course of professional service to clients, except reports submitted by a licensee, are the property of the licensee.
(3))) Sale or transfer of client records: No statement, record, schedule, working paper, or memorandum, including electronic records, may be sold, transferred, or bequeathed without the consent of the client or his or her personal representative or assignee, to anyone other than one or more surviving partners, shareholders, or new partners or new shareholders of the licensee, partnership, limited liability company, or corporation, or any combined or merged partnership, limited liability company, or corporation, or successor in interest.
(((4))) (3) Confidential client communication or information: Licensees, CPA-Inactive certificate holders, nonlicensee firm owners((, or employees of such persons)) must not without the consent of the client or the heirs, successors ((or personal)), authorized representatives or employee of the client disclose any confidential communication or information pertaining to the client obtained in the course of performing professional services.
(4) This rule does not:
(((5) Client records: Licensees, CPA-Inactive certificate holders, nonlicensee firm owners, and employees of such persons must furnish to their client or heirs, successors or personal representatives, upon request and reasonable notice:
(a) A copy of records, schedules, and electronic documents of those persons, to the extent that such records and schedules would ordinarily constitute part of the client's records and are not otherwise available to the client; and
(b) Any accounting or other records belonging to, or obtained from or on behalf of, the client, that the licensee, CPA-Inactive certificate holder, or nonlicensee firm owner, or employees of such persons removed from the client's premises or received for the client's account, including electronic documents; but such persons may make and retain copies of such documents of the client when they form the basis for the professional services offered or rendered by those persons.
(c) Licensees, CPA-Inactive certificate holders, nonlicensee firm owners, and/or employees of such persons must not refuse to return client records, including electronic documents, pending client payment of outstanding fees.
(6) Audit and review record retention requirements: For a period of seven years after a licensee concludes an audit or review such persons must retain the following records and documents, including electronic records unless hard copies of such exist:
(d) Records documenting conclusions reached by the licensee in the audit or review engagement.))
[Statutory Authority: RCW 18.04.055(2), 18.04.390 (4)(b), 18.04.405(1). 08-18-016, § 4-25-640, filed 8/25/08, effective 9/25/08; 05-01-137, § 4-25-640, filed 12/16/04, effective 1/31/05; 03-24-033, § 4-25-640, filed 11/25/03, effective 12/31/03. Statutory Authority: RCW 18.04.055(2). 02-22-082, § 4-25-640, filed 11/5/02, effective 12/31/02. Statutory Authority: RCW 18.40.055 [18.04.055]. 93-22-046, § 4-25-640, filed 10/28/93, effective 11/28/93.]
WAC 4-25-670 What enforcement actions must be reported to the board? (1) A licensee, CPA-Inactive certificate holder, or nonlicensee firm owner must notify the board, of the following matters, in the manner prescribed by the board, within thirty days of the issuance of:
(2) ((Individual licensees and sole proprietors are to report action pursuant to subsection (1) of this section taken against the individual's license and/or the license of the sole proprietorship.
(3))) Licensed CPA firms with more than one licensed owner are not required to report on action taken against owners, principals, partners, or employees.
(((4))) (3) If you hold a license or CPA-Inactive certificate issued through the foreign reciprocity provisions of the act, you must notify the board of any investigations undertaken, or sanctions imposed, by a foreign credentialing body against your foreign credential within thirty days of receiving notice that an investigation has begun or a sanction was imposed.
[Statutory Authority: RCW 18.04.195 (13)(b), 18.04.215 (9)(b). 08-18-016, § 4-25-670, filed 8/25/08, effective 9/25/08. Statutory Authority: RCW 18.04.195 (10)(b) and 18.04.215 (9)(b). 05-01-137, § 4-25-670, filed 12/16/04, effective 1/31/05; 03-24-033, § 4-25-670, filed 11/25/03, effective 12/31/03.]
4-25-640 4-30-050
4-25-670 4-30-036
OTS-3786.2
WAC 4-30-051 What are the requirements concerning client records, including response to requests by clients and former clients for records? (1) The following terms are defined below solely for use with this section:
(4) Licensees, CPA-Inactive certificate holders, nonlicensee firm owners, and/or employees of such persons must not refuse to return or provide records indicated in subsection (1)(a), (b), and (c) of this section including electronic documents, pending client payment of outstanding fees.
(5) Once the licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner and employees of such persons has complied with the requirements in subsection (2) of this section, he or she is under no ethical obligation to comply with any subsequent requests to again provide such records or copies of such records. However, if subsequent to complying with a request, a client experiences a loss of records due to a natural disaster or an act of war, the licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner should comply with an additional request to provide such records.
(6) Licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner working papers are the licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner property and need not be provided to the client under provisions of this section; however, such requirements may be imposed by state and federal statutes and regulations, and contractual agreements.
(7) In connection with any request for client-provided records, client records prepared by the licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner and employees of such persons, or supporting records, the licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner may:
(8) Where a licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner is required to return or provide records to the client, the licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner should comply with the client's request as soon as practicable but, absent extenuating circumstances, no later than forty-five days after the request is made. The fact that the statutes of the state in which the licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner practices grants the licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner a lien on certain records in his or her custody or control does not relieve the licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner of his or her obligation to comply with this section.
(9) A licensee, CPA-Inactive certificate holder, and/or nonlicensee firm owner is under no obligation to retain records for periods that exceed applicable professional standards, state and federal statutes and regulations, and contractual agreements relating to the service(s) performed.
(10) Audit and review record retention requirements: For a period of seven years after a licensee concludes an audit or review such persons must retain the following records and documents, including electronic records unless hard copies of such exist: