WAC 4-25-410

WAC 4-25-410   Definitions.  For purposes of these rules the following terms have the meanings indicated unless a different meaning is otherwise clearly provided in these rules:

     (1) "Act" means the Public Accountancy Act codified as chapter 18.04 RCW.

     (2) "Active individual participant" means a natural person whose primary occupation is at the firm or affiliated entity's business. An individual whose primary source of income from the business entity is provided as a result of passive investment is not an active individual participant.

     (3) "Affiliated entity" means any entity, entities or persons that directly or indirectly through one or more relationships influences or controls, is influenced or controlled by, or is under common influence or control with other entities or persons. This definition includes, but is not limited to, parents, subsidiaries, investors or investees, coinvestors, dual employment or management in joint ventures or brother-sister entities.

     (4) "Applicant" means an individual who has applied:

     (a) To take the CPA exam;

     (b) For a CPA license, a CPA firm license, registration as a resident nonlicensee owner, or practice privileges;

     (c) To renew a CPA license, a CPA-Inactive certificate, a CPA firm license, or registration as a resident nonlicensee firm owner;

     (d) To reinstate a CPA license, a CPA-Inactive certificate, or registration as a resident nonlicensee firm owner.

     (5) "Attest services" are services performed by a licensee in accordance with:

     (a) Statements on Auditing Standards and related Auditing Interpretations issued by the American Institute of Certified Public Accountants (AICPA);

     (b) Statements on Standards for Accounting and Review Services and related Accounting and Review Services Interpretations issued by the AICPA;

     (c) Statements on Standards for Attestation Engagements and related Attestation Engagements Interpretations issued by the AICPA; or

     (d) Auditing standards issued by the Public Company Accounting Oversight Board (PCAOB).

     (6) "Audit," "review," and "compilation" are terms reserved for use by licensees and individuals granted practice privileges under the act.

     (7) "Board" means the board of accountancy created by RCW 18.04.035.

     (8) "Certificate" means a certificate as a CPA-Inactive issued in the state of Washington prior to July 1, 2001, as authorized by the act, unless otherwise defined in rule.

     (9) "Certificateholder" means the holder of a valid CPA-Inactive certificate where the individual is not a licensee and is prohibited from practicing public accounting.

     (10) "Client" means the person or entity that retains a CPA firm, a CPA, the CPA's firm, or a firm owner, an affiliated entity, or the owner of an affiliated entity through other than an employer/employee relationship.

     (11) "Commissions and referral fees" are compensation arrangements where:

     (a) The primary contractual relationship for the product or service is not between the client and the CPA firm, the CPA, the CPA's firm, or a firm owner;

     (b) The CPA firm, the CPA, the CPA's firm, or a firm owner is not primarily responsible to the client for the performance or reliability of the product or service;

     (c) The CPA firm, the CPA, the CPA's firm, or a firm owner adds no significant value to the product or service; or

     (d) A third party instead of the client pays the CPA firm, the CPA, the CPA's firm, or a firm owner for the products or services.

     (12) "Contingent fees" are fees established for the performance of any service pursuant to an arrangement in which no fee will be charged unless a specified finding or result is attained, or in which the amount of the fee is otherwise dependent upon the finding or result of such service.

     (13) "CPA" or "certified public accountant" means a natural person holding a CPA license to practice public accounting recognized in the state of Washington, including a person granted practice privileges pursuant to RCW 18.04.350(2).

     (14) "CPA-Inactive" means a natural person holding a CPA-Inactive certificate recognized in the state of Washington. An individual holding a CPA-Inactive certificate is prohibited from practicing public accounting and may only use the CPA-Inactive title if they are not offering accounting, tax, tax consulting, management advisory, or similar services to the public.

     (15) "CPE" means continuing professional education.

     (16) "Entering the state" means an individual is practicing public accounting in the state of Washington and that individual spends more than ten percent of his or her total work hours on activities conducted within the state of Washington, maintains an office or workstation in the state of Washington or advertises to provide his or her services within the state of Washington.

     (17) "Firm" means a sole proprietorship, a corporation, or a partnership. "Firm" also means a limited liability company formed under chapter 25.15 RCW.

     (18) "Generally accepted accounting principles" (GAAP) is an accounting term that encompasses the conventions, rules, and procedures necessary to define accepted accounting practice at a particular time. It includes not only broad guidelines of general application, but also detailed practices and procedures. Those conventions, rules, and procedures provide a standard by which to measure financial presentations.

     (19) "Generally accepted auditing standards" (GAAS) are guidelines and procedures, promulgated by the AICPA, for conducting individual audits of historical financial statements.

     (20) "Holding out" means any representation to the public by the use of restricted titles as set forth in RCW 18.04.345 by a person or firm that the person or firm holds a license or practice privileges under the act and that the person or firm offers to perform any professional services to the public as a licensee. "Holding out" shall not affect or limit a person or firm not required to hold a license under the act from engaging in practices identified in RCW 18.04.350.

     (21) "Inactive" means the person held a valid certificate on June 30, 2001, has not met the current requirements of licensure and has been granted CPA-Inactive certificateholder status through the renewal process established by the board. A CPA-Inactive may not practice public accounting nor may the individual use the CPA-Inactive title if they are offering accounting, tax, tax consulting, management advisory, or similar services to the public.

     (22) "Independence" means an absence of relationships that impair a licensee's impartiality and objectivity in rendering attest services.

     (23) "Interactive self-study program" means a CPE program that provides feedback throughout the course.

     (24) "IRS" means Internal Revenue Service.

     (25) "License" means a license to practice public accountancy issued to an individual or a firm under the act.

     (26) "Licensee" means an individual or firm holding a valid license to practice public accountancy issued under the act.

     (27) "Manager" means a manager of a limited liability company licensed as a firm under the act.

     (28) "NASBA" means the National Association of State Boards of Accountancy.

     (29) "Natural person" means a living, human being.

     (30) "Nonlicensee owner" means a CPA firm owner who is not licensed in any state to practice public accountancy.

     (31) "PCAOB" means Public Company Accounting Oversight Board.

     (32) "Peer review" means a study, appraisal, or review of one or more aspects of the attest work of a licensee or licensed firm in the practice of public accountancy, by a person or persons who hold licenses and who are not affiliated with the person or firm being reviewed, including a peer review, or any internal review or inspection intended to comply with quality control policies and procedures, but not including the "quality assurance review" under RCW 18.04.025(14).

     (33) "Practice privileges" means an individual:

     • Has a principal place of business outside of Washington state;

     • Is licensed to practice public accounting in another state;

     • Has notified the board of intent to enter the state;

     • Meets the statutory criteria for a grant of privileges;

     • Is subject to discipline in the state of Washington; and

     • Must comply with the act and all board rules applicable to Washington state licensees to retain the privilege.

     (34) "Principal place of business" means a single fixed location designated by the individual from which the individual directs, controls, and coordinates the majority of his or her business activities.

     (35) "Public practice" or the "practice of public accounting" means performing or offering to perform by a person or firm holding itself out to the public as a licensee, or as an individual holding practice privileges, for a client or potential client, one or more kinds of services involving the use of accounting or auditing skills, including the issuance of "audit reports," "review reports," or "compilation reports" on financial statements, or one or more kinds of management advisory, or consulting services, or the preparation of tax returns, or the furnishing of advice on tax matters. The "practice of public accounting" shall not include practices that are permitted under the provisions of RCW 18.04.350(6) by persons or firms not required to be licensed under the act.

     (36) "Quality assurance review or QAR" is the process, established by and conducted at the direction of the board, of study, appraisal, or review of one or more aspects of the attest work of a licensee or licensed firm in the practice of public accountancy, by a person or persons who hold licenses and who are not affiliated with the person or firm being reviewed.

     (37) "Reciprocity" means board recognition of licenses, permits, certificates or other public accounting credentials of another jurisdiction that the board will rely upon in full or partial satisfaction of licensing requirements.

     (38) "Referral fees" see definition of "commissions and referral fees" in subsection (11) of this section.

     (39) "Reports on financial statements" means any reports or opinions prepared by licensees, based on services performed in accordance with generally accepted auditing standards, standards for attestation engagements, or standards for accounting and review services, as to whether the presentation of information used for guidance in financial transactions or for accounting for or assessing the status or performance of an entity, whether public, private, or governmental, conforms with generally accepted accounting principles or other comprehensive bases of accounting. "Reports on financial statements" does not include services referenced in RCW 18.04.350(6) provided by persons not holding a license under the act.

     (40) "Representing oneself" for the purposes of RCW 18.04.295(2) and WAC 4-25-910(3), means having a license, practice privilege, certificate or registration that entitles the holder to use the title "CPA," "CPA-Inactive," or be a nonlicensee firm owner.

     (41) "Rules of professional conduct" means rules adopted by the board to govern the conduct of CPAs and CPA firms while representing themselves to others as CPAs. These rules also govern the conduct of CPA-Inactive certificateholders, nonlicensee firm owners, and persons granted practice privileges pursuant to RCW 18.04.350(2).

     (42) "SEC" means the Securities and Exchange Commission.

     (43) "State" includes the states and territories of the United States, including the District of Columbia, Puerto Rico, Guam, and the United States Virgin Islands.

     (44) "Statements on auditing standards (SAS)"are interpretations of the generally accepted auditing standards and are issued by the Auditing Standards Board of the AICPA. Licensees are required to adhere to these standards in the performance of audits of financial statements.

     (45) "Statements on standards for accounting and review services (SSARS)" are standards, promulgated by the AICPA, to give guidance to licensees who are associated with the financial statements of nonpublic companies and issue compilation or review reports.

     (46) "Statements on standards for attestation engagements (SSAE)" are guidelines, promulgated by the AICPA, for use by licensees in attesting to assertions involving matters other than historical financial statements and for which no other standards exist.

[Statutory Authority: RCW 18.04.055. 05-01-137, § 4-25-410, filed 12/16/04, effective 1/31/05; 03-24-033, § 4-25-410, filed 11/25/03, effective 12/31/03. Statutory Authority: RCW 18.04.055(16). 02-04-064, § 4-25-410, filed 1/31/02, effective 3/15/02. Statutory Authority: RCW 18.04.055(11). 01-11-124, § 4-25-410, filed 5/22/01, effective 6/30/01; 98-12-020, § 4-25-410, filed 5/27/98, effective 6/27/98; 94-23-071, § 4-25-410, filed 11/15/94, effective 12/16/94.]

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