S-3633.1
SENATE BILL 5887
State of Washington 68th Legislature 2024 Regular Session
By Senators Stanford, Dozier, Conway, and Mullet
Prefiled 12/20/23. Read first time 01/08/24. Referred to Committee
on Business, Financial Services, Gaming & Trade.
1 AN ACT Relating to modifying the public accountancy act; amending
2 RCW 18.04.015, 18.04.025, 18.04.105, 18.04.180, 18.04.183, 18.04.195,
3 18.04.205, 18.04.215, 18.04.295, 18.04.345, 18.04.350, 18.04.380,
4 18.04.390, 18.04.405, and 18.04.430; and decodifying RCW 18.04.910
5 and 18.04.911.
6 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
7 Sec. 1. RCW 18.04.015 and 2022 c 85 s 1 are each amended to read
8 as follows:
9 (((1))) It is the policy of this state and the purpose of this
10 chapter:
11 (((a))) (1) To promote the dependability of information which is
12 used for guidance in financial transactions or for accounting for or
13 assessing the status or performance of commercial and noncommercial
14 enterprises, whether public, private or governmental; and
15 (((b))) (2) To protect the public interest by requiring that:
16 (((i))) (a) Persons who hold themselves out as licensees conduct
17 themselves in a competent, ethical, and professional manner;
18 (((ii))) (b) A public authority be established that is competent
19 to prescribe and assess the qualifications of certified public
20 accountants;
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 1 (((iii))) (c) Persons other than licensees refrain from using the
2 words "audit," "review," and "compilation" when designating a report
3 customarily prepared by someone knowledgeable in accounting;
4 (((iv))) (d) A public authority be established to provide for
5 consumer alerts and public protection information to be published
6 regarding persons or firms who violate the provisions of chapter 294,
7 Laws of 2001 or board rule and to provide general consumer protection
8 information to the public; and
9 (((v))) (e) The use of accounting titles likely to confuse the
10 public be prohibited. However as of June 30, 2024, an individual
11 holding a CPA-inactive certificate must be designated as a licensee
12 with an inactive status.
13 (((2) The purpose of chapter 294, Laws of 2001 is to make
14 revisions to chapter 234, Laws of 1983 and chapter 103, Laws of 1992
15 to: Fortify the public protection provisions of chapter 294, Laws of
16 2001; establish one set of qualifications to be a licensee; revise
17 the regulations of certified public accountants; make revisions in
18 the ownership of certified public accounting firms; assure to the
19 greatest extent possible that certified public accountants from
20 Washington state are substantially equivalent with certified public
21 accountants in other states and can therefore perform the duties of
22 certified public accountants in as many states and countries as
23 possible; assure certified public accountants from other states and
24 countries have met qualifications that are substantially equivalent
25 to the certified public accountant qualifications of this state; and
26 clarify the authority of the board of accountancy with respect to the
27 activities of persons holding licenses and certificates under this
28 chapter. It is not the intent of chapter 294, Laws of 2001 to in any
29 way restrict or limit the activities of persons not holding licenses
30 or certificates under this chapter except as otherwise specifically
31 restricted or limited by chapter 234, Laws of 1983 and chapter 103,
32 Laws of 1992.
33 (3) A purpose of chapter 103, Laws of 1992, revising provisions
34 of chapter 234, Laws of 1983, is to clarify the authority of the
35 board of accountancy with respect to the activities of persons
36 holding certificates under this chapter. Furthermore, it is not the
37 intent of chapter 103, Laws of 1992 to in any way restrict or limit
38 the activities of persons not holding certificates under this chapter
39 except as otherwise specifically restricted or limited by chapter
40 234, Laws of 1983.))
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 1 Sec. 2. RCW 18.04.025 and 2022 c 85 s 2 are each amended to read
2 as follows:
3 Unless the context clearly requires otherwise, the definitions in
4 this section apply throughout this chapter.
5 (1) "Attest" means providing the following services:
6 (a) Any audit or other engagement to be performed in accordance
7 with the statements on auditing standards;
8 (b) Any review of a financial statement to be provided in
9 accordance with the statements on standards for accounting and review
10 services;
11 (c) Any engagement to be performed in accordance with the
12 statements on standards for attestation engagements; and
13 (d) Any engagement to be performed in accordance with the public
14 company accounting oversight board auditing standards.
15 (2) "Board" means the board of accountancy created by RCW
16 18.04.035.
17 (3) "Certificate" means an alternative license type issued by the
18 board indicating that the certificate holder had passed the CPA
19 examination, but has not verified the certificate holder's experience
20 and was not fully licensed as a certified public accountant to
21 practice public accounting. The board must allow renewal of
22 certificates until June 30, 2024, at which time any then current and
23 valid certificates automatically convert to a CPA license in an
24 inactive status. As of July 1, 2024, board-issued certificates are no
25 longer a recognized form of licensure.
26 (4) "Certified public accountant" or "CPA" means a person holding
27 a certified public accountant license or certificate.
28 (5) "Compilation" means providing a service to be performed in
29 accordance with statements on standards for accounting and review
30 services that is presenting in the form of financial statements,
31 information that is the representation of management (owners) without
32 undertaking to express any assurance on the statements.
33 (6) "CPE" means continuing professional education.
34 (7) "Firm" or "CPA firm" means a sole proprietorship, a
35 corporation, ((or)) a partnership, or any other form of organization
36 issued a license under RCW 18.04.195. "Firm" or "CPA firm" also means
37 a limited liability company formed under chapter 25.15 RCW.
38 (8) "Holding out" means any representation to the public by the
39 use of restricted titles as set forth in RCW 18.04.345 by a person or
40 firm that the person or firm holds a license under this chapter and
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 1 that the person or firm offers to perform any professional services
2 to the public as a licensee. "Holding out" shall not affect or limit
3 a person or firm not required to hold a license under this chapter
4 from engaging in practices identified in RCW ((18.04.350)) 18.04.345.
5 (9) "Inactive" means the status of a license that is prohibited
6 from practicing public accounting. A person holding an inactive
7 license may apply to the board to return the license to an active
8 status through an approval process established by the board.
9 (10) "Individual" means a living, human being.
10 (11) "License" means a license to practice public accountancy
11 issued to an individual under this chapter, or a license issued to a
12 firm under this chapter.
13 (12) "Licensee" means the holder of a license to practice public
14 accountancy issued under this chapter.
15 (13) "Manager" means a manager of a limited liability company
16 licensed as a firm under this chapter.
17 (14) "NASBA" means the national association of state boards of
18 accountancy.
19 (15) "Peer review" means a study, appraisal, or review of one or
20 more aspects of the attest or compilation work of a licensee or
21 licensed firm in the practice of public accountancy, by a person or
22 persons who hold licenses and who are not affiliated with the person
23 or firm being reviewed, including a peer review, or any internal
24 review or inspection intended to comply with quality control policies
25 and procedures, but not including a quality assurance review.
26 (16) "Person" means any individual, nongovernmental organization,
27 or business entity regardless of legal form, including a sole
28 proprietorship, firm, partnership, corporation, limited liability
29 company, association, or not-for-profit organization, and including
30 the sole proprietor, partners, members, and, as applied to
31 corporations, the officers.
32 (17) "Practice of public accounting" means performing or offering
33 to perform by a person or firm holding itself out to the public as a
34 licensee, for a client or potential client, one or more kinds of
35 services involving the use of accounting or auditing skills,
36 including the issuance of "reports," or one or more kinds of
37 management advisory, or consulting services, or the preparation of
38 tax returns, or the furnishing of advice on tax matters. "Practice of
39 public accounting" shall not include practices that are permitted
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 1 under the provisions of RCW ((18.04.350(10))) 18.04.345(9)(b) by
2 persons or firms not required to be licensed under this chapter.
3 (18) "Practice privilege" means an authorization permitting the
4 practice of public accounting in Washington under RCW 18.04.350.
5 (19) "Principal place of business" means the office location
6 designated by the licensee for purposes of substantial equivalency
7 and reciprocity.
8 (((19))) (20) "Quality assurance review" means a process
9 established by and conducted at the direction of the board of study,
10 appraisal, or review of one or more aspects of the attest or
11 compilation work of a licensee or licensed firm in the practice of
12 public accountancy, by a person or persons who hold licenses and who
13 are not affiliated with the person or firm being reviewed.
14 (((20))) (21) "Report," when used with reference to any attest or
15 compilation service, means an opinion, report, or other form of
16 language that states or implies assurance as to the reliability of
17 the attested information or compiled financial statements and that
18 also includes or is accompanied by any statement or implication that
19 the person or firm issuing it has special knowledge or competence in
20 the practice of public accounting. Such a statement or implication of
21 special knowledge or competence may arise from use by the issuer of
22 the report of names or titles indicating that the person or firm is
23 involved in the practice of public accounting, or from the language
24 of the report itself. "Report" includes any form of language which
25 disclaims an opinion when such form of language is conventionally
26 understood to imply any positive assurance as to the reliability of
27 the attested information or compiled financial statements referred to
28 and/or special competence on the part of the person or firm issuing
29 such language; and it includes any other form of language that is
30 conventionally understood to imply such assurance and/or such special
31 knowledge or competence. "Report" does not include services
32 referenced in RCW ((18.04.350 (10) or (11))) 18.04.345(9) (b) and (c)
33 provided by persons not holding a license under this chapter as
34 provided in RCW ((18.04.350(14))) 18.04.345(2)(b).
35 (((21))) (22) "Review committee" means any person carrying out,
36 administering or overseeing a peer review authorized by the reviewee.
37 (((22))) (23) "Rule" means any rule adopted by the board under
38 authority of this chapter.
39 (((23) "Sole proprietorship" means a legal form of organization
40 owned by one person meeting the requirements of RCW 18.04.195.))
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 1 (24) "State" includes the states of the United States, the
2 District of Columbia, Puerto Rico, Guam, the United States Virgin
3 Islands, and the Commonwealth of the Northern Mariana Islands at such
4 time as the board determines that the Commonwealth of the Northern
5 Mariana Islands is issuing licenses under the ((substantially
6 equivalent)) substantial equivalency standards in RCW
7 18.04.350(((2))) (1)(a).
8 (25) "Substantial equivalency" ((or "substantially equivalent"))
9 means a determination by the board or its designee that the
10 education, examination, and experience requirements contained in the
11 statutes and administrative rules of another jurisdiction are
12 comparable to or exceed the education, examination, and experience
13 requirements contained in this chapter or that an individual CPA's
14 education, examination, and experience qualifications are comparable
15 to or exceed the education, examination, and experience requirements
16 contained in this chapter. In ascertaining substantial equivalency
17 ((and substantially equivalent)) as used in this chapter the board
18 shall take into account the qualifications without regard to the
19 sequence in which experience, education, or examination requirements
20 were attained.
21 Sec. 3. RCW 18.04.105 and 2022 c 85 s 5 are each amended to read
22 as follows:
23 (1) A license to practice public accounting shall be granted by
24 the board to any person:
25 (a) Who is of good character. Good character, for purposes of
26 this section, means lack of a history of dishonest or felonious acts.
27 The board may refuse to grant a license on the ground of failure to
28 satisfy this requirement only if there is a substantial connection
29 between the lack of good character of the applicant and the
30 professional and ethical responsibilities of a licensee and if the
31 finding by the board of lack of good character is supported by a
32 preponderance of evidence. When an applicant is found to be
33 unqualified for a license because of a lack of good character, the
34 board shall furnish the applicant a statement containing the findings
35 of the board and a notice of the applicant's right of appeal;
36 (b) Who has met the educational standards established by rule as
37 the board determines to be appropriate;
38 (c) Who has passed an examination;
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 1 (d) Who has ((had one year of experience)) met the experience
2 requirements established by rule by the board as it deems
3 appropriate, which is gained:
4 (i) Through the use of accounting, issuing reports, management
5 advisory, financial advisory, tax, tax advisory, or consulting
6 skills;
7 (ii) While employed in government, industry, academia, or public
8 practice; and
9 (iii) Meeting the competency requirements in a manner as
10 determined by the board to be appropriate and established by board
11 rule; and
12 (e) Who has paid appropriate application fees as established by
13 rule by the board.
14 (2) The examination described in subsection (1)(c) of this
15 section shall test the applicant's knowledge of the subjects of
16 accounting and auditing, and other related fields the board may
17 specify by rule. The time for holding the examination is fixed by the
18 board and may be changed from time to time. The board shall prescribe
19 by rule the methods of applying for and taking the examination,
20 including methods for grading examinations and determining a passing
21 grade required of an applicant for a license. The board shall to the
22 extent possible see to it that the grading of the examination, and
23 the passing grades, are uniform with those applicable to all other
24 states. The board may make use of all or a part of the uniform
25 certified public accountant examination and advisory grading service
26 of the American Institute of Certified Public Accountants and may
27 contract with third parties to perform administrative services with
28 respect to the examination as the board deems appropriate to assist
29 it in performing its duties under this chapter. The board shall
30 establish by rule provisions for transitioning to a new examination
31 structure or to a new media for administering the examination.
32 (3) The board shall charge each applicant an examination fee for
33 the initial examination or for reexamination. The applicable fee
34 shall be paid ((by the person)) at the time ((he or she)) an
35 individual applies for examination, reexamination, or evaluation of
36 educational qualifications. Fees for examination, reexamination, or
37 evaluation of educational qualifications shall be determined by the
38 board under this chapter. There is established in the state treasury
39 an account to be known as the certified public accountants' account.
40 All fees received from candidates to take any or all sections of the
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 1 certified public accountant examination shall be used only for costs
2 related to the examination.
3 (4) Individuals whose certificates are current and valid on June
4 30, 2024, will automatically be converted to a licensee in an
5 inactive status. To activate a license and become an active licensee,
6 the individual must apply to the board to activate ((his or her)) the
7 license and ((must meet the following requirements)):
8 (a) For applications to activate, the licensees must submit to
9 the board documentation that they ha