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 an individual 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 national uniform CPA examination;

     (b) For an initial individual license, an initial firm license, or initial registration as a resident nonlicensee owner;

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

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

     (5) "Attest" means providing the following financial statement services:

     (a) Any audit or other engagement to be performed in accordance with the statements on auditing standards;

     (b) Any review of a financial statement to be provided in accordance with the statements on standards for accounting and review services;

     (c) Any examination of prospective financial information to be performed in accordance with the statements on standards for attestation engagements; and

     (d) Any engagement to be performed in accordance with the public company accounting oversight board auditing standards.

     (6) "Audit," "review," and "compilation" are terms reserved for use by licensees, as defined in subsection (28) of this section.

     (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 licensee, as defined in subsection (28) of this section, a CPA-Inactive certificateholder, a nonlicensee firm owner of a licensed firm, or an entity affiliated with a licensed firm to perform professional services 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 licensee, as defined in subsection (28) of this section, CPA-Inactive certificateholder, nonlicensee firm owner of a licensed firm, or a person affiliated with a licensed firm;

     (b) Such persons are not primarily responsible to the client for the performance or reliability of the product or service;

     (c) Such persons add no significant value to the product or service; or

     (d) A third party instead of the client pays the persons for the products or services.

     (12) "Compilation" means providing a service to be performed in accordance with statements on standards for accounting and review services that is presenting in the form of financial statements, information that is the representation of management (owners) without undertaking to express any assurance on the statements.

     (13) "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.

     (14) "CPA" or "certified public accountant" means an individual holding a license to practice public accounting under chapter 18.04 RCW or recognized by the board in the state of Washington, including an individual exercising practice privileges pursuant to RCW 18.04.350(2).

     (15) "CPA-Inactive" means an individual 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.

     (16) "CPE" means continuing professional education.

     (17) "Firm" means a sole proprietorship, a corporation, or a partnership. "Firm" also means a limited liability company or partnership formed under chapters 25.15 and 18.100 RCW and a professional service corporation formed under chapters 23B.02 and 18.100 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 that the person holds a license or practice privileges under the act and that the person offers to perform any professional services to the public. "Holding out" shall not affect or limit a person not required to hold a license under the act from engaging in practices identified in RCW 18.04.350.

     (21) "Home office" is the location specified by the client as the address to which a service is directed.

     (22) "Inactive" means the individual 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.

     (23) "Individual" means a living, human being.

     (24) "Independence" means an absence of relationships that impair a licensee's impartiality and objectivity in rendering professional services for which a report expressing assurance is prescribed by professional standards.

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

     (26) "IRS" means Internal Revenue Service.

     (27) "License" means a license to practice public accounting issued to an individual or a firm under the act or the act of another state.

     (28) "Licensee" means an individual or firm holding a valid license to practice public accounting issued under the act, including out-of-state individuals qualifying for practice privileges in this state under RCW 18.04.350(2) and out-of-state firms permitted to offer or render certain professional services in this state under the conditions prescribed in RCW 18.04.195 (1)(b).

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

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

     (31) "Nonlicensee firm owner" means an individual, not licensed in any state to practice public accounting, who holds an ownership interest in a firm permitted to practice public accounting in this state.

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

     (33) "Peer review" means a study, appraisal, or review of one or more aspects of the attest or compilation work of a licensee or licensed firm in the practice of public accounting, 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 subsection (38) of this section.

     (34) "Person" means any individual, nongovernmental organization, or business entity regardless of legal form, including a sole proprietorship, firm, partnership, corporation, limited liability company, association, or not-for-profit organization, and including the sole proprietor, partners, members, and, as applied to corporations, the officers.

     (35) "Practice privileges" are the rights granted by chapter 18.04 RCW to a person who:

     (a) Has a principal place of business outside of Washington state;

     (b) Is licensed to practice public accounting in another substantially equivalent state;

     (c) Meets the statutory criteria for the exercise of privileges as set forth in RCW 18.04.350(2) for individuals or RCW 18.04.195 (1)(b) for firms;

     (d) Exercises the right to practice public accounting in this state individually or on behalf of a firm;

     (e) Is subject to the personal and subject matter jurisdiction and disciplinary authority of the board in this state;

     (f) Must comply with the act and all board rules applicable to Washington state licensees to retain the privilege; and

     (g) Consents to the appointment of the issuing state board of another state as agent for the service of process in any action or proceeding by this state's board against the certificateholder or licensee.

     (36) "Principal place of business" means the office location designated by the licensee for purposes of substantial equivalency and reciprocity.

     (37) "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.

     (38) "Quality assurance review or QAR" is the process, established by and conducted at the direction of the board, to study, appraise, or review one or more aspects of the audit, compilation, review, and other professional services for which a report expressing assurance is prescribed by professional standards of a licensee or licensed firm in the practice of public accounting, by a person or persons who hold licenses and who are not affiliated with the person or firm being reviewed.

     (39) "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.

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

     (41) "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 an "other comprehensive bases of accounting," or the presentation and disclosure requirements of other professional standards. "Reports on financial statements" does not include services referenced in RCW 18.04.350(10) provided by persons not holding a license under the act.

     (42) "Representing oneself" 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.

     (43) "Rules of professional conduct" means rules adopted by the board to govern the conduct of licensees, as defined in subsection (28) of this section, while representing themselves to others as licensees. These rules also govern the conduct of CPA-Inactive certificateholders, nonlicensee firm owners, and persons exercising practice privileges pursuant to RCW 18.04.350(2).

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

     (45) "Sole proprietorship" means a legal form of organization owned by one person meeting the requirements of RCW 18.04.195.

     (46) "State" includes the states and territories of the United States, including the District of Columbia, Puerto Rico, Guam, and the United States Virgin Islands, and the Commonwealth of the Northern Mariana Islands at such time as the board determines that the Commonwealth of the Northern Mariana Islands is issuing licenses under the substantially equivalent standards of RCW 18.04.350 (2)(a).

     (47) "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.

     (48) "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.

     (49) "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, 18.04.025. 08-18-016, § 4-25-410, filed 8/25/08, effective 9/25/08. 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.]