Administrative Rule Review Report #AR07-041
Legislative Service Office
19-Jul-07
AGENCY: Board of Certified Public Accountants.
DATE SUBMITTED: August 19, 2007.
SUBJECT: Chapter 1, General Provisions; Chapter 2, Examinations; Chapter 3, Certificates; Chapter 4, Permits; Chapter 5, Continuing Professional Education; Chapter 6, Professional Conduct; Chapter 7, Rules of Practice and Procedure; and Chapter 9, Peer Review.
NATURE OF RULES: Legislative.
STATUTORY AUTHORITY: W.S. 33-3-108(a).
DETERMINATION OF PROCEDURAL COMPLIANCE BASED UPON INFORMATION
SUBMITTED BY THE AGENCY TO LSO: Apparently complete to date.
SUMMARY OF RULES:
Chapter 1 (General Provisions), Section 2 (Definitions) is amended by adding a definition of "Agreed-Upon Procedure" to mean "a professional service whereby a holder is engaged to issue a written finding that: (i) is based on specific procedures that the specified parties agree are sufficient for their purposes, (ii) are restricted to the specified parties, and (iii) do not provide an opinion or negative assurance." Section 9 (Change of Name, Address, or Employment) is amended to require a certificate holder to notify the Board of any changes in employment, as well as address and name, within 60 days of the change. The amendment to Section 11 (Applications) specifies that a request for a reconsideration of an application denial shall be made with 30 days of the denial decision.
Chapter 2 (Examination), Section (1) (Applications for Examination) is amended to require applicants to complete the Uniform CPA Examination Statistical Questionnaire. The Board will not release examination scores (grades) until the questionnaire has been completed. According to the Board's "Statement of Principal Reasons for Adoption" for Chapter 2, the questionnaire is necessary, "[t]o ensure the examination used to test entry level into the [Certified Public Accountant] CPA profession is psychometrically sound (legally defensible, reliable, and unbiased)…." Section 2 (Education Requirements) is amended to correct the name of the association that accredits colleges and universities in the Northwest United States from "Northwest Association of Secondary and Higher Schools" to "Northwest Commission on Colleges & Universities". Section 3 (Examinations – Certified Public Accountant) strikes language put in place for the transition from a paper test to an electronic test. Those provisions are no longer applicable.
Chapter 3 (Original Certificates), Section 3 (Inactive Status) is amended to allow certificate holders who cease to provide accounting services to maintain active status during a calendar year as long as the certificate holder places his certificate on inactive status no later than the next renewal period. Section 3 is further amended to require those certificate holders on inactive status who begin to provide accounting services again to activate their certificate no later than 30 days after they begin providing services. Section 4 (Retired Status) is amended in essentially the same manner as Section 3 to require certificate holders on retired status to complete an application to activate their certificate within 30 days of providing accounting services again. Section 5 (Renewal) is amended to promote on-line renewals by only mailing paper notice of certificate renewals and not the entire renewal application (which is available on-line).
Chapter 4 (Permits) is amended to promote on-line permit renewals by only mailing paper notice of CPA firm permit and not the entire permit renewal application (which is available on-line).
Chapter 5 (Continuing Professional Education) is amended to require a Continuing Professional Education course for CPAs in ethics, in addition to the existing Wyoming laws and regulations element at least every 3 years. Nonresident certificate holders are not required to take the Wyoming Continuing Professional Education course if they have completed a course in their home state covering ethics and state specific statutes and rules within the applicable renewal period. Section 1 (General Requirements) is amended by striking an obsolete provision relating to Continuing Professional Education requirements for new and reactivated certificate holders from July 1, 2005 to December 31, 2006. Chapter 5 is further amended by striking all references to "the statutes and rules course" and inserting "ethics course" (the statutes and rules portion remains an element of the expanded "ethics course").
Chapter 6 (Rules of Professional Conduct), Section 1 (Preamble) is amended to define "the public" as "clients, credit grantors, governments, employers, investors, the business and financial community, and others who use CPA services". This amendment was made in order for the Rules of Professional Conduct to apply to all CPAs regardless of where, or for whom, the CPA works; be it a CPA firm, the government, industry, academia, etc. Section 1 is further amended to clarify the manner in which the Board may rely on authoritative standards established by other regulatory bodies ("may consider as persuasive, but not necessarily conclusive"). Chapter 6 has been amended to incorporate by reference the most recently adopted accounting and auditing authoritative standards issued by the American Institute of Certified Public Accountants, the U.S. Securities & Exchange Commission, the U.S. Department of Labor, the Public Company Accounting Oversight Board, and the Financial Accounting Standards Board. Section 5 (Other Responsibilities and Practices), Subsection (e) (Rule 406 – Firm Names) is amended to clarify that CPA firms registered in compliance with W.S. 33-3-127 may use within its name: 1) The name(s) of current, retired or deceased owners, either alone or with other descriptive terms, and 2) an assumed trade name if it is not misleading (the designation "and company" or "and associates" or similar terms will not be considered misleading when used in a firm name when a certificate holder or public accounting firm has employees, professional associates, or contractual relationships with other professionals).
Chapter 7 (General Rules of Practice and Procedure), Section 6 (Investigations and Board Action) is amended to clarify the timing of resolution options for the Board and those regulated. Section 6 now delineates what resolution options are available to the Board prior to a formal hearing (sending a written advisory letter to the registrant, accepting a voluntary surrender of a certificate or permit, accepting conditional terms of settlement, dispensing with it in an informal manner, or dismissal) and resolution options available to the Board after notice and a formal hearing (revoking or suspending a certificate or permit, refusing to renew a certificate or permit, reprimanding or censuring a certificate or permit, limiting the scope of practice, placing a certificate holder on probation, requiring completion of a specific continuing professional education program, peer review, or dismissal). Section 8 (Formal Hearing Procedures) is amended to stipulate that all formal disciplinary hearings held by the Board are open to the general public. According to the Board's "Statement of Principal Reasons for Adoption" for Chapter 7, formal disciplinary hearings have been open to the public for the last 20 years and this amendment is notice of the public nature of the hearing for a certificate or permit holder who requests a hearing. Section 8 is further amended to strike the ability of a registrant to meet the answer requirements in a formal hearing proceeding by simply filing a Notice of Appearance. Section 23 (Reinstatement of the Certificate or Permit) is amended by striking Subsection (b), which stated the mechanism to activate an expired or surrendered certificate. That mechanism is now covered in Chapter 3.
Chapter 9 (Peer Review) is amended to incorporate by reference the most recent standards for peer review as promulgated by the Public Company Accounting Oversight Board and the Government Accountability Office. Section 2 (Requirements of Review) is amended to clarify that a peer review must be scheduled for a new firm or a firm who changes its accounting and auditing service it provides within 18 months from the year-end of the first engagement (18 months from the report date if it is an attestation engagement including financial forecasts and projections). Section 4 (Reporting to the Board) is amended to require only a "final" acceptance letter from a registrant with a review in the prior calendar year, and not a conditional letter of acceptance as well.
FINDINGS:
Chapter 6, Sections 1(e), 2(a), 3(b), (c), (d), (e) and (f) and Chapter 9, Section (1)(b) incorporates by reference authoritative standards from various governmental agencies and national accounting boards. Incorporation by reference is authorized under Wyoming law. The Administrative Procedure Act at W.S. 16-3-103(h), provides in part:
(h) An agency may incorporate, by reference in its rules and without publishing the incorporated matter in full, all or any part of a code, standard, rule or regulation that has been adopted by an agency of the United States or of this state, another state or by a nationally recognized organization or association, provided:
(ii) The reference in the rules of the incorporating agency fully identifies the incorporated matter by location, date and otherwise, and states that the rule does not include any later amendments or editions of the incorporated matter;
(iii) The agency, organization or association originally issuing the incorporated matter makes copies of it readily available to the public and the rules of the incorporating agency state where such copies are available;
(iv) The incorporating agency maintains and makes available for public inspection a copy of the incorporated matter and the rules of the incorporating agency state where copies of the incorporated matter are available at cost from the incorporating agency;
Here the Board's rules specify that the standards being incorporated are the version incorporated as of specified dates. Chapter 6, Section 1(e) specifies that all standards incorporated in Chapter 6 "do not include any later amendments or editions than specifically referenced." However, Chapter 9, Section 1(b) does not contain a "no later amendment" provision. Both Chapters 6 and 9 state where incorporated material may be found, but they do not state that incorporated materials are available at cost from the Board.
STAFF RECOMMENDATION:
The APA requires only substantial procedural compliance. While failing to strictly comply, Chapter 6, Sections 1(e), 2(a), 3(b), (c), (d), (e) and (f) and Chapter 9, Section (1)(b) of the rules is considered by LSO to meet the substantial compliance requirement of the Wyoming Administrative Procedure Act, W.S. 16-3-101(c). Even though Chapter 9, Section (1)(b) does not state that no further amendments will be incorporated, it does specify that the standards will be incorporated as of a specified date, thus implying that no later amendment to the standards will be included in the rules. Also, both Chapters 6 and 9 state were the incorporated material can be located, even though the rules do not state that the incorporated materials are available at cost from the Board.
The recommendation is that Council request that the Governor ensure the rules are amended before filing with the Secretary of State, by including the statements required by the statutory provisions in bold above, in brackets. This will ensure the agency and the public are aware of the statutory requirements, and that the incorporated material will be available at cost as from the agency, as required by law. If the rules are not so amended, the recommendation is for the Governor to not approve the rules and to request that the agency readopt the rules, addressing the issues noted.
The recommendation is also for the Governor to caution the agency regarding the need for full compliance in the future.
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Matthew D. Obrecht
Staff Attorney
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David K. Gruver
Assistant Director
MDO/