Administrative Rule Review Report #AR08-061
Legislative Service Office
24-Jul-08
AGENCY: Board of Certified Public Accountants.
DATE SUBMITTED: July 24, 2008.
SUBJECT: Chapter 1, General Provisions; Chapter 2, Examination; Chapter 3, Certificates; Chapter 4, Firms; chapter 5, Continuing Professional Education; Chapter 6, Rules of Professional Conduct; and Chapter 9, Peer Review.
NATURE OF RULES: Legislative and Procedural.
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. After issuing its notice of intent to adopt rules, the agency received comments on the proposed changes to Chapter 1. At least some of the comments lead to changes in the proposed rules. The changes made appear to be nonsubstantive and therefore comport with the "substantial compliance" requirements of the Wyoming Administrative Procedure Act (W.S. 16-3-103(c)).
SUMMARY OF RULES:
The adopted rules make amendments and add new provisions to Chapters 1-6 and 9. Chapter 1, General Provisions, is amended to change the definition of "client," to remove notification for peer review because it is addressed in Chapter 4, to include performance audits in the definition of "audits," to add an administrative processing fee for sole proprietorships who advertise and are required to register with the Board, to clarify the meaning of references to active, inactive and retired status, to amend the rules to reflect the most recent retention schedule, to require notice when a CPA firm's representative is changed, to reference new filing dates, to amend the timing of imposing penalties, to increase fees to accommodate a cost of living increase and to make clear that sole proprietorships are required to obtain permits but allow them to pay a reduced permit fee if they have no CPA employees.
Chapter 2, Examination, is amended to provide more specificity in defining the courses that qualify a candidate to sit for the CPA exam.
Chapter 3, Certificates, is amended to remove the provision allowing a candidate to provide representative samples of work and to remove any requirement that non- certificated persons must follow AICPA standards in submitted financial statements. Outdated provisions intended to address past law changes are removed and various statutory references are corrected.
Chapter 4, Permits, is amended to make clear that all forms of organizations operating as CPA firms, including sole proprietorships, must register with the Board and be permitted. In the past, sole proprietorships registered as "offices." The Chapter has been amended to reflect that CPA firms must register all locations or "offices" with the firm registration form. Sole proprietors will register firms, therefore reference to separate office registrations has been removed.
Chapter 5, Continuing Professional Education, is amended to clarify that four ethics credits may be earned at separate courses, but that all four credits must be completed in the same year. The definition of a "third party" also is amended as it relates to verification of compliance with CPE credits.
Chapter 6, Rules of Professional Conduct, is amended to remove improper brackets, to reference recently issued authoritative standards and to clarify the release of records to clients. The amended rules establish a deadline in which information must be released and address the redaction of information and the ability of a CPA to refuse to release confidential information.
Chapter 9, Peer Review, is amended to reference recent authoritative standards for peer review, to reference new organizations authorized to administer peer review programs, to establish that residents who perform financial services are subject to peer review regardless of the location of their client and to allow the Board to accept peer reviews administered by other boards of accountancy.
FINDINGS: Except as noted below, the rules appear to be within the scope of statutory authority and legislative intent.
The revisions to Chapter 1 establish fees applicable to sole proprietorships which are different from the fees paid by other types of business organizations. For example, the revised fee schedule appears to charge a sole proprietorship operating with no CPA employees differently than a corporation or LLC operating with no CPA employees. Such provisions are facially discriminatory and may represent a constitutional equal protection violation. The Board must, at the very least, have a rational basis for treating similarly situated organizations differently. Generally speaking, discriminatory state action is permissible only where such discrimination is rationally related to a legitimate governmental objective. Newport International University, Inc. v. Wyoming, 2008 WY 72, 186 P.3d 382 (2008).
LSO contacted both the Board and the Board's Attorney General to discuss the basis upon which the fee is determined. After such discussions, there appears to be insufficient reason to adjust the fee based upon the type of business entity. While the Board does not want to adversely impact the ability of very small business to operate, the discrepancy in fees does not appear to be sufficiently related to this purpose. For example, like a sole proprietorship, a flexible limited liability company might operate with a single owner and no CPA employees. The adopted rules would require the LLC to pay a higher fee. The Wyoming Constitution likely requires that the Board's Rules treat all types of business organizations alike.
STAFF RECOMMENDATION:
With regard to Chapter 1, that the Council recommend that the Governor not approve the amendments and direct the Board to establish uniform fees applicable to all types of business organizations.
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Ian Shaw
Staff Attorney
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David K. Gruver
Assistant Director
IDS/