H. B. 4338
(By Mr. Speaker, Mr. Kiss, and Delegates
Staton, Smirl, Campbell, Faircloth and Hutchins)
[Introduced February 11, 1998; referred to the
Committee on Government Organization then Finance.]
A BILL to amend and reenact sections two, four, six and eleven,
article nine, chapter thirty of the code of West Virginia,
one thousand nine hundred thirty-one, as amended; and to
further amend said article by adding thereto three new
sections, designated sections four-a, eleven-a and eleven-b,
all relating to accountants, allowing accountants licensed
by other states to practice in this state, permitting part
ownership of accounting corporations and other entities by
persons other than certified public accountants, and
establishing guidelines for the charge of commissions and
fees.
Be it enacted by the Legislature of West Virginia:
That sections two, four, six and eleven, article nine,
chapter thirty of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted; and
that said article be further amended by adding thereto three new
sections, designated sections four-a, eleven-a and eleven-b, all
to read as follows:
ARTICLE 9. ACCOUNTANTS.
§30-9-2. Definitions.
As used in this article, the following words and terms shall
have the following meanings, unless the context clearly indicates
otherwise:
(a) "Assurance" means any act or action, whether written or
oral, expressing an opinion or conclusion about the reliability
of a financial statement or about its conformity with any
financial accounting principles or standards.
(b) "Board" means the state board of accountancy, known as
the "West Virginia board of accountancy," continued by the
provisions of this article and established under prior law.
(c) "Certificate" means a certificate as a certified public
accountant issued by the board pursuant to this article or
corresponding provisions of prior law or a corresponding
certificate as a certified public accountant issued after
examination under the laws of any other state.
(d) "Certification requirements" means those certification
or licensure requirements as set forth in the UAA.
(e) "Contingent fee" means a fee 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. Such fees
are not regarded as being contingent if fixed by court or other
public authorities, or in tax matters, if determined based on the
results of judicial proceedings or the findings of governmental
agencies.
(f) "Financial statement" means a writing or other
presentation, including accompanying notes, which presents, in
whole or in part, historical or prospective financial position,
results of operations or changes in financial position of any
person, corporation, partnership or other entity.
(g) "License" means a license to practice public accounting
issued annually under the provisions of this article. and
(h) "Licensee" means a person holding such license,
including those persons who were duly registered to practice
public accounting under prior law, and "nonlicensee" means all
other persons.
(i) "Practice of public accountancy" or "public accounting"
means: (1) The giving of an assurance, in a report or otherwise,
whether expressly or implicitly; or (2) in the case of a person holding himself out as a certificate holder, the performance of
or offering to perform any service involving the use of
accounting or auditing skills, including, but not limited to,
management advisory or consulting services, the preparation of
tax returns, the rendering of tax services, the keeping of books
of account and related accounting records and the preparation of
financial statements without the expression of an assurance:
Provided, That an employee giving assurances to or performing
such services for an employer shall not be deemed to be
practicing public accountancy.
(j) "Registered" or "registrant" refers to or means a person
registered, but not certified, by the board under prior law as a
public accountant before the first day of January, one thousand
nine hundred sixty-seven, and "registration" means such
registration.
(k) "Report" or "reports" when used with reference to
financial statements, means an opinion or disclaimer of opinion
or other form of language or representation which states or
implies any form of assurance or denial of assurance.
(l) "State" means any state of the United States, the
District of Columbia, Puerto Rico, the U.S. Virgin Islands or
Guam.
(m) "Substantial equivalency" is a determination by the board or its designee that the education, examination and
experience requirements contained in the statutes and
administrative rules of another jurisdiction are comparable to,
or exceed, the education, examination and experience requirements
contained in the UAA, or that an individual certified public
accountant's education, examination and experience qualifications
are comparable to, or exceed, the education, examination and
experience requirements contained in the UAA.
(n) "UAA" means the uniform accountancy act, third edition
(1998), jointly published by the American institute of certified
public accountants and the national association of state boards
of accountancy.
As used in this article, the singular and plural and the
masculine and feminine are interchangeable unless the context
clearly indicates otherwise.
§30-9-4. Certification; applicability of article to previous
holders of certificates.
(a) The board shall grant a certificate to any applicant
who, at the time of making application:
(1) Is over the age of eighteen years;
(2) Is of good moral character;
(3) Is, at the time of taking the examination provided for
in subdivision (5) of this subsection, a resident of this state or employed in this state on a full-time basis: Provided, That
the board may provide by rule for exceptions to this requirement;
(4) Has satisfied the following educational requirements,
which must be met before an applicant is eligible to apply for
the examination provided for in subdivision (5) of this
subsection:
(a) (A) If application is made prior to the first day of
July, two thousand, the obtainment of a baccalaureate or
equivalent degree conferred by a college or university acceptable
to the board with a concentration in accounting or its
equivalent, as determined by the board by rule For applicants
applying for the examination prior to the fifteenth day of
February, two thousand, a baccalaureate degree or its equivalent
conferred by a college or university acceptable to the board,
with an accounting concentration or equivalent as the board may
determine by rule to be appropriate; or
(b) (B) If application is made on or after the first day of
July, two thousand, the satisfactory completion of one hundred
fifty semester hours or their equivalent at such accredited
institutions, including the obtainment of the aforesaid degree
For applicants applying for the examination on or after the
fifteen day of February, two thousand, at least one hundred fifty
semester hours of college education including a baccalaureate or higher degree conferred by a college or university acceptable to
the board, the total educational program to include an accounting
concentration or equivalent as the board may determine by rule to
be appropriate;
(5) Has completed satisfactorily an examination to be given
by the board at least twice each year in accounting theory,
accounting practice, auditing, commercial law or such other
appropriate subjects as determined by the board by rule. The
board shall prescribe by rule for the retention of credit for the
satisfactory completion of a portion of such examination in
future examinations.
(b) The board may, in its discretion, in lieu of the
examination provided for in this section, issue a certificate to
any person who possesses the other qualifications stated in this
section, and who is the holder of a certificate issued under the
laws of any state which extends similar privileges to certified
public accountants of this state provided the requirements for
such certificates in the state which has granted the certificate
to such person are, in the opinion of the board, equivalent to
those herein required; or but does not qualify for reciprocity
under the substantial equivalency standard set out in section
four-a of this article upon a showing that:
(1) The applicant passed the examination required for issuance of the applicant's certificate with grades that would
have been passing grades at the time in this state;
(2) Within the ten-year period immediately preceding the
application and after passing the examination upon which the
applicant's certificate in such other state was based, the
applicant:
(A) Can demonstrate at least four years of experience
outside of this state in providing professional services
involving the use of accounting, attest, management advisory,
financial advisory, tax or consulting skills, which experience
shall be determined by the board, in its discretion, to be
acceptable; or
(B) Meets equivalent requirements prescribed by the board by
rule; and
(3) If the applicant's certificate was issued more than four
years prior to the application for issuance of an initial
certificate under this subsection, that the applicant has
fulfilled any continuing professional education requirements that
would have been applicable had the applicant held a certificate
in this state under this article or prior law.
(c) As an alternative to the requirements of subsection (b)
of this section, a certificate holder licensed by another state
who establishes his or her principal place of business in this state shall request the issuance of a certificate from the board
prior to establishing such principal place of business. The
board shall issue a certificate to such person upon a showing
that he or she has obtained from the national qualification
appraisal service identified under section four-a of this article
verification that his or her qualifications as a certified public
accountant are substantially equivalent to the certification
requirements of the UAA.
(d) The board may, in its discretion, in lieu of the
examination provided for in this section, issue a certificate to
any person who is the holder of a certificate, or the equivalent
thereof, granted under the authority of a foreign nation, if the
requirements for such certificates in the foreign nation, are, in
the opinion of the board, equivalent to those herein required.
(e) Persons who, on the effective date of this article, hold
certificates theretofore issued by the board are not required to
obtain additional certificates under this article, but are
otherwise subject to all provisions of this article; and such
certificates theretofore issued shall, for all purposes, be
considered certificates issued under this article and subject to
the provisions hereof.
§30-9-4a. Substantial equivalency.
(a)(1) An individual whose principal place of business is not in this state and who holds a valid certificate or license as
a certified public accountant from any state which the board
determines by rule to be substantially equivalent to the
certification requirements of the UAA shall have all the rights
and privileges of certificate holders and licensees of this state
without the need to obtain a certificate under sections four and
five of this article. However, such individuals shall notify the
board of their intent to enter the state under this provision.
(2) An individual whose principal place of business is not
in this state and who holds a valid certificate or license as a
certified public accountant from any state which the board has
not determined by rule to be substantially equivalent to the
certification requirements of the UAA shall have all the rights
and privileges of certificate holders and licensees of this state
without the need to obtain a certificate under sections four and
five of this article if such individual obtains from a national
qualification appraisal service which the board may designate by
rule a verification that such individual's qualifications are
substantially equivalent to the certification requirements of
this article. However, such individuals shall notify the board
of their intent to enter the state under this provision.
(3) The board may designate by rule the national
qualification appraisal service of the national association of state boards of accountancy for use in subdivisions (1) and (2)
of this subsection.
(4) Any individual granted the rights and privileges of a
certificate holder under this subsection hereby consents, as a
condition to the receipt of such rights and privileges:
(A) To the personal and subject matter jurisdiction of the
board concerning all matters within the scope of this article;
(B) To comply with the provisions of this article and all
applicable rules promulgated thereunder; and
(C) To the appointment of the state board of accountancy of
the state in which he or she is licensed or certified as a
certified public accountant as his or her agent upon which
process may be served in an action or proceeding by the board
against the individual.
(b) A certificate holder of this state offering or rendering
services or using his or her title as certified public accountant
in another state shall be subject to disciplinary action in this
state for an act committed in another state for which the
certificate holder would be subject to discipline for an act
committed in the other state. The board shall be required to
investigate any complaint made by the board of accountancy of
another state.
§30-9-6. Practice of public accounting restricted to licensees; prohibited acts.
(a) A person who does not hold a valid license issued by the
board may not claim to hold one; nor may he or she practice or
offer to practice public accountancy or public accounting; nor
may he or she make any other claim of licensure or approval
related to the preparation of financial statements or expression
of assurances thereon which is false or misleading.
(b) Except as set forth in this subsection, a person who
does not hold a valid certificate issued by the board may not
claim to hold one or describe himself as or assume any of the
following titles or designations: Certified public accountant,
CPA, public accountant, PA, certified accountant, CA, chartered
accountant, licensed accountant, LA, registered accountant, RA,
independent auditor, auditor, or similar designation: Provided,
That registrants under prior law may use the title public
accountant or PA.
Partnerships practicing accountancy in this state may use
the aforesaid designations, or practice as such, only if all the
members thereof who practice in this state are so licensed.
(c) A person who does not hold a valid license issued by the
board may not claim to have used "generally accepted accounting
principles," "generally accepted accounting standards," "public
accountancy standards," "public accountancy principles," "generally accepted auditing principles," or "generally accepted
auditing standards," in connection with his preparation of any
financial statement; nor may he or she use any of these terms in
describing any complete or partial variation from such standards
or principles or to imply complete or partial conformity with
such standards or principles.
(d) A person who does not hold a valid license issued by the
board may not use the words "audit," "audit report," "independent
audit," "attest," "attestation," "examine," "examination,"
"opinion," or "review" in a report on a financial statement.
(e) A person who does not hold a valid license issued by the
board may neither state nor imply that he or she is tested,
competent, qualified, or proficient in financial standards
established by: (1) The American institute of certified public
accountants or any agency thereof; (2) the governmental
accounting standards board or any agency thereof; (3) the
securities and exchange commission or any agency thereof; (4) the
financial accounting standards board; or (5) any successor entity
named in this subsection.
(f) No person who holds a valid license issued by the board
may engage in the practice of public accounting under a
professional or firm name or designation that contains a name or
term other than past or present partners, officers or shareholders of the firm or of a predecessor firm; nor may any
such person engage in the practice of public accounting under a
professional or firm name which is deceptive or misleading.
§30-9-11. Accounting corporations.
(a) One or more individuals, each of whom is licensed within
this state, may organize and become a shareholder or shareholders
of an accounting corporation. Individuals who may be are
practicing public accountancy as an organization created
otherwise than pursuant to the provisions of this section may
incorporate under and pursuant to this section. This section is
not intended to amend the statutory or common law as it relates
to associations or partnership, except to allow partnerships of
licensees to organize as an accounting corporation.
(b) An accounting corporation may render public accounting
services only through officers, employees and agents who are
themselves duly licensed within this state. The term "employee"
or "agent," as used in this section, does not include
secretaries, clerks, typists or other individuals who are not
usually and ordinarily considered by custom and practice to be
rendering accounting services for which a license is required.
(c) This section does not modify the law as it relates to
the relationship between a person furnishing accounting services
and his or her client, nor does it modify the law as it relates to liability arising out of such a professional service
relationship. Except for permitting an accounting corporation,
this section is not intended to modify any legal requirement or
court rule relating to ethical standards of conduct required of
persons providing public accounting services.
An accounting corporation may issue its capital stock only
to persons who are duly certified or registered under prior law.
(d) When not inconsistent with this section, the
organization and procedures of accounting corporations shall
conform to the requirements of article one, chapter thirty-one of
this code.
(e) The board may require that those persons subject to this
article must obtain prior board authorization before beginning to
act as an accounting corporation and may require by regulation
rule a fee for each application for authorization to form an
accounting corporation. The board may adopt rules: (1) To set
reasonable standards for granting or refusing authorization to
act as an accounting corporation; (2) to require appropriate
information therefor from an accounting corporation applicant;
and (3) to notify the secretary of state that certain persons
have been given authorization by the board to act as an
accounting corporation.
(f) Upon notification by the board of its approval the secretary of state, upon compliance by the incorporators with
this section and the applicable provisions of chapter thirty-one
of this code, may issue to the incorporators a certificate of
incorporation for the accounting corporation which then may
engage in practice through duly licensed or otherwise legally
authorized stockholders, employees and agents.
A shareholder of an accounting corporation may sell or
transfer his shares of stock in such corporation only to (i)
another individual who is duly licensed to practice public
accountancy in this state or (ii) back to the corporation.
(g) The corporate name of an accounting corporation shall
contain the last name or names of one or more of its shareholders
who are licensees: Provided, That if the rules of the board so
permit, the corporate name may contain or include the name or
names of former shareholders or of persons who were associated
with a predecessor partnership or other organization. The
corporate name shall also contain the words "accounting
corporation", or the abbreviation "A.C." The use of the word
"company," "corporation" or "incorporated," or any other words or
abbreviations in the name of an accounting corporation organized
under this article which indicate that such the corporation is a
corporation, other than the words "accounting corporation" or the
abbreviation "A.C.," is specifically prohibited.
§30-9-11a. Ownership of accounting corporations and other
entities.
(a) Notwithstanding any other provision of this code to the
contrary, any person may: (1) Own capital stock in an accounting
corporation organized under section eleven of this article; or
(2) own or hold an equity interest in any entity which provides
public accounting services, including, but not limited to, a
professional limited liability company organized under article
thirteen, chapter thirty-one-b of this code or a partnership
organized under chapter forty-seven-b of this code: Provided,
That a simple majority of the outstanding stock of such
corporation or equity interest in such entity is owned by persons
who are licensed in this state.
As used in this section, "ownership" of: (i) Stock of an
accounting corporation; or (ii) an equity interest in an entity
providing public accounting services includes both the financial
interests and voting rights of all partners, officers,
shareholders, members or managers of such corporation or entity.
(b) Where the ownership of the accounting corporation or
entity providing public accounting services includes partners,
officers, stockholders, members or managers who are nonlicensees,
the following rules shall apply:
(1) The responsibility for the proper registration of such accounting corporation or entity shall be delegated only to a
licensee, and such licensee shall be identified to the board;
(2) All nonlicensee owners shall be active participants in
the accounting corporation or entity, or the affiliate of such
corporation or entity; and
(3) The corporation or entity complies with all applicable
rules promulgated by the board.
(c) The board may establish rules to require accounting
corporations and other entities to register annually with the
board, and may set a reasonable fee for each such annual
registration.
§30-9-11b. Commissions and fees.
(a)(1) A licensee in public practice shall not for
commission recommend or refer to a client any product or service,
or for a commission, recommend or refer any product or service to
be supplied by a client, or receive a commission, when the
licensee or the licensee's firm also performs for that client:
(A) An audit or review of a financial statement;
(B) A compilation of a financial statement when the licensee
expects, or reasonably might expect, that a third party will use
the financial statement and the licensee's compilation report
does not disclose a lack of independence; or
(C) An examination of prospective financial information.
(2) The prohibition in subdivision (1) of this subsection
applies only during the period in which the licensee is engaged
to perform any of the services listed therein and the period
covered by any historical financial statements involved in any
such listed services.
(b) A licensee in public practice who is not prohibited by
this rule from performing services for or receiving a commission
and who is paid or expects to be paid a commission shall disclose
that fact in writing to any person or entity to whom the licensee
recommends or refers a product or service to which the commission
relates.
(c) Any licensee who accepts a referral fee for recommending
or referring any service of a licensee to any person or entity or
who pays a referral fee to obtain a client shall disclose such
acceptance or payment to the client in writing.
(d)(1) A licensee in public practice shall not:
(A) Perform for a contingent fee any professional services
for, or receive such a fee from a client for whom the licensee or
the licensee's firm performs:
(i) An audit or review of a financial statement;
(ii) A compilation of a financial statement when the
licensee expects, or reasonably might expect, that a third party
will use the financial statement and the licensee's compilation report does not disclose a lack of independence; or
(iii) An examination of prospective financial information;
or
(B) Prepare an original or amended tax return or claim for
a tax refund for a contingent fee for any client.
(2) The prohibition in subdivision (1) of this subsection
applies only during the period in which the licensee is engaged
to perform any of the services listed therein and the period
covered by any historical financial statements involved in any
such listed services.
NOTE: The purpose of this bill is to introduce a standard
of "substantial equivalency" in West Virginia, which would allow
CPAs certified in other states to qualify to practice in West
Virginia without becoming certified in this state if the
certification requirements of those states were deemed to be
"substantially equivalent" to West Virginia's certification
requirements. Likewise, West Virginia CPAs meeting the
substantial equivalency standard would be permitted to practice
without certification in other states.
This bill would also allow persons other than certified
accountants to own shares in an accounting corporation or equity
interests in any entity providing public accounting services, so
long as the majority of the shares or equity is owned by
certified accountants. Finally, this bill establishes guidelines
for the charge of commissions and fees.
§§30-9-4a, 11a and 11b are new; therefore, strike-throughs
and underscoring have been omitted.