ENROLLED
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 468
(Senators Bowman, McKenzie, Kessler
and Ball, original sponsors)
____________
[Passed March 14, 1998; in effect ninety days from passage.]
____________
AN ACT 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 two new
sections, designated sections fourteen and fifteen, all
relating to accountants; adding and revising definitions;
revising and clarifying requirements for licensure;
authorizing part ownership of accounting corporations and
other entities by persons other than accountants; requiring
supervision of persons other than accountants by persons
appropriately licensed; requiring certificates of
authorizations; requiring notification of change in
identities of partners, officers, shareholders, members, managers, supervisory personnel or changes in number or
location of offices; requiring equity ownership in
accounting corporations and other entities by licensed
persons other than accountants who perform services or sell
products requiring licensure other than under this article;
allowing commissions, referral fees and contingency fees;
requiring fee arrangements to be in writing; requiring
rules; and providing for a termination date.
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 two new
sections, designated sections fourteen and fifteen, all to read
as follows:
ARTICLE 9. ACCOUNTANTS.
§30-9-2. Definitions.
As used in this article, 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) "Commission" means compensation, except a referral fee,
for recommending or referring any product or service to be
supplied by another person.
(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. A fee
fixed by a court, taxing authority or other public authority is
not a contingent fee.
(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.
(h) "Licensee" means a person holding a license to practice
public accounting issued under the provisions of this article,
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) "Referral fee" means compensation for recommending or
referring any service of a licensee to any person.
(l) "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.
(m) "State" means any state of the United States, the
District of Columbia, Puerto Rico, the U.S. Virgin Islands or
Guam.
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) For applicants making their initial application 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) For applicants making their initial application for the
examination on or after the fifteenth day of February, two
thousand, at least one hundred fifty semester hours of college
education including a baccalaureate or higher degree conferred by
an accredited 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 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.
(c) 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.
§30-9-6. 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 titles 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:
Provided, That nothing in this section may be construed to
prevent a person not licensed under this article from owning an
equity interest in an accounting partnership, or rendering a compatible professional service that the person is otherwise
legally authorized to render, so long as the nonlicensee owner
does not practice public accounting in this state or exercise
voting rights with respect to any question related to the
practice of accounting:
Provided, however, That ownership of the
accounting partnership is held at least sixty percent by
individuals duly licensed under this article.
(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 or her 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
to an 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, engaged in the
practice of accounting; 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 licensed within this state
pursuant to this article may organize and become a shareholder or
shareholders of an accounting corporation domiciled within this
state, and may organize for this purpose together with
individuals duly licensed or otherwise legally authorized to
provide compatible professional services. The practice of or
offer to practice public accounting through a corporation domiciled in this state is permitted:
Provided, That the person
or persons in direct control or having personal supervision of
the practice and all personnel who act in behalf of the
corporation in the practice of public accounting are individually
licensed under this article; that ownership of the corporation is
held at least sixty percent by individuals duly licensed under
this article; that all nonlicensee owners are active participants
in the accounting corporation; and that the corporation has been
issued a certificate of authorization by the board. As used in
this section, "ownership" includes both the financial interests
and voting rights of all partners, officers, shareholders,
members or managers of the corporation.
(b) The board shall, on or before the first day of July, one
thousand nine hundred ninety-eight, propose rules for legislative
approval in accordance with chapter twenty-nine-a of this code,
establishing a procedure to assure the issuance of certificates
of authorization only upon a determination that a corporation
meets the requirements of this section.
(c) 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.
(d) 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.
(e) 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.
(f) Upon determination that a corporation meets the
requirements of this section, the board shall notify the
secretary of state that a certificate of authorization has been
issued to the person or persons making the application. When the
secretary of state receives this notification from the board, he
or she shall attach the authorization to the corporation
application and, upon compliance with the applicable provisions
of chapter thirty-one of this code, the secretary of state may
issue to the incorporators a certificate of incorporation for the accounting corporation, which then may engage in the practice of
public accounting through persons duly licensed under this
article.
(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 under the provisions of this article:
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 the corporation is a corporation, other than the
words "accounting corporation" or the abbreviation "A.C.", is
specifically prohibited.
(h) Nothing in this section shall be construed to prohibit
the employment of a person duly licensed under this article to
practice public accounting as an employee of a corporation other
than an accounting corporation, or to have an ownership interest
of a corporation other than an accounting corporation. A
corporation other than an accounting corporation may use a nondeceptive trade name including words such as, by way of
illustration, "computer services", "financial services" or
"general business services", but may not use the designation
"accounting corporation" or the abbreviation "A.C.", may not
represent that the corporation is engaged in the practice of
public accounting, and may not engage in or offer to engage in
any act prohibited under section six of this article:
Provided,
That a corporation other than an accounting corporation may
represent that named individuals duly licensed under this article
are employees or members of the corporation.
(i) Any corporation holding a certificate under this article
shall notify the board, in writing, within thirty days after its
occurrence, of any change in the identities of partners,
officers, shareholders, members, managers whose principal place
of business is in this state, or licensed person or persons in
control or having supervision of the practice of public
accounting; or any change in the number or location of offices
within this state.
(j) The provisions of this section are not applicable to
article thirteen, chapter thirty-one-b of this code related to
professional limited liability companies and rules of the board
promulgated thereunder.
(k) A license issued under the provisions of this article may not be construed to permit a licensee to perform a service or
sell a product which is not a traditional accounting service when
the activity requires a separate license under federal law or
other provision of this code and the licensee does not hold the
separate license. The provisions of this article may not be
construed to permit a person, by reason of licensure under the
provisions of this article or by employment by or ownership in an
accounting firm, to practice law, to appraise real estate, to act
as a real estate broker or salesperson, or to act as a
stockbroker or insurance agent, broker or solicitor, when the
person is not separately licensed to engage in that activity.
(l) Notwithstanding the provisions of subsection (j) of this
section, an accounting corporation may perform a service or sell
a product which is not a traditional accounting service and which
requires a separate license under federal law or other provision
of this code, when an owner of an equity interest in the
corporation holds a valid license as required for the activity,
and supervises and is responsible for the licensed activity, to
the extent permitted by applicable law relating to licensure of
the separate activity.
§30-9-14. Commissions, referral fees and contingent fees.
(a) (1) A licensee may not, for a commission or referral
fee, recommend or refer to a client any product or service or refer any product or service to be supplied by a client, or
perform for a contingent fee any professional services for or
receive referral fees, commissions or contingent fees from a
client for whom the licensee or any firm with which the licensee
works or associates or any firm in which the licensee owns an
interest 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 may not for a contingent fee:
(1) Prepare an original or amended tax return or claim for
a tax refund; or
(2) Serve as an expert witness.
(c) To the extent permitted by reasonable rules of the board
proposed to the Legislature pursuant to the provisions of article three, chapter twenty-nine-a of this code, a licensee may for a
contingent fee represent a client before a taxing authority
within the scope of practice of public accounting:
Provided,
That this provision may not be construed either to limit or to
expand the scope of practice of public accounting, and may not be
construed to permit the unauthorized practice of law.
(d) All agreements or arrangements in which a licensee is to
be paid a commission, referral fee or contingent fee shall be in
writing, shall state the method by which the fee is to be
determined, shall be signed by both the licensee and the client,
and shall be delivered to the client before the performance of
any services or the delivery of any product to which the
commission, referral fee or contingent fee relates. A contingent
fee agreement shall state the method of calculation of the fee,
including the percentage or percentages which shall accrue to the
licensee in the event of all foreseeable outcomes, the expenses
to be deducted from any recovery, collection or other amount on
which the fee may be based, and whether the expenses are to be
deducted before or after the contingent fee is calculated.
(e) The board shall, on or before the first day of July, one
thousand nine hundred ninety-eight, propose rules for legislative
approval in accordance with chapter twenty-nine-a of this code,
establishing a procedure to assure that all fees charged by and paid to licensees are reasonable.
§30-9-15. Termination date.
The West Virginia board of accountancy shall terminate on
the first day of July, two thousand one, pursuant to the
provisions of article ten, chapter four of this code.