Title of Regulation: 18VAC5-21. Board of Accountancy Regulations (repealing 18VAC5-21-10 through 18VAC5-21-170).

18VAC5-22. Board of Accountancy Regulations (adding 18VAC5-22-10 through 18VAC5-22-170).

Statutory Authority: §§ 54.1-4402 and 54.1-4403 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: September 1, 2010.

Effective Date: September 16, 2010.

Agency Contact: Wade A. Jewell, Executive Director, Board of Accountancy, 9960 Mayland Drive, Suite 402, Henrico, VA 23233, telephone (804) 367-8540, FAX (804) 527-4409, or email wade.jewell@boa.virginia.gov.

Basis: Section 54.1-4402 of the Code of Virginia gives the board the responsibility of enforcing the accountancy statutes and establishing by regulation rules and procedures for the implementation of those statutes.

Purpose: The purpose of this action is to cure the considerable deficiencies in current regulations arising primarily from the comprehensive revision of the accountancy statutes in 2007. Examples of deficiencies in current regulations are:

1. All the definitions the board believes are necessary are now in the statutes. In addition, the statutes now have standards of conduct and practice that will remain evergreen. Definitions and standards of conduct and practice are therefore no longer needed in the regulations.

2. Some terms are defined differently in the statutes and the current regulations. In addition, standards of conduct and practice in the current regulations are out-of-date and therefore inconsistent with the guidance that is now in the statutes.

3. The 2007 revisions to the statutes gave the board the ability to enter into confidential consent agreements and directed the board to adopt regulations identifying the type of minor violations for which confidential consent orders may be offered and limit the number of confidential consent orders that may be offered to the same licensee in any given period.

4. The current regulations on continuing professional education are extremely difficult to understand, for example by taking inconsistent positions for categories of licensees.

5. The current regulations on continuing professional education also do not address some important issues, such as whether the holder of a Virginia license who has been exempt from the requirement to obtain continuing professional education should be required to obtain continuing professional education before he begins providing services to the public or to an employer, as those services are defined by the revised statutes.

6. Some of the current regulations were time sensitive and are no longer relevant. For example, regulations on the CPA examination before it became computer-based are no longer relevant. In addition, some of the current regulations refer to statutes that were repealed by the 2007 revisions.

The deficiencies are causing confusion among licensees and the public over how to apply the requirements of the statutes and the regulations. The new regulations will protect the public by eliminating the confusion and decreasing the risk of noncompliance.

Rationale for Fast-Track Process: The deficiencies in the current regulations are causing considerable confusion among licensees and the public over how to apply the requirements of the statutes and the regulations. This confusion among licensees and the public increases the risk of noncompliance and the time required to assess and enforce compliance. Deficiencies in the current regulations should therefore be cured as soon as possible.

The board set five criteria in developing the changes to the regulations to propose through the fast track regulatory process: (i) remove regulations that are now addressed by the statutes, (ii) add the emergency regulation that became effective May 14, 2009, (iii) add interpretations required as a result of the 2007 revisions to the statutes, (iv) clarify the existing guidance that continues to be applicable, and (v) eliminate the current regulations that were time sensitive and are no longer needed or that only refer to other regulations.

Removing regulations now addressed by the statutes eliminates much of the current regulations: 12 of the 17 sections of the current regulations and parts of three of the other five sections are overridden by the revised statutes. Regulations that are now addressed by the statutes are no longer applicable and should not be followed. However, the licensees and the public should not be put in the position of having to decide which regulations are still applicable and which regulations are overridden by the revised statutes. The best approach for the licensees and the public is to remove the regulations that are now addressed by the statutes.

Eleven of the 17 sections of the proposed new regulations provide interpretations required as a result of the 2007 revisions to the statutes. The interpretations are practical and generally provide for the exercise of judgment based on the underlying facts and circumstances. The board believes this best protects the public and that these interpretations are not controversial. The board also believes these interpretations are already appropriate and views the proposed new regulations as only formalizing them.

The proposed revisions to the regulations are not designed to change practice. For example, the proposed revisions do not increase the amount of continuing professional education that is required under the current regulations. In addition, a licensee will still be able to use the CPA title without obtaining continuing professional education as long as he does not provide services to the public or to an employer, as those services are defined by the revised statutes. As an observation, the revised statutes made that provision available to more licensees.

The proposed revisions to the regulations will make compliance with the statutes and regulations easier and provide flexibility. They will also substantially reduce the length of the board’s regulations: the proposed new regulations are approximately one-third the length of the current regulations.

Changes that conform to these criteria can only have a positive economic effect. By eliminating the current deficiencies, the risk of noncompliance and the time required to assess and enforce compliance will be reduced. No negative economic effects are anticipated. The Virginia Society of Certified Public Accountants, whose members comprise over a third of the approximately 22,500 persons who hold a Virginia license, submitted a letter expressing its support of the proposed new regulations.

Substance: The new regulations (i) remove regulations that are now addressed by the statutes, (ii) add the emergency regulation that became effective May 14, 2009, and expires November 13, 2010, which reduces from 150 to 120 the number of hours of education a person must have in order to take the CPA examination, (iii) add interpretations required as a result of the 2007 revisions to the statutes, (iv) clarify the existing guidance that continues to be applicable, and (v) eliminate the current regulations that were time sensitive and are no longer needed or that only referred to other regulations.

Issues: The primary advantage to the public is the elimination of the significant confusion that currently exists largely because of the inconsistencies between the statutes as they were revised in 2007 and 18VAC5-21, which is being repealed. The new regulations will make it easier for licensees to comply with the accountancy statutes and regulations and provide flexibility. The primary advantage to the agency or Commonwealth is that eliminating the confusion will reduce the number of (i) inquiries received by the board and staff about how to apply the statutes and regulations and (ii) enforcement cases. These reductions will enable the board and its staff to focus on other issues.

There are no disadvantages to the public or the Commonwealth in implementing the new regulations.

The Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Board of Accountancy (Board) proposes to repeal its current regulations and promulgate replacement regulations. These proposed regulations will replace emergency regulations that expire May 13, 2010 and will incorporate statutory changes passed by the 2007 General Assembly.

Result of Analysis. The benefits likely exceed the costs for some proposed changes. Costs likely exceed benefits for at least one of the proposed changes.

Estimated Economic Impact. With one exception, the Board of Accountancy Regulations have not been amended since the General Assembly made changes to the statutes that govern licensure for accountants in 2007. Because the regulatory changes that are required or suggested by Chapter 804 of the 2007 Acts of the Assembly are extensive, the Board now proposes to completely repeal its existing regulatory chapter (18VAC5-21) and promulgate a new chapter (18VAC5-22).

Most of the changes that are now proposed by the Board are either required to make these regulations consistent with statute, changes to the fee schedule fall into this category, or are not strictly required to conform the regulations to the statute but would likely impose minimal or no costs on any regulated entity. The Board's proposal to eliminate definitions from the regulations and, instead, refer readers to the relevant statutory definitions falls into this category. The Board's decision to eliminate definitions rather than just amending them to reflect any changes that were made by the General Assembly in 2007 is discretionary. Regulated entities may incur some minimal time costs from having to go to another source for definitions but these costs are likely outweighed by the benefits of not having conflicts between regulatory and statutory definitions if the statute should change again at some point in the future.

In addition to changes that are either required by statute or are discretionary but are unlikely to have net costs attached, the Board is proposing one change to these regulations that is discretionary and may have substantial costs attached. Current regulations delineate the circumstances under which individuals who provide services to the public or to an employer would be responsible for completing continuing professional education. Specifically, current regulations require:

...any person referring to himself as a Certified Public Accountant or "CPA," including the use of the "CPA" title on individual business cards, letterhead and all other documents and devices except the CPA wall certificate, and who is performing or offering to perform any services involving accounting skills or auditing skills, issuing reports on financial advisory or consulting services, preparing tax returns, or furnishing advice on tax matters...

for either the public or an employer to obtain 120 hours of continuing education each renewal cycle. In 2007, the General Assembly amended statutory language so that the definition of providing services using a CPA title allows the Board discretion to add other skills to the list of things that would constitute providing services and would, therefore, require individuals to complete continuing education. The Board now proposes to remove from the regulations the specific list of services that would trigger continuing education requirements. The Board proposes, instead, to generally require continuing education of any individual who holds a Virginia license and provides services to either the public or an employer using the CPA title.

Although the Board does now have the right to define any relevant skills as falling under the definition of providing services using a CPA title, removing the limiting language that lays out exactly which services will trigger continuing education requirements has the potential to subject more people to these requirements. For individuals who currently do not have to complete continuing education (CE) because they do not provide any of the services specifically listed in current regulations, but who may have to complete CE due to a Board decision that the services that they provide falls under the other skills portion of the statute, the cost of maintaining a CPA license will increase substantially. Additionally, removing the limiting language from the regulations increases uncertainty for regulated entities because the Board will be able to change the rules these entities must abide by without going through normal regulatory procedures. The costs of this particular regulatory change for regulated entities likely outweigh the benefit of added flexibility that will accrue to the Board. Regulated entities would likely be much better off if the Board were to amend this particular part of these regulations to add to the list of services that will trigger CE as they find other skills that should be on the list rather than removing the list entirely from the regulations.

Businesses and Entities Affected. The Board reports that there are currently approximately 22,500 individual accountants and 1,200 accountancy firms licensed in the Commonwealth. All of these entities will be affected by these proposed regulations.

Localities Particularly Affected. No locality will be particularly affected by this proposed regulatory action.

Projected Impact on Employment. This regulatory action will likely have little impact on employment in the Commonwealth.

Effects on the Use and Value of Private Property. This regulatory action will likely have little effect on the use or value of private property in the Commonwealth.

Small Businesses: Costs and Other Effects. Small businesses in the Commonwealth are unlikely to incur any costs on account of this regulatory action.

Small Businesses: Alternative Method that Minimizes Adverse Impact. Small businesses in the Commonwealth are unlikely to incur any costs on account of this regulatory action.

Real Estate Development Costs. This regulatory action will likely have no effect on real estate development costs in the Commonwealth.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 36 (06). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPBs best estimate of these economic impacts.

Agency's Response to the Department of Planning and Budget's Economic Impact Analysis:

1. The Conclusion and Recommendation of the Department of Planning and Budget (DPB). In its Economic Impact Analysis (EIA) of the new regulations the Virginia Board of Accountancy (Board) is proposing:

a. DPB concludes, "In addition to changes that are either required by statute or are discretionary but are unlikely to have net costs attached, the Board is proposing one change to these regulations that is discretionary and may have substantial costs attached." That change is in the determination of whether holders of a Virginia license (licensees) are required to obtain continuing professional education.

b. DPB recommends that the Board amend the proposed regulations to require basing the determination solely on whether the licensee provides certain services.

2. The Board's Response. DPB's conclusion that the proposed change to the regulations on determining whether licensees are required to obtain continuing professional education is discretionary and may have substantial costs attached is incorrect, and its recommendation that the determination be based solely on whether licensees provide certain services is inconsistent with the accountancy statutes:

a. The current regulations on determining whether a licensee is required to obtain continuing professional education have been superseded by the revisions to the accountancy statutes that became effective July 1, 2007. The proposed change to the regulations is mandatory, not discretionary.

b. The requirements for the determination that are now prescribed by the statutes because of the 2007 revisions are less restrictive than the superseded requirements. The new requirements will not increase costs, and for some licensees will reduce costs.

c. Because of the 2007 revisions, the accountancy statutes do not permit basing the determination solely on services provided.

3. Additional Information. Two appendixes provide additional information that may be helpful.

a. Appendix A discusses the reasoning underlying the Board's response and presents a roadmap for determining whether continuing professional education is required.

b. Appendix B uses a series of practical illustrations to show how to make the determination and how the new requirements are less restrictive than the superseded requirements.

The Board would welcome the opportunity to discuss any questions or concerns.

Appendix A - The Reasoning Underlying the Board's Response

A1. The accountancy statutes (statutes) are in Chapter 44 (§ 54.1-4400 et seq.) of Title 54.1 of the Code of Virginia, and the Board's regulations (regulations) are in Chapter 21 of Agency 5, Title 18 of the Virginia Administrative Code (18VAC5-21). The current regulations that address which licensees are required to obtain continuing professional education cite as their precedent two subsections of the statutes that were repealed effective July 1, 2007. The 2007 revisions to the statutes replaced the framework for determining which licensees are required to obtain continuing professional education (framework) in the superseded statutes with a new framework.

A2. The Board's mission is to protect the public, and the Board believes continuing professional education should be required when it is necessary to protect the public. Since many licensees do not provide services to the public, the framework is structured according to two categories of services: services provided to the public and services provided to an employer.

A3. Consistent with its mission of protecting the public, the Board believes licensees who provide services to the public should be required to obtain continuing professional education. However, the number of licensees who provide services to an employer in academia, government, or industry now exceeds the number of licensees who provide services to the public. Those licensees provide a wide variety of services to their employers, and the services often do not require the use of skills a person needs to become licensed.

A4. Services provided to the public generally are three-party engagements: the licensee, the person or entity who engaged the licensee to provide the service, and one or more third-party users of the results of the service provided by the licensee. Services provided to an employer generally are two-party engagements: the licensee and the employer.

A5. While there is no bright line in applying the Board's mission to a two-party engagement, a practical approach that best protects the public is to base the determination of whether continuing professional education is required on the relative importance of the license to the employer. Two illustrations of the notion of relative importance follow.

a. If a licensee becomes a sales representative for an entity, the fact that the person is licensed is not important to the entity and requiring him to obtain continuing professional education would not be consistent with the Board's mission.

b. If a licensee becomes the chief financial officer or the internal auditor of an entity, the fact that he is licensed is important to the entity and requiring him to obtain continuing professional education would be consistent with the Board's mission.

A6. The Board established two criteria for assessing relative importance: whether the services the licensee provides to the employer require the use of skills that are relevant to determining whether the licensee should be required to obtain continuing professional education and whether the licensee uses those skills to fulfill a substantial portion of his responsibilities to the employer.

A7. The framework added to the statutes through the 2007 revisions is based on three definitions that appear in § 54.1-4400 of the Code of Virginia:

a. Continuing professional education means the education that a person obtains after passing the CPA examination and that relates to services provided to an employer in academia, government, or industry using the CPA title or to services provided to the public using the CPA title.

b. Providing services to an employer using the CPA title means providing to an entity services that require the substantial use of accounting, financial, tax, or other skills that are relevant, as determined by the Board.

c. Providing services to the public using the CPA title means providing services that are subject to the guidance of the standard-setting authorities listed in the standards of conduct and practice in subdivisions 5 and 6 of § 54.1-4413.3 of the Code of Virginia.

A8. Under this framework:

a. Continuing professional education is only required when it is necessary to protect the public.

b. Continuing professional education is considered necessary to protect the public when a licensee either:

(1) provides services to the public or

(2) provides services to an employer that require the substantial use of skills that are relevant to determining whether the licensee should be required to obtain continuing professional education.

A9. The statutes do not require a licensee to obtain continuing professional education if he does not provide services to the public and he does not provide services to an employer that require the substantial use of relevant skills. However, the proposed new regulations clarify that in order for a licensee who is not required to obtain continuing professional education to begin providing these services:

a. He is required to have obtained at least 120 hours of continuing professional education prior to providing the services, including an ethics course of at least two hours.

b. Continuing professional education obtained during the three calendar years prior to the current calendar year and from the start of the current calendar year to when he begins providing the services shall be considered in determining whether the licensee has complied with that requirement.

A10. A Roadmap. A roadmap for applying the framework prescribed by the statutes follows.

a. Does the licensee provide services to the public?

(1) If the answer is yes, stop: the licensee is required to obtain continuing professional education.

(2) If the answer is no, go to the next question.

b. Does the licensee provide services to an employer in academia, government, or industry?

(1) If the answer is no, stop: the licensee is not required to obtain continuing professional education.

(2) If the answer is yes, go to the next question.

c. Do the services the licensee provides to the employer require the use of skills that are relevant to determining whether he should be required to obtain continuing professional education?

(1) If the answer is no, stop: the licensee is not required to obtain continuing professional education.

(2) If the answer is yes, go to the next question.

d. Does the licensee use those skills to fulfill a substantial portion of his responsibilities to the employer?

(1) If the answer is no, stop: the licensee is not required to obtain continuing professional education.

(2) If the answer is yes, stop: the licensee is required to obtain continuing professional education.

A11. If a licensee is not required to obtain continuing professional education:

a. He is still permitted to use the CPA title in Virginia.

b. If he begins providing services that would require him to obtain continuing professional education, he will be subject to the continuing professional education requirements prospectively and to protect the public will also be subject to a catch-up requirement that must be met before he begins providing those services.

Appendix B - Practical Illustrations

B1. A series of practical illustrations follows to show how to determine whether a licensee is required to obtain continuing professional education under the new requirements and how the new requirements are less restrictive than the superseded requirements.

B2. Illustration 1. The managing partner of a CPA firm holds a Virginia license and leaves the firm to become the chief executive officer of an entity. She only provides services that would be expected of a chief executive officer. None of those services requires the use of skills that would be relevant to determining whether she should be required to obtain continuing professional education. She is therefore not required to obtain continuing professional education. (The answer would have been the same under the superseded requirements.)

B3. Illustration 2. Change the facts in illustration 1 so that it later becomes apparent that the chief financial officer may leave and not prepare the annual financial statements. The licensee offers to prepare the annual financial statements if the chief financial officer leaves and a replacement cannot be found in time. Preparing financial statements requires the use of skills that are relevant to determining whether the licensee should be required to obtain continuing professional education. However, the licensee has only offered to provide the service. Only services provided are considered under the new framework. She is therefore not required to obtain continuing professional education. (The answer would have been different under the superseded requirements. Since they included offering to provide any services that require the use of accounting skills, she would have been required to obtain continuing professional education. Because the new requirements are less restrictive, the licensee is no longer required to obtain continuing professional education.)

B4. Illustration 3. Change the facts in illustration 2 so that the chief financial officer leaves, a replacement cannot be found in time, and the licensee prepares the annual financial statements. Preparing financial statements requires the use of skills that are relevant to determining whether the licensee should be required to obtain continuing professional education. However, the licensee does not use those skills to fulfill a substantial portion of her responsibilities to the employer. She is therefore not required to obtain continuing professional education. (The answer would have been different under the superseded requirements. Since they included providing any services that require the use of accounting skills, she would have been required to obtain continuing professional education even though this was a special, one-time situation. Because the new requirements are less restrictive, the licensee is no longer required to obtain continuing professional education.)

B5. Illustration 4. The general manager of a car dealership holds a Virginia license. Each year, he prepares the dealership's federal and state income tax returns. Preparing income tax returns requires the use of skills that are relevant to determining whether the licensee should be required to obtain continuing professional education. However, the licensee does not use those skills to fulfill a substantial portion of his responsibilities to the employer. He is therefore not required to obtain continuing professional education. (The answer would have been different under the superseded requirements. Since they included preparing tax returns for an employer, he would have been required to obtain continuing professional education even though he did not use those skills to fulfill a substantial portion of his responsibilities to the employer. Because the new requirements are less restrictive, the licensee is no longer required to obtain continuing professional education.)

B6. If in addition to preparing the dealership's tax returns, the licensee also prepares income tax returns for a few relatives and friends as a side venture, he would be considered to be providing services to the public and is required to obtain continuing professional education. (The answer would have been the same under the superseded requirements.)

B7. Illustration 5. A licensee is a project manager for an entity that develops real estate. His responsibilities include analyzing potential sites for their development potential and making recommendations to the owners of the entity, preparing budgets for projects adopted, and analyzing and reporting significant variances between budgeted and actual results. The development of prospective information and the financial analyses are services that require the use of skills that are relevant to determining whether the licensee should be required to obtain continuing professional education. However, the licensee does not use those skills to fulfill a substantial portion of his responsibilities to the employer. He is therefore not required to obtain continuing professional education. (The answer would have been different under the superseded requirements. They included providing any services that require the use of accounting skills and reports on financial advisory services for an employer. Because the new requirements are less restrictive, the licensee is no longer required to obtain continuing professional education.)

B8. Illustration 6. A licensee is the development director of a not-for-profit organization. A significant part of his responsibilities is consulting with potential donors and their advisors about the income tax and estate tax planning considerations for making contributions to the organization and obtaining and allocating federal and state tax credits. Those services require the use of skills that are relevant to determining whether the licensee should be required to obtain continuing professional education. In addition, the licensee uses those skills to fulfill a substantial portion of his responsibilities to the employer. As a practical matter, the fact that he is licensed was likely an important consideration to the organization in hiring him. He is therefore required to obtain continuing professional education. (The answer would have been the same under the superseded requirements. They included furnishing advice on tax matters for an employer.)

Summary:

This regulatory action is the result of comprehensive revisions to the accountancy statutes that became effective July 1, 2007. This action (i) repeals 18VAC5-21, Board of Accountancy Regulations, in its entirety as the regulations are unnecessary, inconsistent with statute, or obsolete; (ii) adopts as a replacement 18VAC5-22, Board of Accountancy Regulations, that are consistent with changes passed by the 2007 General Assembly, and (iii) replaces emergency regulations expiring November 13, 2010.

The board does not intend for the replacement regulation to make any substantive changes to current practice. The replacement chapter: (i) incorporates by reference statutory definitions; (ii) does not affect fees; (iii) provides requirements for determining whether a person or entity is located in Virginia; (iv) clarifies the circumstances under which the holder of a Virginia license is subject to continuing professional education (CPE) requirements; (v) provides requirements for determining whether the principal place of business is in Virginia; (vi) provides a method for an accrediting organization that is not one of the six major accrediting organizations to demonstrate substantial equivalence to the accreditation process and standards of those organizations; (vii) retains in 18VAC5-22-70 the emergency regulation expiring November 13, 2010, regarding educational prerequisites to sit for the CPA examination through Virginia; (viii) retains generally the provisions of 18VAC5-21-30 regarding examinations but updates and simplifies the language; (ix) clarifies the CPE requirements; (x) prescribes the experience requirement that must be met prior to applying for a license; (xi) clarifies that a person is not required to notify the board that his education, CPA examination, and experience are substantially equivalent to the requirements for obtaining a Virginia license; (xii) clarifies supervision requirements; (xiii) requires that owners of a firm who are not licensees to participate in the firm's activities on a regular, continuous, and substantial basis; (xiv) requires a person who releases or authorizes the release of reports on attest services or compilation services to obtain annual CPE and requires firms providing attest or compilation services to establish policies and procedures regarding the release of, or authorization to release, the reports; (xv) requires a firm to comply with all components of its monitoring program and allows the board to waive the peer review requirement or extend the time for compliance; (xvi) includes provisions for confidential consent orders; and (xvii) requires certain information to be communicated to the board during the application, peer review, or investigation process.

CHAPTER 22
BOARD OF ACCOUNTANCY REGULATIONS

18VAC5-22-10. Definitions.

The definitions in § 54.1-4400 of the Code of Virginia apply to these regulations.

18VAC5-22-20. Fees.

A. The board shall charge the following fees for services it provides:

Processing an application to take the CPA examination	$120
Processing an application for issuance of a Virginia license	$24
Processing an application for the timely renewal of a Virginia license	$24
Additional fee for processing an application for a license renewal that is not timely	$25
Processing an application for reinstatement of a Virginia license	$250
Processing an application for lifting the suspension of the privilege of using the CPA title in Virginia or for lifting the suspension of the privilege of providing attest services or compilation services for persons or entities located in Virginia	$250
Providing an additional wall certificate	$25
Additional fee for not using the online payment option for any service provided by the board	$5

B. All fees for services the board provides are due when the service is requested and are nonrefundable.

18VAC5-22-30. Determining whether persons or entities to whom communications are made, or for whom services are provided, are located in Virginia.

For the purpose of complying with Chapter 44 (§ 54.1-4400 et seq.) of Title 54.1 of the Code of Virginia for communication to persons or entities located in Virginia or providing services for persons or entities located in Virginia, persons are considered to be located in Virginia if their primary residence for federal income tax reporting is located in Virginia, and entities are considered to be located in Virginia if they conduct any activities in Virginia.

18VAC5-22-40. Determining whether a person who holds a Virginia license is providing services to the public using the CPA title or to an employer using the CPA title.

For the purpose of determining whether a person who holds a Virginia license is providing services to the public using the CPA title or to an employer using the CPA title, as those terms are defined in § 54.1-4400 of the Code of Virginia, because of the written information readily available to the public through the board's Internet postings, holding a Virginia license constitutes using the CPA title. Accordingly, a person who holds a Virginia license:

1. Is providing services to the public using the CPA title if he provides services that are subject to the guidance of the standard-setting authorities listed in the standards of conduct and practice in subdivisions 5 and 6 of § 54.1-4413.3 of the Code of Virginia.

2. Is providing services to an employer using the CPA title if he provides to an entity services that require the substantial use of accounting, financial, tax, or other skills that are relevant, as determined by the board.

18VAC5-22-50. Determining whether the principal place of business of a person using the CPA title, or of a firm, is in Virginia.

Complying with subdivision A 1 of § 54.1-4409.1, subsection B of § 54.1-4411, or subsection B of § 54.1-4412.1 of the Code of Virginia requires the person or firm to use reasonable judgment in determining whether Virginia is the principal place of business in which the person provides services to the public using the CPA title or the firm provides attest services or compilation services. The determination shall be reasonable considering the facts and circumstances and can be based on quantitative or qualitative assessments. The determination shall be reconsidered for changes in facts and circumstances that are not temporary.

18VAC5-22-60. Determining whether a college or university is an accredited institution.

A. For the purpose of complying with subdivision A 1 a of § 54.1-4409.2 of the Code of Virginia, a college or university that is not accredited by one of the six major regional accrediting organizations listed in the definition of accredited institution in § 54.1-4400 of the Code of Virginia or their successors shall be considered an accredited institution if it is accredited by an accrediting organization recognized by the Council on Higher Education Accreditation (CHEA) or its successor. Publication of the name of the accrediting organization by CHEA or its successor shall be sufficient notification that the accrediting organization is recognized by CHEA or its successor.

B. To determine whether a college or university is an accredited institution if it is accredited by an accrediting organization that is neither one of the six major regional accrediting organizations or their successors, nor an accrediting organization recognized by CHEA or its successor, representatives of the accrediting organization shall meet with a task force appointed by the board to study and recommend to the board how the organization shall demonstrate that its accreditation process and standards are substantially equivalent to the accreditation process and standards of the six major regional accrediting organizations or their successors. The size and composition of the task force shall depend on the facts and circumstances. However, at least one of the members of the task force shall have substantial experience with the accreditation process and standards of the six major regional accrediting organizations or their successors.

After the task force provides its recommendations to the board, the board shall decide what the requirements shall be to demonstrate that the accreditation process and standards of the accrediting organization are substantially equivalent to the accreditation process and standards of the six major regional accrediting organizations or their successors and shall communicate its decision to the organization. The organization shall then provide the required documentation to the board that will enable the board to decide whether a college or university accredited by the organization is an accredited institution as defined in § 54.1-4400 of the Code of Virginia.

18VAC5-22-70. Education.

A. In order for a person to take the CPA examination through Virginia, he must have obtained from one or more accredited institutions or from the National College at least 120 semester hours of education, a baccalaureate or higher degree, and an accounting concentration or equivalent prior to taking any part of the CPA examination.

B. For the purpose of complying with subsection A of this section and with subdivision A 1 a of § 54.1-4409.2 of the Code of Virginia, obtaining an accounting concentration or equivalent requires obtaining at a minimum:

1. 24 semester hours of accounting courses, including courses in auditing, financial accounting, management accounting, and taxation; and

2. 24 semester hours of business courses, no more than six semester hours of which could be considered accounting courses.

Principles or introductory accounting courses cannot be considered in determining whether a person has obtained the 48 minimum number of semester hours required for an accounting concentration or equivalent.

18VAC5-22-80. Examination.

A. In order to comply with subdivision A 1 b of § 54.1-4409.2 of the Code of Virginia:

1. Each section of the CPA examination must be passed by attaining a uniform passing grade established through a psychometrically acceptable standard-setting procedure approved by the board.

2. Persons may take sections of the CPA examination in any order.

3. A person who fails a section of the CPA examination may not retake that section until the next quarter of the calendar year.

4. When a person first passes a section of the CPA examination, he has 18 months to pass the remaining sections. If the remaining sections are not passed within the 18-month period, the person loses credit for the first section passed, and a new 18-month period starts with the next section passed.

B. Failure to comply with the policies established by the board for conduct at the CPA examination may result in the loss of eligibility to take the CPA examination or credit for sections of the CPA examination passed. Cheating by a person in connection with the CPA examination shall invalidate any grade earned on any section of the CPA examination and may warrant expulsion from the CPA examination site and disqualification from taking the CPA examination for a specified period of time as determined by the board.

C. The board may postpone scheduled CPA examinations, the release of grades, or the issuance of licenses under the following circumstances:

1. A breach of CPA examination security;

2. Unauthorized acquisition or disclosure of the contents of a CPA examination;

3. Suspected or actual negligence, errors, omissions, or irregularities in conducting a CPA examination; or

4. Any other reasonable circumstances.

D. Prior to being considered for a Virginia license, a person shall pass an ethics examination approved by the board.

18VAC5-22-90. Continuing professional education.

A. If during the current calendar year a person who holds a Virginia license provided services to the public using the CPA title, he shall have obtained at least 120 hours of continuing professional education during the three-calendar-year period ending with the current calendar year. For each of the calendar years in that period, he shall have obtained at least 20 hours of continuing professional education, including an ethics course of at least two hours.

1. If the person also holds the license of another state and Virginia is not the principal place of business in which he provides services to the public using the CPA title, the ethics course taken to comply with this subsection either shall conform with the requirements prescribed by the board or shall be an ethics course acceptable to the board of accountancy of another state in which the person holds a license.

2. Otherwise, the ethics course shall conform with the requirements prescribed by the board.

B. If during the current calendar year a person who holds a Virginia license provided services to an employer using the CPA title and did not provide services to the public using the CPA title, he shall have obtained a minimum number of hours of continuing professional education determined as follows:

1. If the current calendar year is 2009 or 2010, the person shall have obtained at least 90 hours of continuing professional education during the three-calendar-year period ending with the current calendar year. For each of the calendar years in that period, he shall have obtained at least 15 hours of continuing professional education, including an ethics course of at least two hours.

2. If the current calendar year is 2011 or later, the person shall have obtained at least 120 hours of continuing professional education during the three-calendar-year period ending with the current calendar year. For each of the calendar years in that period, he shall have obtained at least 20 hours of continuing professional education, including an ethics course of at least two hours.

The ethics course taken to comply with this subsection either shall conform with the requirements prescribed by the board or shall be an ethics course acceptable to the board of accountancy of another state in which the person holds a license.

C. If during the current calendar year a person who holds a Virginia license provided services to the public using the CPA title or to an employer using the CPA title and did not hold a Virginia license or the license of another state during one or both of the two preceding calendar years, he shall determine whether he has complied with the requirements of subsection A or B of this section as follows:

1. If the person became licensed during the current calendar year, he shall be considered to have met the requirements of the subsection for the three-calendar-year period ending with the current calendar year.

2. If the person became licensed during the preceding calendar year, he shall be considered to have met the requirements of the subsection for the three-calendar-year period ending with the current calendar year if during the current calendar year he obtained at least the minimum number of hours of continuing professional education required by the subsection for the current calendar year, including an ethics course of at least two hours.

3. If the person became licensed during the calendar year prior to the preceding calendar year, he shall be considered to have met the requirements of the subsection for the three-calendar-year period ending with the current calendar year if during the current calendar year and the preceding calendar year he obtained at least the minimum number of hours of continuing professional education required by the subsection for each of the years, including for each year an ethics course of at least two hours.

D. If during the current calendar year a person who holds a Virginia license did not provide services to the public using the CPA title or to an employer using the CPA title, he is not required to have obtained continuing professional education during the three-calendar-year period ending with the current calendar year. However, in order to begin providing those services:

1. He is required to have obtained at least 120 hours of continuing professional education prior to providing the services, including an ethics course of at least two hours.

2. The ethics course shall conform with the requirements prescribed by the board for the calendar year in which the person begins providing the services.

Continuing professional education obtained during the three calendar years prior to the current calendar year and from the start of the current calendar year to when he begins providing the services shall be considered in determining whether the person has complied with the requirements of this subsection.

E. If a person who has not held the license of any state applies for a Virginia license after the end of the calendar year in which he passes the CPA examination, he shall obtain continuing professional education prior to applying for the license, including an ethics course of at least two hours.

1. The required minimum number of hours of continuing professional education shall be 40, 80, or 120 depending on whether he applies for the Virginia license by the end of the first calendar year after the calendar year in which he passes the CPA examination, by the end of the second calendar year, or later.

2. The ethics course shall conform with the requirements prescribed by the board for the calendar year in which the person applies for the license.

Continuing professional education obtained subsequent to passing the CPA examination but during the three calendar years prior to the calendar year in which the person applies for the license and from the start of that calendar year to when he applies for the license shall be considered in determining whether he has complied with this requirement.

F. Continuing professional education acceptable to the board may be obtained through a variety of forums, provided there is a means of demonstrating that the education was obtained. The following forums are acceptable:

1. Attendance at seminars and educational conferences, provided that the instructors have appropriate knowledge of the subject matter and use appropriate teaching materials and that attendance is monitored in a manner that can be verified by the board;

2. Taking courses at an accredited institution for credit;

3. Self-study courses, provided there is a method for determining that the person met the learning objectives;

4. Making a presentation at a professional seminar, educational conference, or in a classroom setting, provided the person has appropriate knowledge of the subject matter and uses appropriate teaching materials; and

5. Writing material that is relevant to providing services to an employer using the CPA title or to the public using the CPA title, that is formally reviewed by an independent party, and that is published in a book, magazine, or similar publication that is used by persons who provide services to the public using the CPA title or to an employer using the CPA title.

Whether other forums are acceptable shall be determined by the board on a case-by-case basis.

G. In determining whether a person has obtained the required number of hours of continuing professional education:

1. Repeat presentations shall not be considered.

2. No more than 30 hours from preparing for and making presentations shall be considered during each three-calendar-year period.

3. One semester-hour of credit for courses at an accredited institution constitutes 15 hours of continuing professional education, and one quarter-hour of credit constitutes 10 hours of continuing professional education.

H. Depending on the facts and circumstances, the board may waive all or part of the continuing professional education requirement for one or more calendar years or grant additional time for complying with the continuing professional education requirement, provided that the waiver or deferral is in the public interest.

18VAC5-22-100. Experience.

Prior to applying for a license, a person must have been employed in academia, a firm, government, or industry in any capacity involving the substantial use of accounting, financial, tax, or other skills that are relevant, as determined by the board, to providing services to the public using the CPA title or to an employer using the CPA title for a period that is the full-time equivalent of one year. Whether other skills are relevant shall be determined by the board on a case-by-case basis. Self-employment does not meet the definition of experience in § 54.1-4400 of the Code of Virginia.

18VAC5-22-110. Demonstrating that a person's education, CPA examination, and experience are substantially equivalent to the requirements for obtaining a Virginia license.

Subdivision A 2 of § 54.1-4411 of the Code of Virginia does not require the person to notify the board that the person's education, CPA examination, and experience are substantially equivalent to the requirements for obtaining a Virginia license.

18VAC5-22-120. Supervision of firm personnel.

To comply with subdivision C 2 of § 54.1-4412.1 of the Code of Virginia, a person's work must be planned, supervised, and reviewed by a person who either (i) holds a Virginia license or (ii) holds the license of another state and complies with the substantial equivalency provisions of § 54.1-4411 of the Code of Virginia.

18VAC5-22-130. Owners of firms who are not licensees.

To comply with subdivision D 2 of § 54.1-4412.1 of the Code of Virginia, owners of a firm who are not licensees must be persons who, based on the facts and circumstances, participate in the firm's activities on a regular, continuous, and substantial basis.

18VAC5-22-140. Persons who release or authorize the release of reports.

A. To comply with subdivision D 4 of § 54.1-4412.1 of the Code of Virginia, a person who releases or authorizes the release of reports on attest services or compilation services provided for persons or entities located in Virginia shall annually obtain a minimum of eight hours of continuing professional education related to attest services or compilation services. The hours obtained to meet this requirement shall be considered in determining whether the person has complied with the requirements of 18VAC5-22-90.

B. Firms providing attest services or compilation services shall establish policies and procedures to provide the firm with reasonable assurance that persons who release or authorize the release of reports on attest services or compilation services possess the kinds of competencies that are appropriate given the facts and circumstances. These policies and procedures shall address the required technical proficiency, familiarity with the industry and the person or entity, skills that indicate sound professional judgment, and other competencies necessary under the circumstances.

18VAC5-22-150. Monitoring program and peer review.

In order to comply with subdivision D 6 of § 54.1-4412.1 of the Code of Virginia, a firm shall comply with all components of the monitoring program in which it is enrolled, except that, depending on the facts and circumstances, the board may waive the requirement for a peer review or grant additional time for complying with the requirement.

18VAC5-22-160. Confidential consent agreements.

To determine whether to enter into a confidential consent agreement under subsection A of § 54.1-4413.5 of the Code of Virginia, the board shall consider a violation minor if the board believes that the violation was not intentional misconduct, was not the result of gross negligence, and did not have a significant financial impact on persons or entities. The board shall enter into no more than two additional confidential consent agreements with a person or firm within 10 years after the first confidential consent agreement.

18VAC5-22-170. Communication between the board and licensees.

A. When requested by the board:

1. Persons or firms applying for the issuance, renewal, or reinstatement of a Virginia license or for lifting the suspension of the privilege of using the CPA title in Virginia or providing attest services or compilation services for persons or entities located in Virginia shall provide the board with support for their conclusion that they have complied with applicable provisions of Chapter 44 (§ 54.1-4400 et.seq.) of Title 54.1 of the Code of Virginia and this chapter.

2. Firms shall provide the board with proof of enrollment in a monitoring program and copies of reports and other documentation related to acceptance of their peer reviews.

3. Persons or firms shall provide the board documents related to the board's investigation of their possible violation of provisions of Chapter 44 (§ 54.1-4400 et seq.) of Title 54.1 of the Code of Virginia or this chapter.

Each person or firm shall respond within 30 calendar days to any request for information by the board under this subsection.

B. Each holder of a Virginia license shall notify the board in writing within 30 calendar days of any change in the holder's name or in the postal and electronic addresses where the person or firm may be reached.

C. The board shall transmit license renewal notices electronically unless a person or firm is unable to communicate electronically. However, § 54.1-4413.2 of the Code of Virginia places the responsibility for renewing a Virginia license on its holder, and that responsibility is not affected by whether the holder receives a license renewal notice.