8Ed.sol7.2

8Ed.sol7.2 - CASE 7.2 STEPHEN GRAY, CPA Synopsis In 1988,...

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CASE 7.2 STEPHEN GRAY, CPA Synopsis In 1988, the Federal Trade Commission effectively forced the AICPA to allow its members to accept commissions for certain services provided to non-attest clients. By the late 1990s, most state boards of accountancy had grudgingly adopted the AICPA’s new ethical rule governing the receipt of commissions by CPAs. Stephen Gray, a CPA who owned and operated a small accounting practice in south central Mississippi, found himself swept up in the decade-long controversy over CPAs’ receipt of commissions. In 1987, Gray obtained a brokerage’s license and began offering brokerage services through his accounting firm. At the time, Gray realized that the Mississippi State Board of Public Accountancy prohibited CPAs from accepting commissions from their clients. Gray disagreed with that rule, insisting that the state board did not have the authority to ban CPAs from accepting commissions. Gray also believed that the rule was not in the public’s interest. After he began offering brokerage services on a commission basis, Gray took several steps to protect the integrity of his CPA status. He prominently displayed his broker’s license in his office to make clients and potential clients aware of his dual roles, he only accepted commissions from non-attest clients, and he informed his brokerage clients that he would earn commissions on securities trades they placed through him. In 1990, another CPA learned that Gray was offering brokerage services on a commission basis and notified the Mississippi state board. Following a hearing, the state board voted to revoke Gray’s CPA certificate and license to practice, although he retained both while his case was under review. A state court subsequently overturned the state board’s revocation decision only to see its decision reversed by the Mississippi Supreme Court. The latter court ruled that the Mississippi state board had the authority to establish practice and ethical standards for Mississippi CPAs. The supreme court also ruled that the ban on commissions was in the public’s interest and served to protect and promote CPAs’ independence and objectivity. In 1996, the Mississippi state board adopted the AICPA’s rule that allows its members to accept commissions from non-attest clients. In that same year, the state board rescinded its decision to revoke Stephen Gray’s CPA certificate and license to practice. Instead, the state board required Gray’s accounting practice to undergo one year of supervisory review.
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Case 7.2 Stephen Gray, CPA Stephen Gray, CPA—Key Facts 1. In 1987, Stephen Gray, a Mississippi CPA, obtained a broker’s license and began offering brokerage services on a commission basis to non-attest clients, although he realized that doing so violated the ethical code of the Mississippi State Board of Public Accountancy. 2.
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This note was uploaded on 12/12/2010 for the course MGMT 365 taught by Professor G during the Spring '10 term at Bucknell.

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8Ed.sol7.2 - CASE 7.2 STEPHEN GRAY, CPA Synopsis In 1988,...

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