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Unformatted text preview: at all promotional efforts were within the Rules of Conduct.
a) Members must not do through others what they are prohibited from doing
themselves. Copyright © 2012 Gleim Publications, Inc., and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited. www.gleim.com 20 SU 2: Professional Responsibilities 3. Commissions and Referral Fees – Rule 503
a. Prohibited commissions are those received when a member in public practice
1) Recommends or refers
b) 2) To a client any product or service or
Any product or service to be supplied by a client. Also performs for the client
c. An audit,
A compilation reasonably expected to be used by a third party if the
member’s lack of independence is not disclosed, or
d) An examination of prospective financial information (PFI).
A permitted commission must be disclosed to any person or entity to whom the
member recommends or refers a related product or service.
Referral fees are not considered commissions and are permitted if disclosed to the
client. These include
2) Acceptance of a referral fee for recommending or referring any service of a
CPA to anyone
Payment of a referral fee to obtain a client
EXAMPLES q q A member is permitted to purchase a product and resell it to a client. Any profits collected are not considered a
commission because the member had title to the product and assumed the risks of ownership.
A member may not refer for commissions products to audit clients through distributors and agents when the member
is performing any of the services described in Rule 503. A member may not do through others what (s)he cannot
do himself or herself. If the services are not being provided by the member, (s)he may refer the products, provided
(s)he discloses the commission to the client. 4. Form of Organization and Name – Rule 505
e. A member may practice public accounting only in a form of organization allowed by
law or regulation that conforms with resolutions of the AICPA Council.
The firm name must not be misleading.
Names of past owners may be included in the name of the successor firm.
A firm cannot designate itself as “members of the AICPA” unless all CPA owners are
If a firm holds itself out as CPAs or performs audits, reviews, or examination of
prospective financial information, it must have certain attributes:
5) CPAs own a majority of the firm.
A CPA must be responsible for all services.
A non-CPA owner must be active as a member of the firm or its affiliates.
Non-CPA owners cannot hold themselves out as CPAs.
A member must not permit a person (s)he controls to do what is prohibited to
the member by the Code.
a) f. The member also may be responsible for the acts of such a person who is
an associate in the practice of public accounting.
6) Non-CPA owners are not eligible to be AICPA members.
Members may practice not only in corporations and general partnerships but also in
limited liability companies, limited liability partnerships, and other forms permitted by
state law. Copyright © 2012 Gleim Publications, Inc., and/or Gleim Internet, Inc. All rights reserved. Duplication prohibited. www.gleim.com 21 SU 2: Professional Responsibilities g. Ownership of a Separate Business
2) h. A member practicing public accounting may own an interest in a separate
business that performs the services for which standards are established.
If the member controls the separate business, the entity and all its owners and
employees must comply with the Code. a) Absent such control, only the member is subject to the Code.
Alternative Practice Structures (APSs)
2) 3) AICPA requirements emphasize that CPAs remain responsible, financially and
otherwise for the attest work performed to protect the public interest.
However, in an APS, CPAs may own the majority of financial interests in the
attest firm, but substantially all revenues may be paid to another entity for
services and the lease of employees, equipment, etc.
Nevertheless, given the requirements of state law and the AICPA, if the
CPA-owners of the attest firm remain financially responsible under state law,
they are deemed to be in compliance with the financial-interests requirement.
EXAMPLES q q
q q q A partnership may continue to practice using the managing partner’s name as the firm name after (s)he withdraws.
“And Company” should be added to the partnership name.
If a CPA forms a partnership with a non-CPA, the CPA is responsible for the non-CPA’s violation of the Code.
A CPA in partnership with non-CPAs may sign the firm name to a report and below it affix his/her name with the CPA
designation. However, it must be clear that the partnership does not consist entirely of CPAs.
Although members may share an office, have the same employees, etc., they should not use a letterhead with both
their names unless a partnership exists.
CPA firms that are associated for joint advertising and other purposes should practice under their own names and
indicate the association in other ways. In addition to testing the AICPA Code of Professional Conduct, the CPA exam includes ethics and
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This note was uploaded on 04/02/2013 for the course ACCT 7100 taught by Professor Swanson during the Spring '13 term at Valdosta State University .
- Spring '13