Under what condition should CPAs be allowed to accept commissions and contingent fees?
Historically, CPAs were not allowed to accept commissions and contingent fees. However, when the Federal Trade Commission (FTC) initiated a non-public investigation focusing on the AICPA's commission and contingent fee rules, it concluded that the Institute's rules violated Section 5 of the FTC Act. To end the investigation, AICPA signed a Final Order with the FTC in 1990 narrowing AICPA’s ability to prohibit the acceptance of commissions and contingent fees. The AICPA rules, issued after the FTC Order became effective, prohibit the acceptance of commissions and contingent fees only with respect to clients for whom the AICPA member performs attest (as specifically defined in the Order) services. The AICPA rule also prohibits members from preparing original or amended tax returns or claims for tax refunds for a contingent fee.
In 1997, the AICPA governing Council voted overwhelmingly to adopt all of the recommendations of the AICPA/NASBA Joint Committee on Regulation of the Profession, thereby eliminating the AICPA position on restrictions that had previously existed on fee arrangements. Under the AICPA/NASBA Joint recommendations CPAs can accept commissions with full disclosure, except in situations where the CPA performs certain attest services for a client. CPAs can accept contingent fees for services, except from clients for whom they perform certain attest services and for preparing an original tax return. Contingent fees for preparation of amended tax returns or refund claims are permitted as long as the CPA has a reasonable expectation the claim would be the subject of a substantive review by the taxing authority.
At the same time of entering into the FTC agreement, which only impacted the AICPA membership requirements, the AICPA governing Council endorsed a resolution to encourage states to seek legislation to prohibit the acceptance or payment of any commission by those in the practice of public accountancy.
Importance to CPAs
The public’s image of the accounting profession is affected most by the quality of the services it receives, not by the fee arrangement for those services. As long as fee arrangements are disclosed, clients are free to choose the type of arrangement they want. In the eyes of many, prohibitions against such fee arrangements are viewed as self-serving, anti-competitive and not in the public’s interest. In some cases, clients are not able to pay for services on an hourly basis, and actually prefer a contingent fee basis. In a free market system, the marketplace should dictate fee arrangements as long as they are disclosed to clients, unless there is an overriding public interest, which is the case for attest services.
A provision permitting the acceptance of commissions and contingent fees, as outlined above, is now included in the Uniform Accountancy Act as Sections 14 (n-o). The language is taken from the AICPA Code of Professional Conduct.
The trend has been for states to allow CPAs to accept commissions and contingent fees with 47 states and jurisdictions currently providing for the acceptance of commissions and/or contingent fees.
AICPA Staff Contacts
Lisa Snyder, Professional Ethics, 212.596.6093
Virgil Webb, General Counsel and Trial Board, 202.434.9222
AICPA Code of Professional Conduct
Federal Trade Commission (FTC)