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[1.] Retention
of Records
[Superseded by interpretation 501-1.]
2. Fees:
Collection of Notes Issued in
Payment
Question—A
member's firm made arrangements with a bank to collect notes issued by a client in payment of fees due, and so advised the delinquent client. Is this procedure ethical?
Answer—The
procedure followed does not violate any provision of the Code.
3. Employment
by Non-CPA Firm
Question—A
member is considering employment with a public accounting firm made up of one or more non-CPA practitioners. If he or she is employed by such a firm, what are his or her responsibilities under the Rules of Conduct?
Answer—A
member so employed must comply with all the Rules of Conduct. If he or she becomes a partner in such a firm, he or she will then in addition be held responsible for compliance with the Rules of Conduct by all persons associated with him or her.
[4.] Association
Employee
[5.] Association
as an Agent
[6.] Associations,
Speaking Engagements
[8.] Change
of Control of Client Company
[9.] Charity
Solicitation by Phone
[12.] Confirmation
Requests
[13.] Confirmation
Stickers
[16.] Letter
on Behalf of Client
[17.] Letterhead
for Estate Practice
[18.] Letterhead
for Promotional Material
[19.] Mailings
to Accountants
[20.] Trade
Association Analysis
[21.] Trade
Association Survey
[22.] Management
Consultant
[23.] Tax
Work Obtained Through Bookkeeper
[24.] Advertising
on Tax Broadcast
[25.] Alumni
Magazine Announcement
[26.] Brochure
Showing Use of Equipment
[27.] Client
Publishing Article on Member's
Software Program
[28.] Business
Card on Newsletter
[30.] Charitable
Contribution
[31.] Congratulatory
Message
[32.] Copyright
for Wheel Computer and
Tax Withholding Tables
Question—What
responsibility does a member have for the information included in advertising material used to promote a course which he or she has been asked to conduct?
Answer—It
is of value to prospective students to know the instructor's background—such as degrees he or she holds, professional society affiliations, and the name of his or her firm. The member has the responsibility to ascertain that all promotional efforts are within the bounds of rule 502 [ET section 502.01].
[34.] Course
Promotional Circular
[36.] CPA-Author
of Book Review
[37.] CPA-Authored
Articles
38. CPA
Title, Controller of Bank
Question—A
member not in public practice is controller of a bank. May the member permit the bank to use his or her CPA title on bank stationery and in paid advertisements listing the officers and directors of the bank?
Answer—The
use of the CPA title on bank stationery by a member not in public practice is proper. It would also be proper for the CPA title of the member to appear in paid advertisements of the bank that list the officers and directors.
[39.] CPA
Title Imprinted on Checks
[40.] CPA
Title in Campaign for School
Board Membership
[41.] CPA
Title in Lecture Ad
[42.] CPA
Title in Political Endorsement
[43.] CPA
Designation in Speaker's Qualifications
[44.] CPA
Designation of Speaker Named
in Tax Forum Ad
[45.] CPA
Title on Agency Letterhead
[46.] CPA
Title on Employment Agency Letterhead
[47.] Low-Income
Taxpayers
[48.] CPA
Title on Public Official's Match
Folder
[49.] CPA
Designation on Research Reports
[50.] Data
Processing Program Ad in Technical
Publications
[51.] Directories
in Elevator
[52.] Directory,
Alphabetical
[53.] Directory,
Chamber of Commerce Buyer's
Guide
[54.] Directory,
Trade Association
[55.] Directory
Listing, Bank Auditors
[56.] Directory
Listing, Change in Telephone
Number Announcements
[57.] Directory
Listing, Fraternity
[58.] Directory
Listing, "Lawyer-CPA-Tax
Attorney"
[59.] Directory
Listing, Membership Designation
[60.] Directory
Listing, Multiple
[62.] Directory
Listing, Partners' Names
[63.] Directory
Listing, White Pages
[Superseded February 1976]
[64.] Directory,
Trade Association
[65.] Distribution
of Firm Bulletin to
Publisher
[66.] Distribution
of Firm Literature
[67.] Firm
Publications: Annual Financial
Report
[68.] Employment
Ads: "Situations Wanted"
[69.] Firm
Name in Staff Training Manual
[70.] CPA
Title on License Plates
[71.] Firm
Name on Bowling Shirts
[72.] Firm
Name on Desk Calendars
[73.] Firm
Name on EDP Publication
[74.] Firm
Name on Tax Booklet
[75.] Greeting
Cards to Clients
[77.] Letterhead:
Academic Degrees
78. Letterhead:
Lawyer-CPA
Question—May
a member who is also admitted to the Bar represent him or herself on his or her letterhead as both an attorney and a CPA, or should he or she use separate letterheads in the conduct of the two practices?
Answer—The
Code does not prohibit the simultaneous practice of accounting and law by a member licensed in both professions. Either a single or separate letterheads may be used, provided the information with respect to the CPA designation complies with rule 502 [ET section 502.01].
However, the member should also consult the rules of the applicable Bar Association.
[79.] Letterhead:
Tax Specialization
[83.] Nonpractitioner
in Sales Brochure
[84.] Paid
for by Others, Member's Testimonial
Letter
[85.] Paid
for by Others, Member's Testimonial
Letter
[86.] Paid
for by Others, Name in Client
Ad
[87.] Paid
for by Others, Radio Program
Dedication
[88.] Political
Endorsement
[89.] Postage
Meter Machines
[91.] Press
Release on Change in Staff
[92.] Press
Release on Change in Staff
[93.] Press
Release on Society Chapter
Meeting
[94.] Professorship
Named After CPA
[95.] Qualifications
as Attachment to Report
[96.] Resume
for Lender's Information
[97.] Seminar
Announcement
[98.] Signs
on Office Premises
[99.] Signs
on Office Premises
[100.] Specialization
on Business Card
[101.] Specialization,
Acquisitions &
Mergers
[102.] Specialization:
"Tax Accountant"
Designation by Nonpractitioner
[103.] Recruiting
Ad in Employment Guide
or Career Opportunity Guide
[104.] Staff
Recruiting in University Publication
[105.] Announcement
Card: Elected to Vice
Presidency
[106.] Information
Under Telephone Directory
Heading
[107.] Member
as Consultant for Client's
Customers
108. Member
Interviewed by the Press
Question—What
ethical standards should a member observe when he or she is interviewed by the press?
Answer—When
interviewed by a writer or reporter, the member should observe the limitations imposed on him or her by the Rules of Conduct. The member may not provide the press with any information for publication that he or she could not publish him or herself.
[109.] Compensation
From Nonpractitioners
[110.] Computer
Service Franchise
[111.] Purchase
of Bookkeeping Practice
[113.] Member's
Spouse as Insurance Agent
[114.] Member's
Firm Paying Employee Bonuses
117. Consumer
Credit Company Director
Question—A
consumer credit company purchases installment sales contracts from retailers and receives payments from consumers. May a practicing CPA serve as a director or officer of such a corporation?
Answer—Yes,
as long as he or she does not audit the corporation and does not participate in matters which might involve a conflict of interest.
[121.] Insurance
Salesman
[122.] Investment
Advisor
[124.] Mutual
Fund Salesman
[125.] Private
Investor in Business and
Real Estate
[126.] Real
Estate Broker
[128.] State
Secretary of Revenue
[131.] Bookkeeping
Service as Feeder
[132.] Tax
Practice: Conflict of Interest
[133.] Member
Employed by Incorporated
Law Firm
134. Association
of Accountants Not Partners
Question—Two
members who are not partners share an office, have the same employees, have a joint bank account, and work together on each other's engagements. Would it be proper to have a joint letterhead showing both names, "Certified Public Accountants," and their addresses?
Answer—In
these circumstances the public would assume that a partnership existed. If any reports were to be issued under the joint heading, rule 505 [ET section 505.01]
would be violated.
Members should not use a letterhead showing the names of two accountants when a partnership does not exist.
135. Association
of Firms Not Partners
Question—Three
CPA firms wish to form an association—not a partnership—to be known as "Smith, Jones & Associates." Is there any impropriety in this?
Answer—The
use of such a title is not permitted since it might mislead the public into thinking a true partnership exists. Instead, each firm is advised to use its own name on its letterhead, indicating the other two as correspondents.
136. Audit
with Former Partner
Question—A
member's firm consisting of one certified and one noncertified partner has been dissolved. One account was retained which the two practitioners plan to continue to service together. Should the audit report be submitted on partnership stationery?
Answer—It
would appear proper for the audit to be carried out jointly by the two former partners. The opinion should be presented on plain paper and signed somewhat as follows:
John Doe, Certified Public Accountant
Richard Roe, Accountant
Such a signature would leave no doubt as to whether a partnership existed, and the client and others would have the assurance that both accountants participated in the audit.
137. Nonproprietary
Partners
Question—A
member's firm wishes to institute the designation "nonproprietary partner" to describe certain high-ranking staff who were former partners of merged firms who did not qualify for partnership in the merging firm. With this title, they would be eligible to participate in the firm's pension plan. In holding themselves out to the public they would be required to use this designation. Is there any impropriety in the proposed title?
Answer—The
use of the designation "partner" should be restricted to those members of the firm who are legally partners. Those who are not parties to the partnership agreement should not hold themselves out in any manner which might lead others to believe that they are partners. The use of the designation "nonproprietary partner" by one who is not in fact a partner is considered misleading and therefore is not permitted.
138. Partner
Having Separate Proprietorship
Question—May
a member be a partner of a firm of public accountants, all other members of which are noncertified, and at the same time retain for him or herself a practice of his or her own as a CPA?
Answer—Rule
505 [ET section 505.01]
would not prohibit such a practice. However, clients and others interested should be advised about the dual position of the member to prevent any misunderstanding or misrepresentation.
[139.] Partnership
with Non-CPA
Question—A
member's firm, consisting of four members, practices under the name of the managing partner who is presently seeking election to high public office. If he or she is elected and withdraws from the partnership, may the three remaining partners continue to use the present firm name?
Answer—It
would not be a violation for the three remaining partners to continue to practice under the name of the managing partner followed by the designation "and Company."
141. Responsibility
for Non-CPA Partner
Question—Is
a member who has formed a partnership with a noncertified public accountant ethically responsible for all the acts of the partnership?
Answer—Yes.
If the noncertified partner should violate the Code, the member would be held accountable.
[143.] Partnership
With Non-CPA
144. Title:
Partnership Roster
Question—Is
there any prohibition in the Code to the use of an established firm name in a different state where there is some difference in the roster of partners?
Answer—It
would be proper for the firm to use the established name in different states even though the roster of partners differed as long as the firm otherwise complies with rule 505 [ET section 505.01].
145. Firm
Name of Merged Partnerships
Question—When
two partnerships merge, is it permissible for the newly merged firm to practice under a title which includes the name of a partner who had retired from one of the two firms prior to the merger?
Answer—Rule
505 [ET section 505.01]
of the Code of Professional Conduct states that partnerships may practice under a firm title which includes the name or names of former partners. Since the retired partner was once a partner in one of the merged firms, it would be proper for his or her name to appear in the title of a newly created firm.
[146.] Membership
Designation
[149.] Data
Processing: Accounting and
Bookkeeping Assistance
[150.] Data
Processing: Billing Service
[151.] Data
Processing: Computer Center
[152.] Data
Processing: Computer Center
[153.] Data
Processing: Computer Center
[154.] Data
Processing: Computer Center,
Service Bureau as Client
[155.] Data
Processing: Computer Corporation
[156.] Data
Processing: Consultant to Service
Bureaus
[157.] Data
Processing: Employee Not in
Practice
[158.] Operation
of Separate Data Processing
Business by a Public Practitioner
[159.] Data
Processing: Fees Paid to Other
CPAs
[160.] Data
Processing: Forwarding Fees
[161.] Time-Sharing
Computer Programs Developed
by Member's Firm
[162.] CPA
Designation on Professional
Organization Letterhead
[163.] Distribution
of Firm Publications
to News Media
[164.] Nonclients
on Firm Publication Mailing
List
[165.] Sale
of Firm Publications
[166.] Announcement
of Member's Withdrawal
from Firm
[167.] Member
Receiving Payment for Referral
of Client to Others
[168.] Audit
Guides Issued by Governmental
Agencies
[Superseded by interpretation 501-3.]
[169.] Firm
Publications, Distribution
to Client's Board of Directors
[170.] Sponsor's
Announcement of Member's
Participation in Educational Seminar
[171.] CPA
Designation on Professional
Organization or Corporation Letterhead
[172.] Outside
Review of Firm Publication
[173.] Use
of Credit Cards for Payment
of Professional Services
[174.] Directory
Listing, White Pages
[Replaced by ruling No. 85 under rule of conduct 102
and ruling No. 18 under rule of conduct 301.]
176. Member's
Association With Newsletters
and Publications
Question—May
a newsletter, tax booklet, or similar publication be attributed to a member or a member's firm (member) if it has not been prepared by the member?
Answer—Yes,
provided that the member has a reasonable basis to conclude that the information contained therein that is attributed to the member is not false, misleading, or deceptive.
[Replaces previous ruling No. 176, Newsletters and Publications Prepared by Others,
effective August 31, 1989. Revised, effective November 30, 1997, by the Professional Ethics Executive Committee.]
177. Data
Processing: Billing Services
Question—A
member in public practice plans to form a separate business to perform centralized billing services for local doctors. The member maintains that this service, which is similar to one currently offered and advertised by a local bank, does not constitute the practice of public accounting and that rules 502 [ET section 502.01]
and 505 [ET section 505.01]
do not apply. Is the member correct in this conclusion?
Answer—No,
the service in question does in fact constitute service of a type performed by public accountants and consequently the member could proceed with this plan only if the operation were conducted in accordance with the Institute's rules of conduct.
[178.] Location
of Separate Business
179. Practice
of Public Accounting Under
Name of Association or Group
Question—Several
CPA firms wish to form an association or group whereby certain joint advertising, training, professional development and management assistance will take place. The firms will otherwise remain separate and distinct. Would it be proper for such firms to practice public accounting under the name of an association or group in the United States?
Answer—The
practice of public accounting under such a name in the United States is not permitted since it would be likely to confuse the public as to the nature of the actual relationship which exists among the firms. Instead, each firm should practice only in its own firm name and may indicate the association or group name elsewhere on the firm stationery. Each firm may also list on its stationery the names of the other firms in the association or group.
[180.] Side
Business Which Offers Services
of a Type Performed by CPAs
[181.] Sale
of a Practice—Purchase of Accounts
[182.] Termination
of Engagement Prior
to Completion
[Deleted April 30, 2006.]
183. Use
of the AICPA Personal Financial
Specialist Designation
Question—In
what circumstances may a firm include the AICPA-awarded designation "Personal Financial Specialists" on the firm's letterhead and in marketing materials?
Answer—It
is permissible under rule 502 [ET section 502.01]
for the designation "Personal Financial Specialists" (PFS) to be used on a firm's letterhead and in marketing materials if all partners or shareholders of the firm currently have the AICPA-awarded designation. An individual member who holds the designation may use it after his or her name.
184. Definition
of the Receipt of a Contingent
Fee or a Commission
Question—Rules
302 [ET section 302.01]
and 503 [ET section 503.01]
prohibit, among other acts, the receipt of contingent fees for the performance of certain services and the receipt of a commission for the referral of products or services under certain circumstances. When is a contingent fee or commission deemed to be received?
Answer—A
contingent fee or commission is deemed to be received when the performance of the related services is complete and the fee or the commission is determined. For example, if in one year a member sells a life insurance policy to a client and the member's commission payments are determined to be a fixed percentage of future years' renewal premiums, the commission is deemed to be received in the year the policy is sold.
185. Sale
of Products to Clients
Question—May
a member purchase a product from a third-party supplier and resell the product to a client without violating rule 503 [ET section 503.01]?
Answer—Yes.
If a member purchases a product and resells it to a client, any profit on the sale would not constitute a commission. Purchasing entails taking title to the product and having all the associated risks of ownership.
186. Billing
for Subcontractor's Services
Question—A
member has contracted with a computer-hardware maintenance servicer to provide support for a client's computer operations. Would it be a violation of rule 503 [ET section 503.01]
for that member to bill the client a higher service fee than that charged the member by the service provider?
Answer—No.
The increased fee would not constitute a commission.
187. Receipt
of Contingent Fees or Commissions
by Member's Spouse
Question—May
a member's spouse provide services to the member's attest client for a contingent fee or refer products or services for a commission to or from the member's attest client without causing the member to be in violation of rule 302 [ET section 302.01]
or rule 503 [ET section 503.01]?
Answer—Yes,
if the activities of the member's spouse are separate from the member's practice and the member is not significantly involved in those activities. The member, however, should consider whether a conflict of interest may exist as described in rule 102 [ET section 102.01]
and interpretation 102-2 [ET section 102.03].
188. Referral
of Products of Others
Question—A
member refers computer products of wholesalers to clients of the firm through distributors and agents. A payment is received by the member from the wholesaler if the clients purchase the computer products. Must the member consider rule 503 [ET section 503.01]
in connection with this payment?
Answer—Yes.
Section 91.02 [ET section 91.02]
of the Code of Professional Conduct provides that a member shall not permit others to perform acts on behalf of the member that, if carried out by the member, would place the member in violation of the rules. Therefore, the member would be held responsible for the actions of the distributors and agents.
Rule 503 [ET section 503.01]
provides that, if a member or the member's firm performs for a client a service described in rule 503 [ET section 503.01],
the member may not recommend or refer to that client for a commission any product or service, or receive a commission for a recommendation or referral. This prohibition applies during the period in which the member is engaged to perform any of the services described in rule 503 [ET section 503.01]
and during the period covered by any historical financial statements in such services.
If the products are referred on a commission basis to clients for which the member is not engaged to perform any of the services described in rule 503 [ET section 503.01],
rule 503 [ET section 503.01]
would not be violated as long as the commission is disclosed to the client. However, any subsequent performance of services described in rule 503 [ET section 503.01]
during a period in which the commission was received would constitute a violation of rule 503 [ET section 503.01].
189. Requests
for Records Pursuant to Interpretation
501-1
Question—Individuals
associated with a client entity who are currently on opposing sides in an
internal dispute have each issued separate requests calling for the member
to supply them with records pursuant to interpretation 501-1
[ET section 501.02].
Does
the member have to comply with all such requests?
Answer—In
providing
professional services to individuals, partnerships, or corporations, a member
will usually deal with an individual who has been designated or held out as
the client's representative. Such a representative might include, for example,
a general partner or a majority shareholder. A member who has provided the
records to the individual designated or held out as the client’s representative
has no obligation to provide such records to other individuals associated
with the client.
[Revised, effective April 30, 2006, by the Professional
Ethics Executive Committee.]
Question—May
a member who is in partnership with non-CPAs sign reports with the firm name and below it affix his or her own signature with the designation "Certified Public Accountant"?
Answer—This
would not be improper, provided it is clear that the partnership itself is not being held out as composed entirely of CPAs.
[Formerly ruling No. 7 under section 291. Transferred from section 291.013-.014, April 1995.]
191. Member
Removing Client Files From
an Accounting Firm
Question—If
the relationship of a member who is not an owner of a firm is terminated, may he or she take or retain originals or copies from the firm's client files or proprietary information without the firm's permission?
Answer—No,
except where permitted by contractual arrangement.
[Revised, effective December 31, 1998, by the Professional Ethics Executive Committee.]
192. Commission
and Contingent Fee Arrangements
With Nonattest Client
Question—A
member or member’s firm (member) provides for a contingent fee investment advisory services, or refers for a commission products or services of a nonclient or a nonattest client, to the owners, officers, or employees of an attest client or to a nonattest client employee benefit plan sponsored by an attest client. Would the member be considered to be in violation of either rule 302 [ET section 302.01]
or rule 503 [ET section 503.01]?
Answer—No.
The member would not be in violation of either rule 302 [ET section 302.01]
or rule 503 [ET section 503.01]
provided that, with respect to rule 503 [ET section 503.01],
the member discloses the commission to the owners, officers, or employees or to the employee benefit plan. The member should also consider the applicability of interpretation 102-2, Conflicts of Interest
[ET section 102.03],
and his or her professional responsibility to clients under Rule 301, Confidential
Client Information
[ET section 301.01].
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