Chapter 20-12 CODE OF PROFESSIONAL CONDUCT
| (1) |
This Code of
Professional Conduct is promulgated under the authority granted by Code Section
43-3-8(a)(2),
which delegates to the Board the power and duty to prescribe rules of
professional conduct for establishing and maintaining high standards of
competence and integrity in the profession of public accountancy. |
| (2) |
The Rules of Conduct set out below rest
upon the premises that the reliance of the public in general, and of the
business community in particular, on sound financial reporting, and, on the
implication of professional competence which inheres in the authorized use of a
legally restricted title relating to the practice of public accountancy, impose
on individuals engaged in such practice certain obligations both to their
clients and to the public. These obligations, which the Rules of Conduct are
intended to enforce where necessary, include the obligation to maintain
independence of thought and action, to strive continuously to improve one's
professional skills, to observe where applicable generally accepted accounting
principles and generally accepted auditing standards, to promote sound and
informative financial reporting, to hold the affairs of clients in confidence,
to uphold the standards of the public accountancy profession, and to maintain
high standards of personal conduct in all matters affecting one's fitness to
practice public accountancy. |
| (3) |
Acceptance of licensure to engage in the practice of public accountancy, or to
use titles which imply a particular competence so to engage, involves
acceptance by the licensee of such obligations, and accordingly of a duty to
abide by the Rules of Conduct. |
| (4) |
The Rules of Conduct are intended to have application to all kinds of
professional services performed in the practice of public accountancy,
including tax and management advisory services, and to apply as well to all
licensees, whether or not engaged in the practice of public accountancy, except
where the wording of a Rule clearly indicates that the applicability is more
limited. |
| (5) |
A licensee who is
engaged in the practice of public accountancy outside the United States will
not be subject to discipline by the Board for departing, with respect to such
foreign practice, from any of the Rules so long as his or her conduct is in
accordance with the standards of professional conduct applicable to the
practice of public accountancy in the country in which he or she is practicing.
However, even in such case, if a licensee's name is associated with financial
statements in such manner as to imply that he or she is acting as an
independent public accountant and under circumstances that would entitle the
reader to assume that United States practices are followed, he or she will be
expected to comply with Rules
20-12-.08 and
20-12-.09. |
| (6) |
In the interpretation and enforcement of
the Rules of Conduct, the Board will give consideration, but not necessarily
dispositive weight, to relevant interpretations, rulings and opinions issued by
the Boards of other jurisdictions, and by appropriately authorized committees
on ethics of professional organizations. |
A licensee shall not express an opinion on financial statements
of an enterprise in such a manner as to imply that he or she is acting as an
independent public accountant with respect thereto unless he or she is
independent with respect to such enterprise. Independence will be considered to
be impaired if, for example:
| (a) |
During the period of his or her professional engagement, or at the time of
expressing his or her opinion, the licensee:
| 1. |
Had or was committed to acquire any direct
or material indirect financial interest in the enterprise; or |
| 2. |
Was a trustee of any trust or executor or
administrator of any estate if such trust or Estate had or was committed to
acquire any direct or material indirect financial interest in the enterprise;
or |
| 3. |
Had any joint closely-held
business investment with the enterprise of any officer, director or principal
stockholder thereof which was material in relation to the net worth of either
the licensee or the enterprise; or |
| 4. |
Had any loan to or from the enterprise or
any officer, director or principal stockholder thereof other than loans of the
following kinds made by a financial institution under normal lending
procedures, terms and requirements:
| (i) |
Loans
obtained by the licensee which are not material in relation to the net worth of
the borrower; |
| (iii) |
Other secured loans,
except those secured solely by a guarantee of the licensee. |
|
|
| (b) |
During the period
covered by the financial statements, during the period of the professional
engagement, or at the time of expressing an opinion, the licensee:
| 1. |
Was connected with the enterprise as a
promoter, underwriter or voting trustee, a director or officer or in any
capacity equivalent to that of a member of management or of an employee;
or |
| 2. |
Was a trustee for any pension
or profit-sharing trust of the enterprise. |
|
| (c) |
The foregoing examples are not intended
to be all-inclusive. |
A licensee shall not in the performance of professional
services knowingly misrepresent facts, nor subordinate his or her judgment to
others. In tax practice, however, a licensee may resolve doubt in favor of his
or her client as long as there is reasonable support for his or her
position.
| (1) |
"Commission"
means any item of value given or received by a licensee to or from any third
party in return for suggesting the purchase of any product or
service. |
| (2) |
A licensee shall not
recommend or refer to a client any product or service in exchange for a
commission, recommend any product or service to be supplied by his or her
client to a third party, or receive a commission when the licensee or the
licensee's firm also performs for that client:
| (a) |
An audit or review of a financial
statement; |
| (b) |
A compilation of a
financial statement when the licensee expects or reasonably might expect that a
third party will use the financial statement and the licensee's report does not
disclose a lack of independence; or |
| (c) |
An examination of prospective financial
information. |
|
| (3) |
The
prohibition of subsection (2) of this section applies during the period in
which the licensee is engaged to perform any of the services listed in
subsection (2)(a), (b), and (c) and the period covered by any historical
financial statements involved in the listed services. |
| (4) |
A licensee who is not prohibited from
receiving a commission and who is paid or expects to be paid a commission shall
disclose that fact, in writing, to any individual or entity to whom the
licensee recommends or refers a product or service to which the commission
relates. |
| (5) |
A licensee who accepts
a fee for recommending or referring any service of another licensee to any
individual or entity or who pays a fee to obtain a client shall disclose, in
writing, the receipt or payment of the fee to the client. |
| (6) |
This rule shall not prohibit:
| (a) |
Payments for the purchase of an
accounting practice; or |
| (b) |
Retirement payments to individuals, and their heirs or estates, who were
formerly engaged in the practice of public accountancy. |
|
| (1) |
"Contingent fee" means a fee established
for the performance of any public accountancy service pursuant to a written or
oral agreement in which no fee will be charged unless a specified finding or
result is attained, or in which the amount of the fee is otherwise dependent
upon the finding or result of the service. |
| (2) |
A licensee shall not accept or perform
any public accountancy services for a contingent fee or receive a contingent
fee from a client for whom the licensee or the licensee's firm performs:
| (c) |
A compilation of a financial statement
when the licensee expects or reasonably might expect that a third party will
use the financial statement and the licensee's report does not disclose a lack
of independence; or |
| (d) |
An
examination of prospective financial information. |
|
| (3) |
The prohibition of subsection (2) of this
section applies during the period of time in which the licensee is engaged to
perform those services and the period covered by any historical financial
statements involved in those services. |
| (4) |
A licensee in public practice shall not
prepare for a contingent fee:
| (a) |
An original
or amended tax return or claim for a tax refund. Preparation of an original or
amended tax return or claim for tax refund includes giving advice on events
which have occurred at the time the advice is given if such advice is directly
relevant to determining the existence, character, or amount of a schedule,
entry, or other portion of a return or claim for refund; or |
| (b) |
An amended federal or state income tax
return for a client claiming a refund of taxes because a deduction was
inadvertently omitted from the return originally filed when there is no
question as to the propriety of the deduction, rather the claim is filed to
correct an omission. |
|
| (5) |
The following are examples of circumstances where a contingent fee would be
permitted regardless of whether the licensee or licensee's firm is performing
the services specified in subsection (2) of this section:
| (a) |
Representing a client in an examination
by a revenue agent of the client's federal or state income tax
return; |
| (b) |
Filing an amended
federal or state income tax return claiming a tax refund based on a tax issue
that is either the subject of a test case by a different taxpayer or with
respect to which the taxing authority is developing a position; |
| (c) |
Filing an amended federal or state income
tax return or refund claim which claims a tax refund in an amount greater than
the threshold for review by the Joint Committee on Internal Revenue Taxation or
state taxing authority; |
| (d) |
Requesting a refund of either overpayments of interest or penalties charged to
a client's account or deposits of taxes improperly accounted for by the federal
or state taxing authority in circumstances where the taxing authority has
established procedures for the substantive review of such refund
requests; |
| (e) |
Requesting, by means
of protest or similar document, consideration by the state or local taxing
authority of a reduction in the assessed value of property under an established
taxing authority review process for hearing all taxpayer arguments relating to
assessed value; or |
| (f) |
Representing
a client to obtain a private letter ruling or influencing the drafting of a
regulation or statute. |
|
| (6) |
Fees shall not be considered as
contingent:
| (a) |
If fixed by courts or other
public authorities; or |
| (b) |
In tax
matters if determined based on the results of judicial proceedings or the
findings of governmental agencies. A fee is considered determined based on the
findings of governmental agencies, if the licensee can demonstrate a reasonable
expectation at the time of the fee arrangement, of substantive consideration by
an agency with respect to the licensee's client. The expectation is deemed not
reasonable in the case of preparation of original tax returns. |
|
| (7) |
Fees may vary depending on the
complexity of services rendered. |
A licensee shall not concurrently engage in the practice of
public accountancy and in any other business or occupation which impairs his or
her independence or objectivity in rendering professional
services.
A licensee shall not undertake any engagement for the
performance of professional services which he or she cannot reasonably expect
to complete with due professional competence, including compliance, where
applicable, with Rules
20-12-.08 and
20-12-.09.
A licensee shall not permit his or her name to be associated
with financial statements in such a manner as to imply that he or she is acting
as an independent public accountant with respect to such financial statements
unless he or she has complied with applicable generally accepted auditing
standards. Statements on Auditing Standards issued by the American Institute of
Certified Public Accountants, and other pronouncements having similar generally
recognized authority, are considered to be interpretations of generally
accepted auditing standards, and departures therefrom must be justified by
those who do not follow them.
A licensee shall not express an opinion that financial
statements are presented in conformity with generally accepted accounting
principles if such financial statements contain any departure from such
accounting principles which has a material effect on the financial statements
taken as a whole, unless the licensee can demonstrate that by reason of unusual
circumstances the financial statements would otherwise have been misleading. In
such a case, the licensee's report must describe the departure, the approximate
effects thereof, if practicable, and the reasons why compliance with the
principle would result in a misleading statement. For purposes of this Rule
generally accepted accounting principles are considered to be defined by
pronouncements issued by the Financial Accounting Standards Board and its
predecessor entities and similar pronouncements issued by other entities having
similar generally recognized authority.
A licensee shall not in the performance of professional
services permit his or her name to be used in conjunction with any forecast of
future transactions in a manner which may reasonably lead to the belief that
the licensee vouches for the achievability of the forecast.
A licensee shall not without the consent of his or her client
disclose any confidential information pertaining to his or her client obtained
in the course of performing professional services.
| (a) |
This Rule does not:
| 2. |
Affect in any way a licensee's obligation
to comply with a validly issued subpoena or summons enforceable by order of a
court; or |
| 3. |
Prohibit disclosures
in the course of a quality review of a licensee's professional services;
or |
| 4. |
Preclude a licensee from
responding to any inquiry made by the Board or any investigative or
disciplinary body established by law or formally recognized by the
Board. |
|
| (b) |
Members of
the Board and professional practice reviewers shall not disclose any
confidential client information which comes to their attention from licensees
in disciplinary proceedings or otherwise in carrying out their
responsibilities, except that they may furnish such information to an
investigative or disciplinary body of the kind referred to above. |
A licensee shall furnish to his or her client or former client,
upon request made within a reasonable time:
| (a) |
Any accounting or other records belonging
to, or obtained from or on behalf of, the client which the licensee removed
from the client's premises or received for the client's account, but the
licensee may make and retain copies of such documents when they form the basis
for work done by him or her; and |
| (b) |
A copy of the licensee's working papers,
to the extent that such working papers include records which would ordinarily
constitute part of the client's books and records and are not otherwise
available to the client. |
A licensee shall not commit any act that reflects adversely on
his or her fitness to engage in the practice of public
accountancy.
A licensee shall not permit others to carry out on his or her
behalf, either with or without compensation, acts which, if carried out by the
licensee would place him or her in violation of the Rules of
Conduct.
| (1) |
A licensee shall not use or participate
in the use of any form of public communication having reference to his or her
professional services which contains a false, fraudulent, misleading, deceptive
or unfair statement or claim. A false, fraudulent, misleading, deceptive or
unfair statement or claim includes but is not limited to a statement or claim
which:
| (a) |
Contains a misrepresentation of
fact; or |
| (b) |
Is likely to mislead
or deceive because it fails to make full disclosure of relevant facts;
or |
| (c) |
Contains any testimonial or
laudatory statement, or other statement or implication that the licensee's
professional services are of exceptional quality if not supported by verifiable
facts; or |
| (d) |
Is intended or likely
to create false or unjustified expectations of favorable results; or |
| (f) |
Implies educational or professional
attainments or licensing recognition not supported in fact; or States or
implies that the licensee has received formal recognition as a specialist in
any aspect of the practice of public accountancy, except in accordance with
Rules adopted by the Board; or |
| (g) |
Represents that professional services can or will be competently performed for
a stated fee when this is not the case, or makes representations with respect
to fees for professional services that do not disclose all variables affecting
the fees that will in fact be charged; or |
| (h) |
Contains other representations or
implications that in reasonable probability will cause an ordinarily prudent
individual to misunderstand or be deceived. |
|
| (2) |
A licensee shall not by any communication
use coercion, duress, compulsion, intimidation, threats, overreaching, or
vexatious or harassing conduct in the course of offering, soliciting, or
advertising to perform an engagement. |
| (1) |
A licensee may practice public
accountancy only in a partnership, an association, a corporation, or any legal
entity which practices public accountancy. |
| (2) |
A CPA or foreign accountant may only
practice public accountancy in any legal entity in which a simple majority of
the financial interests and voting rights are owned by CPAs in good standing in
this state or any other state. |
A licensee shall not practice public accountancy under a firm
name which is misleading in any way as to the legal form of the firm or as to
the individuals who are partners, members, officers or shareholders of the
firm, or as to any matter with respect to which public communications are
restricted by Rule
20-12-.15. However, the names of one
or more past CPA owners may be included in the name of a firm or its successor,
and a CPA owner surviving the death or withdrawal of all other CPA owners may
continue to practice under a firm name for up to two years after becoming a
sole CPA owner; provided, however, that the name of any such former CPA owner
may not be used in the event that such past CPA owner license has been revoked,
suspended or otherwise been the subject of action by the Board whereby the
licensee has been prohibited, for any period of time from practicing public
accountancy or prohibited from using the title CPA or holding himself or
herself out as a CPA. The firm name is not intended to reflect those licensees
who are solely employees of the firm, having no ownership interest in the firm.
A firm name may not include the names of Non-CPA owners.
A licensee shall, when requested, respond to communications
from the Board within thirty days of the mailing of such communications by
registered or certified mail.
In the performance of services in the practice of public
accountancy for which standards have been established by the American Institute
of Certified Public Accountants or by other entities having similar generally
recognized authority, a licensee shall conform to such standards. Services
subject to this rule shall include but not be limited to, accounting and review
services, consulting services, financial planning services, and tax
services.
