Cleaning Up the Profession: Clients Take a Stand on Commissions & Contingency Fees

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After many years of investigations, discussions, analysis and rules, in August, 1990, a final consent order from the Federal Trade Commission (FTC) became effective. The American Institute of Certified Public Accountants agreed with the FTC not to restrict accountants from accepting contingent fees and commissions from non-audit clients.

The Federal Trade Commission had been concerned with this issue of commissions and contingent fees for a long period of time. In 1985, the FTC began an extensive investigation of the accounting profession and its code of ethics. Upon completion of its inquiries and deliberations, the Commission concluded that several professional rules of conduct discouraged competition among public accountants. Specifically, the FTC suggested that the code be amended to allow accountants to accept contingent fees and commissions, to pay for referrals to use trade names, to vouch for the achievability of forecasts and to engage in unrestricted advertising.

The FTC complaint that led to the final consent order charged that the AICPA illegally restrained competition and deprived consumers of information about the "availability, price, and quality of CPA services" by:

* preventing CPAs from accepting work on a contingent-fee or commission basis for those for whom they are not performing audit or other attest services;

* preventing CPAs from accepting work on a contingent-fee or commission basis for those for whom they are not performing audit or other attest services;

* restricting truthful, nondeceptive advertising, such as the use of truthful claims in comparative advertising;

* restricting CPA solicitation of clients and the use of referral fees; and

* banning the use of nondeceptive trade names.

Prior to the challenge by the FTC, both the AICPA and state legislation had prohibited the taking of commissions. The AICPA Code of Professional Conduct Rule 503 stated:

"Commissions. A member shall not pay a …