The AICPA Code of Professional Conduct (AICPA Professional Standards) is an ever-evolving document. Periodically, the JofA publishes answers from AICPA Professional Ethics Division staff to questions asked by AICPA members via the Institute's Ethics Hotline or on topics related to revisions to the code. This set of questions and answers deals with application of the code both to members in business and to members in public practice.
1. A CPA prepares an individual tax return for a client. Upon completion of the tax return, the client has not paid the fees in full for the preparation of that tax return, yet has requested to receive the tax return from the CPA. May the CPA withhold the tax return until such payment has been received?
2. A CPA firm audits a 401(k) plan for a company but performs no attest services for that company. The company has asked the CPA firm to perform an appraisal of the company's fixed assets based on the belief that some of the assets are impaired or overvalued on the property, plant, and equipment listing. The fixed assets are material to the company's financial statements. Can the CPA firm perform the valuation service and still remain independent to audit the 401(k) plan?
3. A CPA firm in Springfield, Ill., has a client with inventory housed in warehouses in El Paso, Texas, and Juarez, Mexico. The firm is a member of an accounting firm association and is considering using CPAs from an El Paso firm that also is a member of the association to do the observation of the physical inventory. Would the use of CPAs from another member firm be considered sharing significant professional resources under Interpretation 101-17, Networks and Network Firms, of the code, resulting in the firms in Springfield and El Paso being considered network firms?
4. A CPA firm has been asked by a benchmarking organization to provide certain financial information, not available to the public, on the firm's medical products manufacturing clients. The benchmarking organization intends to use this information to analyze and aggregate data on this industry group for its quarterly newsletter. The organization has assured the CPA firm that no one would be able to identify the CPA firm's individual clients, as the information would be aggregated and presented as industry statistical averages. Can the CPA firm provide this information to the benchmarking organization without violating client confidentiality if the firm has not received specific client consent?
5. A CPA works for a privately held manufacturing company as a senior financial analyst. The company does not release any financial information to the public and considers such information confidential. The CPA resigns from the company and is subsequently hired by that company's main competitor. Can the CPA disclose to the new employer what his former employer's profit margins were on products?
6. A privately owned company has engaged a CPA firm to perform agreed-upon procedures (AUP) related to royalty and licensing fees under Statements on Standards for Attestation Engagements (SSAE) No. 10 (as amended by SSAE No. 11), Agreed-Upon Procedures Engagements. The company believes it is not receiving all the royalties and licensing fees it is due. The company has asked to pay the CPA firm based on a percentage of royalties and licensing fees collected. The CPA firm currently provides only tax services to this company. May the CPA firm perform this AUP engagement on such a contingent-fee basis?
7. A CPA firm has acquired a new client. The client's financial records were prepared by the predecessor CPA firm in QuickBooks. Is the predecessor CPA firm required to provide, upon the client's request, the client's records in a QuickBooks data file to the client?
8. The spouse of a partner in a CPA firm has a 10% ownership interest in ABC Co., an investment group controlled by XYZ Co. …