References
are to North Carolina Administrative Code, Title 21 - Occupational Licensing
Boards, Chapter 08 - Board of Certified Public Accountant Examiners.
SUBCHAPTER 08N - PROFESSIONAL ETHICS
AND CONDUCT
SECTION .0100 - SCOPE AND
APPLICABILITY
21 NCAC 08N .0101 SCOPE OF THESE RULES
(a) The rules in this Subchapter are the rules of
professional ethics and conduct which G.S. 93‑12(9) authorizes the Board
to adopt. As such, they complement the other statutory causes for discipline
set out in G.S. 93‑12(9)(a) through (d) and other provisions of G.S. 93,
55B, 57C, and 59‑84. These Rules cover a broad range of behavior and do
not enumerate every possible unethical act.
(b) In the interpretation and enforcement of
these Rules, 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 ethics committees of
professional organizations.
21
NCAC 08N .0102 APPLICABILITY AND
ORGANIZATION OF RULES
These
Rules are generally applicable to all certificate holders. Rules in Section
.0200 of this Subchapter relate to CPAs whether or not employed in the public
practice of accountancy. Rules in Section .0300 of this Subchapter pertain to
CPAs using the CPA title in connection with providing products or services to
clients. Rules in Section .0400 of this Subchapter pertain to CPAs whenever
engaged in attest services.
21
NCAC 08N .0103 RESPONSIBILITY FOR
COMPLIANCE BY OTHERS
A
CPA and CPA firm shall be responsible for assuring compliance with the rules in
this Subchapter by anyone who is the CPA's partner, fellow shareholder, member,
officer, director, licensed employee, unlicensed employee or agent or
unlicensed principal, or by anyone whom the CPA supervises. A CPA or CPA firm shall
not permit others (including affiliated entities) to carry out on the CPA's
behalf, with or without compensation, acts which if carried out by the CPA
would be a violation of these Rules.
SECTION
.0200 - RULES APPLICABLE TO ALL CPAs
21
NCAC 08N .0201 INTEGRITY
The
reliance of the public and the business community on sound financial reporting
and advice on business affairs imposes on the accounting profession an
obligation to maintain high standards of technical competence, morality, and integrity.
To this end, a CPA shall at all times maintain independence of thought and
action, hold the affairs of clients in strict confidence, strive continuously
to improve professional skills, observe generally accepted accounting
principles and standards, promote sound and informative financial reporting,
uphold the dignity and honor of the accounting profession, and maintain high
standards of personal conduct.
21
ncac 08n .0202 DECEPTIVE CONDUCT
PROHIBITED
(a) Deception Defined. A CPA shall not engage in
deceptive conduct. Deception includes fraud or misrepresentation and
representations or omissions which a CPA either knows or should know have a
capacity or tendency to deceive. Deceptive conduct is prohibited whether or not
anyone has been actually deceived.
(b) Prohibited Deception. Prohibited conduct
under this Section includes but is not limited to deception in:
(1) obtaining or maintaining employment;
(2) obtaining or keeping clients;
(3) obtaining or maintaining certification, retired
status, or exemption from peer review;
(4) reporting CPE credits;
(5) certifying the character or experience
of exam or certificate applicants;
(6) implying abilities not supported by
education, professional attainments, or licensing recognition;
(7) asserting that services or products sold
in connection with use of the CPA title are of a particular quality or standard
when they are not;
(8) creating false or unjustified
expectations of favorable results;
(9) using or permitting another to use the
CPA title in a form of business not permitted by the accountancy laws or rules;
(10) permitting anyone not certified in this
state (including one licensed in another state) to unlawfully use the CPA title
in this state or to unlawfully operate as a CPA firm in this state; or
(11) falsifying a review, report, or any
required program or checklist of any peer review program.
21
ncac 08n .0203 DISCREDITABLE CONDUCT
PROHIBITED
(a) Discreditable Conduct. A CPA shall not engage
in conduct discreditable to the accounting profession.
(b) Prohibited Discreditable Conduct.
Discreditable conduct includes but is not limited to:
(1) acts that reflect adversely on the CPA's
honesty, integrity, trustworthiness, good moral character, or fitness as a CPA
in other respects;
(2) stating or implying an ability to
improperly influence a governmental agency or official;
(3) failing to comply with any order issued
by the Board; or
(4) failing to fulfill the terms of a peer
review engagement contract.
21
NCAC 08N .0204 DISCIPLINE BY FEDERAL
AND STATE AUTHORITIES
(a) Violations of Other Authorities' Laws or
Rules. A CPA shall not act in a way that would cause said CPA to be disciplined
by federal or state agencies or boards for violations of laws or rules on
ethics. CPAs who engage in activities regulated by other federal or state
authorities (including but not limited to the following agencies: IRS,
Department of Revenue, SEC, State Bar, North Carolina Secretary of State,
PCAOB, NASD, Department of Insurance, GAO, HUD, State Auditor, State Treasurer,
or Local Government Commission) must comply with all such authorities' ethics
laws and rules.
(b) Prima Facie Evidence. A conviction or final
finding of unethical conduct by a competent authority is prima facie evidence
of a violation of this Rule.
(c) Notice to the Board Required. A CPA shall
notify the Board in writing within 30 days of any conviction or finding against
him or her of unlawful conduct by any federal or state court or regulatory
authority.
21
ncac 08n .0205 CONFIDENTIALITY
(a) Nondisclosure. A CPA shall not disclose any
confidential information obtained in the course of employment or a professional
engagement except with the consent of the employer or client.
(b) Exceptions. This Rule shall not be construed:
(1) to relieve a CPA of any report
obligations pertaining to Section .0400 of this Subchapter; or
(2) to affect in any way the CPA's
compliance with a validly issued subpoena or summons enforceable by this Board
or by order of a court; or
(3) to preclude the CPA from responding to
any inquiry made by the AICPA Ethics Division or Trial Board, by a duly
constituted investigative or disciplinary body of a state CPA society, or under
state statutes; or
(4) to preclude the disclosure of
confidential client information necessary for the peer review process or for
any quality review program; or
(5) to preclude the CPA from assisting the
Board in enforcing the accountancy statutes and rules; or
(6) to affect a CPA's disclosure of
confidential information to state or federal authorities when the CPA concludes
in good faith based upon professional judgment that a crime is being or is
likely to be committed; or
(7) to affect a CPA's disclosure of
confidential information when such disclosure is required by state or federal
laws or regulations.
21
NCAC 08N .0206 COOPERATION WITH
BOARD INQUIRY
A CPA shall
fully cooperate with the Board in connection with any inquiry it shall
make. Full cooperation includes
responding within 21 days to all inquiries of the Board or representatives of
the Board and claiming Board correspondence from the U.S. Postal Service,
private delivery service or personal delivery.
21
NCAC 08N .0207 VIOLATION OF TAX LAWS
A CPA shall
not knowingly violate any state or federal tax laws or regulations in handling
the CPA's personal business affairs, or the business affairs of an employer or
client, or the business affairs of any company owned by the CPA.
21
NCAC 08N .0208 REPORTING
CONVICTIONS, JUDGMENTS, AND DISCIPLINARY ACTIONS
(a) Criminal Actions. A CPA shall notify the
Board within 30 days of any conviction or finding of guilt of, pleading of nolo contendere, or receiving a prayer
for judgment continued to any criminal offense.
(b) Civil Actions. A CPA shall notify the Board
within 30 days of any judgment or settlement in a civil suit, bankruptcy
action, administrative proceeding, or binding arbitration, the basis of which
is grounded upon an allegation of professional negligence, gross negligence,
dishonesty, fraud, misrepresentation, incompetence, or violation of any federal
or state tax law and which was brought against either the CPA or a North
Carolina office of a CPA firm of which the CPA was a managing partner.
21
NCAC 08N .0209 ACCOUNTING PRINCIPLES
(a) Generally Accepted Accounting Principles. A
CPA shall not express an opinion that financial statements are presented in
conformity with generally accepted accounting principles if such statements
contain any departure from an accounting principle which has a material effect
on the statements taken as a whole, unless the CPA can demonstrate that due to
unusual circumstances the financial statements would otherwise have been
misleading.
(b) Financial Accounting Standards Board Accounting
Standards Codification including subsequent amendments and editions, are hereby
adopted by reference, as provided by G.S. 150B‑21.6, and shall be
considered generally accepted accounting principles for the purposes of
Paragraph (a) of this Rule.
(c) Departures. In such cases the CPA'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.
(d) Copies of Standards. Copies of the Financial
Accounting Standards Board Accounting Standards Codification may be inspected
in the offices of the Board, as described in 21 NCAC 08A .0102. Copies may be
obtained from the FASB, Post Office
21
ncac 08n .0211 RESPONSIBILITIES IN TAX PRACTICE
(a) Standards for Tax Services. A CPA shall not
render services in the area of taxation unless the CPA has complied with the
standards for tax services.
(b) Statements on Standards for Tax Services. The
Statements on Standards for Tax Services issued by the AICPA, including subsequent
amendments and editions, are hereby incorporated by reference, as provided by
G.S. 150B-21.6, and shall be considered as the standards for tax services for
the purposes of Paragraph (a) of this Rule.
(c) Departures. Departures from the statements
listed in Paragraph (b) of this Rule must be justified by those who do not
follow them as set out in the standards.
(d) Copies of Standards. Copies of the Statements on Standards for Tax
Services may be inspected in the offices of the Board, as described in 21 NCAC
08A .0102. Copies may be obtained from
the AICPA,
21
NCAC 08N .0212 COMPETENCE
A
CPA shall perform professional services competently and shall:
(1) undertake
only those engagements which the CPA or CPA's firm can reasonably expect to
complete with professional competence;
(2) exercise
due professional care in the performance of an engagement;
(3) adequately
plan and supervise an engagement; and
(4) obtain
sufficient relevant data to afford a reasonable basis for conclusions or
recommendations in relation to an engagement.
21
NCAC 08N .0213 OTHER RULES
A
CPA shall not willfully violate any other rule in this Chapter nor any other
provision of the Accountancy Statutes, the Professional Corporation Act, the
Partnership Act, the Taxation Act, or the North Carolina Limited Liability
Company Act.
21 NCAC 08N .0214 OUTSOURCING TO THIRD-PARTY SERVICE
PROVIDERS
(a) A CPA shall provide a written disclosure to
the client that he or she is using a third-party provider to assist the CPA in
providing any professional services to the client.
(b) A CPA shall provide annual disclosure in a
written statement of the services to be rendered by the third-party provider as
well as the third-party provider's name, address, and phone number. The written
statement shall be dated, signed by both the CPA and client in advance of the
outsourcing, and a copy provided to the client.
(c) A CPA outsourcing professional services to a third-party
provider is responsible for ensuring a third-party provider is in compliance
with all rules of Professional of Conduct and Ethics in 21 NCAC 08N.
21 NCAC 08N .0215 INTERNATIONAL FINANCIAL ACCOUNTING
STANDARDS
(a) International Financial Accounting
Standards. A CPA shall not express an
opinion that financial statements are presented in accordance with
international financial accounting standards if such statements contain any
departure from an accounting standard which has a material effect on the
statements, taken as a whole, unless the CPA can demonstrate that due to
unusual circumstances the financial statements would otherwise have been
misleading.
(b) International Financial Accounting Standards
consist of the following:
(1) International Financial Reporting
Standards (IFRS) issued after 2001;
(2) International Accounting Standards (IAS)
issued before 2001;
(3) Interpretations originated from the
International Financial Reporting Interpretations Committee (IFRIC) issued
after 2001; and
(4) Standing Interpretations Committee (SIC)
issued before 2001.
(c) Departures.
The CPA's report must describe the departure, the approximate effect
thereof if practicable and the reasons why compliance with the standard would
result in a misleading statement.
(d) Copies of Standards. Copies of International Financial Accounting
Standards may be inspected in the office of the Board, as described in 21 NCAC
08A .0102. Copies may be obtained from
the International Accounting Standards Board, IASC Foundation Publications
Department, 30 Cannon Street, London, EC4M6XH, United
Kingdom. They are available at cost,
which is approximately thirty-four dollars ($34.00) in paperback form or three
hundred eighty-three dollars ($383.00) in loose-leaf subscription form.
SECTION
.0300 - RULES APPLICABLE TO ALL CPAs WHO USE THE CPA TITLE IN
OFFERING OR RENDERING PRODUCTS OR SERVICES TO CLIENTS
21
NCAC 08N .0301 PROFESSIONAL JUDGMENT
(a) Professional Judgment. A CPA shall not
subordinate the CPA's professional judgment to non‑CPAs.
(b) Tax Practice. In tax practice, the CPA may
resolve doubt in favor of the CPA's client as long as there is reasonable
support for the CPA's position.
21
NcAc 08N .0302 FORMS OF PRACTICE
(a) Authorized Forms of Practice. A CPA who uses CPA in or with the name of the
business or offers or renders attest or assurance services in the public
practice of accountancy to clients shall do so only through a registered sole
proprietorship, partnership, Professional Corporation, Professional Limited
Liability Company, or Registered Limited Liability Partnership.
(b) Authorized Ownership. A CPA firm may have an ownership of up to 49
percent by non-CPAs. A CPA firm shall
have ownership of at least 51 percent and be controlled in law and fact by holders
of valid CPA certificates who have the unrestricted privilege to use the CPA
title and to practice public accountancy in a jurisdiction and at least one of
whom shall be licensed by this Board.
(c) CPA Firm
Registration Required. A CPA shall not offer
or render professional services through a CPA firm which is in violation of the
registration requirements of 21 NCAC 08J .0108, 08J .0110, or 08M .0105.
(d) Supervision of CPA Firms. Every North Carolina office of a CPA firm registered
in North Carolina shall be actively and locally supervised by a designated
actively licensed North Carolina CPA whose primary responsibility and a
corresponding amount of time shall be work performed in that office.
(e) CPA Firm
Requirements for CPA Ownership. A CPA
firm and its designated supervising CPA is accountable for the following in
regard to a CPA owner:
(1) A CPA owner shall be a natural person or
a general partnership or a limited liability partnership directly owned by
natural persons.
(2) A CPA owner shall actively participate
in the business of the CPA firm.
(3) A CPA owner who, prior to January 1,
2006, is not actively participating in the CPA firm may continue as an owner
until such time as his or her ownership is terminated.
(f) CPA Firm
Requirements for Non-CPA Ownership. A
CPA firm and its designated supervising CPA partner is accountable for the
following in regard to a non-CPA owner:
(1) a non-CPA owner
shall be a natural person or a general partnership or limited liability
partnership directly owned by natural persons;
(2) a non-CPA owner
shall actively participate in the business of the firm or an affiliated entity
as his or her principal occupation;
(3) a non-CPA owner
shall comply with all applicable accountancy statutes and the rules;
(4) a non-CPA owner shall be of good moral
character and shall be dismissed and disqualified from ownership for any
conduct that, if committed by a licensee, would result in a discipline pursuant
to G.S. 93-12(9);
(5) a non-CPA owner shall report his or her
name, home address, phone number, social security number and Federal Tax ID
number (if any) on the CPA firm's registration; and
(6) a non-CPA
owner's name may not be used in the name of the CPA firm or held out to clients
or the public that implies the non-CPA owner is a CPA.
21
NCAC 08N .0303 OBJECTIVITY AND
CONFLICTS OF INTEREST
(a) Personal Financial Interest in Advice. When
offering or rendering accounting or related financial, tax, or management
advice, a CPA shall be objective and shall not place the CPA's own financial
interests nor the financial interests of a third party ahead of the legitimate
financial interests of the CPA's client or the public in any context in which a
client or the public can reasonably expect objectivity from one using the CPA
title.
(b) Expectation of Objectivity Presumed. If the
CPA uses the CPA title in any way to obtain or maintain a client relationship,
the Board will presume the reasonable expectation of objectivity.
(c) Acceptance of a Commission or Referral Fee. A
CPA shall not for a commission recommend or refer to a client any product or
service, or for a commission recommend or refer any product or service to be
supplied by a client, or receive a commission, when the CPA also performs for
that client:
(1) an audit or review of a financial
statement; or
(2) a compilation of a financial statement
when the CPA expects, or reasonably might expect, that a third party will use
the financial statement and the CPA's compilation report does not disclose a
lack of independence; or
(3) an examination of prospective financial
information.
This
prohibition applies during the period in which the CPA is engaged to perform
any of the services listed in Subparagraph (c)(2) of this Rule and the period
covered by any historical financial statements involved in such listed
services.
(d) Acceptance of a Contingent Fee.
(1)
The offering or rendering of
professional services for, or the receipt of, a contingent fee by a CPA is not
prohibited except for engaging to render or rendering by a CPA:
(A) of professional services for any person
for whom the CPA also performs attest services, during the period of the attest
services engagement and the period covered by any historical financial
statements involved in such attest services; and
(B) for the preparation of original or
amended tax returns or claims for tax refunds.
(2) Fees are not regarded as being
contingent if fixed by courts or other public authorities or, in tax matters, if
determined based on the results of judicial proceedings or the findings of
governmental agencies.
(e) A CPA shall communicate in advance to a
client the scope of services or products to be rendered or referred for which
the CPA will receive a commission, referral, or contingent fee. A CPA shall
provide disclosure in a written statement within ten business days of the
service or product to be rendered or referred with the commission, referral, or
contingent fee to be charged or received by the CPA.
21
NCAC 08N .0304 CONSULTING SERVICES
STANDARDS
(a) Standards for Consulting Services. A CPA
shall not render consulting services unless the CPA has complied with the
standards for consulting services.
(b) Statements on Standards for Consulting
Services. The Statements on Standards for Consulting Services (including the
definition of such services) issued by the AICPA, including subsequent
amendments and editions, are hereby adopted by reference, as provided by G.S.
150B-21.6, and shall be considered as the approved standards for consulting
services for the purposes of Paragraph (a) of this Rule.
(c) Departures. Departures from the statements
listed in Paragraph (b) of this Rule must be justified by those who do not
follow them as set out in the statements.
(d) Copies of Statements. Copies of the Statements on Standards for
Consulting Services may be inspected in the offices of the Board, as described
in 21 NCAC 08A .0102. Copies may be obtained from the AICPA,
21
NCAC 08N .0305 RETENTION OF CLIENT
RECORDS
(a) Return upon Demand. A CPA must return client
records in his or her possession to the client after a demand is made for their
return. The records must be returned immediately upon demand unless
circumstances make some delay reasonable in order to retrieve a closed file or
to extract the CPA's work papers described in Paragraph (f) of this Rule. If
the records cannot be returned immediately upon demand, the CPA shall
immediately notify the client of the date the records will be returned. Nothing
in this Rule shall be interpreted to require a CPA to pay delivery costs when
the records are returned to the client.
(b) Who may Demand Client Records. If the client
is a partnership, records shall be returned upon request to any of its general
partners. If the client is a limited partnership or a registered limited
liability partnership, records shall be returned upon request to its general
partner(s) and the managing partner or his or her designated individual
respectively. If the client is a corporation, records shall be returned upon
request to its president. If the client is a limited liability company, records
shall be returned upon request to the manager. Joint records shall be returned
upon request to any party.
(c) Return of Original Records. If the engagement
is terminated prior to completion or the CPA's work product has neither been
received nor paid for the by the client, the CPA is only required to return
those records originally given to the CPA by the client.
(d) Retention to Force Payment. A CPA shall not
retain a client's records in order to force payment of any kind.
(e) Work Papers Included in Client Records. Work
papers are usually the CPA's property and need not be surrendered to the
client. However, in some instances work papers will contain data which should
properly be reflected in the client's books and records but for convenience
have not been duplicated therein with the result that the client's records are
incomplete. In such instances, the portion of the work papers containing such
data constitutes part of the client's records, and copies shall be given to the
client along with the rest of the client's records. Work papers considered part
of the client's records include but are not limited to:
(1) Worksheets in lieu of original entry
(e.g., listings and distributions of cash receipts or cash disbursements on
columnar work paper);
(2) Worksheets in lieu of general ledger or
subsidiary ledgers, such as accounts receivable, job cost and equipment
ledgers, or similar types of depreciation records;
(3) All adjusting and closing journal
entries and supporting details not fully set forth in the journal entry; and
(4) Consolidating or combining journal
entries and worksheets and supporting detail used in arriving at final figures
incorporated in an end product such as financial statements or tax returns.
(f) Work Papers Belonging to the CPA. Work papers
developed by the CPA incident to the performance of an engagement which do not
result in changes to the client's records, or are not in themselves part of the
records ordinarily maintained by such clients, are solely the CPA's work papers
and are not the property of the client. For example, the CPA may make extensive
analyses of inventory or other accounts as part of the selective audit
procedures. These analyses are considered to be a part of the CPA's work
papers, even if the analyses have been prepared by client personnel at the
request of the CPA. Only to the extent these analyses result in changes to the
client's records would the CPA be required to furnish the details from the work
papers in support of the journal entries recording the changes, unless the
journal entries themselves contain all necessary details.
(g) Reasonable Fees for Copies. Nothing in this
Rule shall be construed to require the CPA to furnish a client with copies of
the client's records already in the client's possession. However, if the client
asserts that such records have been lost, or are otherwise not in the client's
possession, the CPA shall furnish copies of the records and may charge a
reasonable fee.
(h) Retention of Work Product and Work Papers. A
CPA shall ensure that the work product and the work papers created in the
performance of an engagement for a client are retained for a minimum of five
years after the date of issuance of the work product unless the CPA is required
by law to retain such records for a longer period.
21
NCAC 08N .0306 ADVERTISING OR OTHER
FORMS OF SOLICITATION
a) Deceptive Advertising. A CPA shall not seek to obtain clients by
advertising or using other forms of solicitation in a manner that is deceptive.
(b) Specialty Designations. A CPA may advertise the nature of services
provided to clients but the CPA shall not advertise or indicate a specialty
designation or other title unless the CPA has met the requirements of the
granting organization for the separate title or specialty designation and the
individual is currently on active status and in good standing with the granting
organization for the separate title or specialty designation.
(c) The CPA firm shall offer to perform or
perform professional services only in the exact name of the CPA firm as
registered with the Board. The exact CPA
firm name as registered with the Board shall be used on the following
documents:
(1) Letterhead;
(2) contracts;
(3) engagement
letters;
(4) tax returns;
and
(5) all
professional services reports.
(d) The CPA firm may advertise professional
services using the exact name of the CPA firm, a portion of the CPA firm name,
initials or acronyms derived from the exact CPA firm name as registered with
the Board.
(e) Any CPA or CPA firm offering to or performing
professional services via the Internet shall include the following information
on the Internet:
(1) CPA business or CPA firm name as
registered with the Board;
(2) principal place
of business;
(3) business phone;
and
(4)
(f) The use of the phrase "certified public
accountant(s)" or "CPA(s)" in the name of any business entity on
letterhead, professional services reports, business cards, brochures, building
signage, office signs, telephone directories, contracts, engagement letters, tax
returns, Internet directories or any other advertisements or forms or
solicitation is prohibited except for registered CPA firms.
21
NCAC 08N .0307 CPA FIRM NAMES
(a) Deceptive Names Prohibited. A CPA or CPA firm shall not trade upon the
CPA title through use of any name that would have the capacity or tendency to
deceive. The name or initials of one or
more members of a new CPA firm, as defined in 21 NCAC 08A .0301, shall be
included in the CPA firm name. The name
of former members and the initials of former members that are currently in the
CPA firm name and the name of current members and the initials of current
members may be included in a new CPA firm name.
The name, the portion of the name, the initials of the name or the
acronym derived from the name of a firm association or firm network that
includes names that were not previous CPA members or are not current CPA
members of the CPA firm and the name or initials of a non-CPA member in a CPA
firm name is prohibited.
(b) Style of Practice. It is misleading if a CPA firm practices
under a name or style which would tend to imply the existence of a partnership
or registered limited liability partnership or a professional corporation or
professional limited liability company of more than one CPA shareholder or CPA
member or an association when in fact there is no partnership nor is there more
than one CPA shareholder or CPA member of a CPA firm. For example, no CPA firm having just one CPA
member may have as a part of its name the words "associates,"
"group," "firm," or "company" or their
abbreviations. It is also misleading if
a CPA renders non-attest professional services through a non-CPA firm using a
name that implies any non-licensees are CPAs.
(c) Any CPA firm that has continuously used an
assumed name approved by the Board prior to April 1, 1999, may continue to use
the assumed name. A CPA firm (or a
successor firm by sale, merger, or operation of law) using the name, or a
portion of a name, or the initials of the name, or the acronym derived from the
name of a firm association or firm network that was approved by the Board prior
to April 1, 1999 may continue to use that name so long as that use is not
deceptive. A CPA firm (or a successor
firm by sale, merger, or operation of law) may continue to use the surname of a
retired or deceased partner or shareholder in the CPA firm's name so long as
that use is not deceptive.
21
NCAC 08N .0308 valuation services
standards
(a) Standards for Valuation Services. A CPA shall
not render valuation services of a business, a business ownership interest,
security, or intangible asset unless the CPA has complied with the standards
for valuation services.
(b) Statements on Standards for Valuation
Services. The Statements on Standards for Valuation Services (including the
definition of such services) issued by the AICPA, including amendments and
editions, are hereby adopted by reference, as provided by G.S. 150B-21.6, and
shall be considered as the approved standards for valuation services for the
purposes of Paragraph (a) of this Rule.
(c) Departures. Departures from the standards
listed in Paragraph (b) of this Rule must be justified by those who do not
follow them as set out in the statements.
(d) Copies of Statements. Copies of the statements on standards for
valuation services may be inspected in the offices of the Board, as described
in 21 NCAC 08A .0102. Copies may be obtained from the AICPA,
SECTION
.0400 - RULES APPLICABLE TO CPAs
PERFORMING ATTEST SERVICES
21
nCAC 08N .0401 PUBLIC RELIANCE
The
rules in this Section apply to any CPA who engages in the attest or assurance
services as defined in 21 NCAC 08A .0301(b). CPAs who engage in such services
are also subject to the Peer Review requirements of Subchapter 08M.
21
ncac 08n .0402
(a) A CPA, or the CPA's firm, who is performing
an engagement in which the CPA, or the CPA's firm, will issue a report on
financial statements of any client (other than a report in which lack of
independence is disclosed) must be independent with respect to the client in
fact and appearance.
(b) Independence is impaired if, during the
period of the professional engagement, a covered person:
(1) Had or was committed to acquire any
direct or material indirect financial interest in the client.
(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 client; and
(A) The covered person (individually or with
others) had the authority to make investment decisions for the trust or estate;
(B) The trust or estate owned or was
committed to acquire more than 10 percent of the client's outstanding equity
securities or other ownership interests; or
(C) The value of the trust's or estate's
holdings in the client exceeded 10 percent of the total assets of the trust or
estate.
(3) Had a joint closely held investment that
was material to the covered person.
(4) Except as permitted in the AICPA
Professional Standards Code of Professional Conduct and Bylaws, had any loan to
or from the client or any officer or director of the client, or any individual
owning 10 percent or more of the client's outstanding equity securities or
other ownership interests.
(c) Independence is impaired if during the period
of the professional engagement, a shareholder, a member, a partner or
professional employee of the firm, his or her immediate family and close
relatives, (as defined in the AICPA Code of Professional Conduct and Bylaws) or
any group of such persons acting together owned more than five percent of a
client's outstanding equity securities or other ownership interests.
(d) Independence is impaired if, during the
period covered by the financial statements, or during the period of the
professional engagement, a shareholder, a member, a partner or professional
employee of the firm was simultaneously associated with the client as a:
(1) Director, officer, employee, or in any
capacity equivalent to that of a member of management;
(2) Promoter, underwriter, or voting
trustee; or
(3) Trustee for any pension or
profit-sharing trust of the client.
(e) For the purposes of this Rule
"Covered" person is
(1) An individual on the attest engagement
team;
(2) An individual in a position to influence
the attest engagement;
(3) A partner or manager who provides nonattest services to the attest client beginning once he
or she provides 10 hours of nonattest services to the
client within any fiscal year and ending on the later of the date:
(A) the firm signs
the report on the financial statements for the fiscal year during which those
services were provided; or
(B) he or she no
longer expects to provide 10 or more hours of nonattest
services to the attest client on a recurring basis;
(4) A partner in the office in which the
lead attest engagement partner primarily practices in connection with the
attest engagement;
(5) The firm, including the firm's employee
benefit plans; or
(6) An entity whose operating, financial, or
accounting policies can be controlled (as defined by generally accepted
accounting principles (GAAP) for consolidation purposes) by any of the
individuals or entities described in Subparagraphs (1) through (5) of this
Paragraph or by two or more such individuals or entities if they act together;
(f) The impairments of independence listed in
this Rule are not intended to be all-inclusive.
21
NCAC 08N .0403 AUDITING STANDARDS
(a) Standards for Auditing Services. A CPA shall
not render auditing services unless the CPA has complied with the applicable
generally accepted auditing standards.
(b) Statements on Auditing Standards. The
Statements on Auditing Standards issued by the AICPA, including subsequent amendments
and editions, are hereby adopted by reference, as provided by G.S. 150B‑21.6,
and shall be considered generally accepted auditing standards for the purposes
of Paragraph (a) of this Rule.
(c) Departures. Departures from the statements
listed in Paragraph (b) of this Rule must be justified by those who do not
follow them as set out in the statements.
(d) Copies of Statements. Copies of the Statements on Auditing
Standards may be inspected in the offices of the Board, as described in 21 NCAC
08A .0102. Copies may be obtained from
the AICPA,
21
NCAC 08N .0404 ACCOUNTING AND REVIEW
SERVICES STANDARDS
(a) Standards for Accounting and Review Services.
A CPA shall not render accounting and review services unless the CPA has
complied with the standards for accounting and review services.
(b) Statements on Standards for Accounting and
Review Services. The Statements on Standards for Accounting and Review Services
issued by the AICPA, including subsequent amendments and editions, are hereby
adopted by reference, as provided by G.S. 150B‑21.6, and shall be
considered as the approved standards for accounting and review services for the
purposes of Paragraph (a) of this Rule.
(c) Departures. Departures from the statements
listed in Paragraph (b) of this Rule must be justified by those who do not
follow them as set out in the statements.
(d) Copies of Statements. Copies of the Statements on Standards for
Accounting and Review Services may be inspected in the offices of the Board, as
described in 21 NCAC 08A .0102. Copies may be obtained from the AICPA,
21 NCAC
08N .0405 GOVERNMENTAL ACCOUNTING
STANDARDS
(a) Standards for Governmental Accounting. A CPA
shall not permit the CPA's name to be associated with governmental financial
statements for a client unless the CPA has complied with the standards for
governmental accounting.
(b) Statements on Governmental Accounting and
Financial Reporting Services. The Statements on Governmental Accounting and
Financial Reporting Services issued by the GASB, including subsequent
amendments and editions, are hereby adopted by reference, as provided by G.S.
150B-21.6, and shall be considered as the approved standards for governmental
accounting for the purposes of Paragraph (a) of this Rule.
(c) Departures. Departures from the statements
listed in Paragraph (b) of this Rule must be justified by those who do not
follow them as set out in the statements.
(d) Copies of Statements. Copies of the Statements on Governmental
Accounting and Financial Reporting Standards, including technical bulletins and
interpretations, may be inspected in the offices of the Board, as described in
21 NCAC 08A .0102. Copies may be obtained from the GASB, Post Office
21
NCAC 08N .0406 ATTESTATION STANDARDS
(a) Standards for Attestation Services. A CPA
shall not render attestation services unless the CPA has complied with the
applicable attestation standards.
(b) Statements on Standards for Attestation
Engagements. The Statements on Standards for Attestation Engagements issued by
the AICPA, including subsequent amendments and editions, are hereby adopted by reference,
as provided by G.S. 150B‑21.6, and shall be considered attestation
standards for the purposes of Paragraph (a) of this Rule.
(c) Departures. Departures from the statements
listed in Paragraph (b) of this Rule must be justified by those who do not
follow them as set out in the statements.
(d) Copies of Statements. Copies of the Statements on Standards for
Attestation Engagements may be inspected in the offices of the Board, as
described in 21 NCAC 08A .0102. Copies
may be obtained from the AICPA,
21
NCAC 08N .0407 COMPETITIVE BIDDING
Regarding
an invitation for competitive bids on attest services, it shall be
discreditable for a CPA or CPA firm to knowingly offer to perform said services
below cost for the purposes of injuring or destroying competition; provided, it
shall not be a violation to do so in order to meet competition. Nothing herein
shall be construed to prohibit competitive bidding nor establish a minimum
price of any CPA service.
21
NCAC 08N .0408 PEER REVIEW STANDARDS
A
CPA who is engaged to perform a peer review shall not violate the rules or
standards as set in Subchapter 08M of the peer review program under which the
review is made or the engagement contract connected with that peer review.
21 NCAC 08N .0409 GOVERNMENT AUDITING STANDARDS
(a) Standards for Government Audits. A CPA shall not render audit services to a
government entity or entity that receives government awards and is required to
receive an audit in accordance with Government Auditing Standards unless the
CPA has complied with the applicable Generally Accepted Government Auditing
Standards.
(b) Government Auditing Standards. The Government Auditing Standards issued by
the United States Government Accountability Office, including subsequent
amendments and additions, are hereby incorporated by reference, as provided by
G.S. 150B-21.6, and shall be considered Generally Accepted Government Auditing
Standards for the purpose of Paragraph (a) of this Rule.
(c) Departure.
Departures from the standards listed in Paragraph (b) of this Rule must
be justified by those who do not follow them as set out in the standards.
(d) Copies of the Standards. Copies of the Government Auditing Standards
may be inspected in the offices of the Board, as described in 21 NCAC 08A
.0102. Copies may be obtained from the
Government Printing Office, Washington, D.C. 20402-0001. They are available at a cost, which is
approximately twelve dollars and fifty cents ($12.50) in paperback form.