References are to North Carolina Administrative Code, Title 21 - Occupational Licensing Boards, Chapter 08 - Board of Certified Public Accountant Examiners, as amended through January 1, 2007.
SUBCHAPTER 08N - PROFESSIONAL ETHICS AND CONDUCT
SECTION .0100 - SCOPE AND APPLICABILITY
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.
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.
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
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.
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.
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.
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.
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.
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 fully responding in a timely
manner to all inquiries of the Board or representatives of the Board and
claiming Board correspondence from the U.S. Postal Service.
08N .0207 VIOLATION OF TAX LAWS
A CPA shall not knowingly violate any state or federal tax laws 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.
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.
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) Statements of Financial
Accounting Standards. The Statements of Financial Accounting Standards,
together with those Accounting Research Bulletins and Accounting Principles
Board Opinions which are not superseded by action of the FASB, 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 Statements of Financial Accounting Standards may be inspected in the
offices of the Board, as described in 21 NCAC 08A .0102. Copies may be obtained
from the FASB,
08N .0210 FORECASTS
(a) Forecast of Future
Transactions. A CPA shall not permit the CPA's name to be used in conjunction
with any forecast of future transactions in a manner which may lead to the
belief that the CPA vouches for the achievability of the forecast.
(b) Applicable Standards. A CPA
shall not render services associated with prospective financial statements
unless the CPA has complied with the standards for accountants' services on
prospective financial information.
(c) Statements on Standards. The
Statements on Standards for Accountants' Services on Prospective Financial
Information issued by the AICPA, including subsequent amendments and editions,
are adopted by reference, as provided by G.S. 150B‑21.6, and shall be
considered as the approved standards for services on prospective financial
information for the purposes of Paragraph (b) of this Rule.
(d) Departures. Departures from
the statements listed in Paragraph (c) of this Rule must be justified by those
who do not follow them as set out in the statements.
(e) Copies of Standards. Copies
of the Statements on Standards for Accountants' Services on Prospective
Financial Information may be inspected in the offices of the Board as described
in 21 NCAC 08A .0102. Copies may be obtained from the AICPA, 1211 Avenue of the
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, 1211 Avenue of the
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.
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 insuring a third-party provider is in
compliance with all rules of Professional of Conduct and Ethics in 21 NCAC 08N.
SECTION .0300 - RULES APPLICABLE TO ALL CPAs WHO USE
THE CPA TITLE IN OFFERING OR
RENDERING PRODUCTS OR
SERVICES TO CLIENTS
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.
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 .0101.
(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 shall be held 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 shall be held 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 administrative code;
(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.
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.
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, 1211 Avenue of the
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.
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
advertise professional services only in the exact name of the CPA firm as
registered with the Board.
(d) 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;
(2) principal place of business;
(3) business phone; and
(4)
(e) The use of the phrase "certified public
accountant(s)" or "CPA(s)" in the name of any business entity on
letterhead, reports, business cards, brochures, office signs, telephone
directories, or any other advertisements or forms or solicitation is prohibited
except for registered CPA firms.
(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 of one or more former
members of the CPA firm, as defined in 21 NCAC 08A .0301, may be included in
the CPA firm name. The name of a non-CPA owner in a CPA firm name is prohibited.
(b) Style of Practice. It is considered
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 owner may have as a part
of its name the words "associates," "group," or
"company" or their abbreviations. It is also considered 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, so long as the CPA firm is owned only by the individual
practitioner, partners, or shareholders who obtained Board approval for the
assumed name. 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.
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,
1211 Avenue of the
SECTION .0400 RULES APPLICABLE TO CPAs PERFORMING ATTEST SERVlCES
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.
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)
(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 that had or was committed to acquire any direct
or material indirect financial interest in the client; and
(A) The covered person had the authority to make investment
decisions for the trust or estate; or
(B) The trust or estate owned more than 10 percent of the
client's outstanding equity securities or other ownership interests or 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 or closely held investment
that was material to the covered person; or
(4) 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 shall be considered to be 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, 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 shall be considered to be
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 a:
(1) Director, officer, employee, or in any
capacity equivalent to that of a member of management of the client;
(2) Promoter, underwriter, or voting trustee
of the client; or
(3) Trustee for any pension or
profit-sharing trust of the client.
(e) "Covered person" is:
(1) A person on the attest engagement team;
(2) A person 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 Paragraphs (a) through (e) of this Rule 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.
(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, 1211 Avenue of the
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, 1211 Avenue of the
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 Box 9125,
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,
1211 Avenue of the
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.
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.
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