1. Texas Rules of Professional Conduct: Additional Professional Responsibilities
Dr. Donald McConnell Jr.
4/8/2019

2. Recent Changes in Texas Rules of Conduct:
Fundamentally now aligns the following with AICPA rules of conduct:
Commissions
Contingent Fees*
TSBPA code now differs in terms of:*
Who can register to perform attest services
Who can perform perform not-attest services
Issues concerning MIGI’s
Reporting of practice problems to TSBPA
Until very recently, there were some differences.
Insofar as AICPA only gives the exam, TSBPA gives/can suspend CPA certificate, right to practice public accounting
4/8/2019

3. Solicitation: Attempting to Obtain Another CPA’S Client
AICPA has no restrictions upon solicitation
Ethics violations in Texas to persist in contacting a prospective client when such client does not desire to be contacted [ (c)]
However, “persistent contacting” also probably an act discreditable for AICPA purposes
4/8/2019

4. Direct-mail Solicitations
CPA must retain for 36 months a copy of the mailing and a list of persons to whom it was sent…
unless solicited party:
Was at that time a client, or
The communication was invited [where another CPA providing services], or
Was seeking professional services not being provided by another CPA [ (d)]
4/8/2019

5. Various Solicitation Issues
Addressing a letter and salutation to a specific party [Dear Mr. Jones, banker] is a solicitation
Addressing a letter and salutation generically [Dear banker] is not. It is advertising.
4/8/2019

6. A Solicitations Case
A CPA sends a direct-mail communication about his/her tax practice to an audit client whose tax work is done by another CPA firm
Does the soliciting CPA need to follow the “36 month” provisions? *
Not likely that the audit and tax work would be split; however, it is a client, but not for that service.
Technically probably do not have to retain for 36 months the communication and list that party, but would be prudent to do so
4/8/2019

7. Is Low-balling of Audit Fees for Professional Services Prohibited?
Texas code states independence is impaired: [ (d)]
If a CPA performs auditing services (other than for a charitable organization)
For a fee < direct labor cost
AICPA has no such restrictions
However, this could be viewed as creating an indirect financial interest, which if material, could impair independence
Why is this potentially an indirect financial interest?
4/8/2019

8. Attest Services: Entity Registration Requirements [501.40]
Attest services (which includes any form of compilation services) can only be done by CPAs in registered practice units [those registered with TSBPA]
CPAs in non-registered entities cannot even issue compilation reports
4/8/2019

9. Non-Attest Services: Entity Registration Requirements [501.40]
CPAs in non-registered entities (American Express, H&R Block) which perform non attest public accounting functions, e.g. :
Tax work
Consulting work
Advice or recommendations requiring or implying accounting or auditing expertise
If using the CPA designation, must include prominent disclaimer:
“Not qualified to register with the TSBPA to practice public Accountancy in Texas.”
4/8/2019

10. Non-Attest Services: Entity Registration Requirements [501.40]
Such disclaimer must also be at conclusion of a radio broadcast
Law firms and FDIC Banks offering some public accounting non test functions are exempt from these provisions
4/8/2019

11. CPA Passive Ownership in Non-registered Accounting Entities [508.38]
AICPA can have a passive ownership interest in a non-registered entity [e.g. H&R Block, American Express] which provides some public accounting services if:
Entity is publicly held, or
Ownership interest is not material to net worth of entity
Passive interest does not exist if CPA has significant influence over entity
4/8/2019

12. Firm Names [501.47]
Texas does not allow firm names descriptive about quality of service
Texas does allow descriptive words about geographical area
An incorporated firm or PC must include words Corporation or PC
“… and Co.” cannot be used unless at least two licensees are practicing public accounting full-time
PC or partnership name must contain name of at least one person now or previously a partner/shareholder
Sole proprietor must have proprietor’s name in firm name
4/8/2019

13. Loans with Clients: Are There Differences?
Fundamentally, No
However loans immaterial to the net worth of the borrower CPA are grandfathered, if they existed as of 1/1/97.
4/8/2019

14. Some Lesser Issues
The following must be reported to TSBPA within 30 days: (501.36)
Conviction of a felony
Any crime related to functions or duties of the CPA
Any crime of embezzlement or involving improper financial statements
Deferred adjudication involving criminal felony prosecution
Cancellation of right to practice as a CPA in any jurisdiction, including SEC or IRS
4/8/2019

15. Some Issues concerning MIGI’s (CPA’s in Government or Industry)
CPA designation may be used by licensed individual; however, professional services may not be offered to the public
Employer of such CPA may not offer professional services to the public, e.g.:
Issuance of reports
Management Consulting
Preparation of tax returns, or tax advice
Advice requiring or implying possession of accounting skills
Employer practice registration is not permitted with TSBPA
Including issuance of reports, furnishing of management consulting, preparation of tax returns or advice on tax matters, providing advice or recommendations requiring or implying the possession of Accounting or auditing skills
4/8/2019

16. Some Lesser Issues (con.)
AICPA interpretation allows retaining adjusting entries, closing entries, consolidating entries until client pays a past due fee
Texas code silent about return of such as being contingent upon receipt of past due fees
Texas apparently more restrictive
4/8/2019