April 2000

By Ann E. Spaulding

The NYSSCPA offers assistance with members' questions on ethics and regulation. Inquiries address a variety of topics such as:

Acceptance of Gifts

Would the independence of a member's firm be considered to be impaired if an employee or partner accepts a gift or other unusual consideration from a client?

If an employee or partner accepts more than a token gift from an attest client, even with the knowledge of the member's firm, the appearance of independence may be lacking.

Association Membership

If a member joined a trade association that is an attest client, would the independence of the member be considered to be impaired with respect to the association?

Independence of the member would not be considered to be impaired provided the member did not serve as an officer, director, or in any capacity equivalent to that of a member of management.

Receipt of a Contingent Fee or Commission

Ethics Rules 302 and 503 prohibit, among other acts, the receipt of contingent fees for the performance of certain services and the receipt of commissions for the referral of products or services under certain circumstances. When are contingent fees or commissions deemed to be received?

Contingent fees or commissions are deemed to be received when the performance of the related services is complete and the fee or commission is determined. For example, if in one year a member sells a life insurance policy to a client and the member's commission payments are determined to be a fixed percentage of future years' renewal premiums, the commission is deemed to be received in the year the policy is sold.

Disclosure of Confidential Client Information

Would a member violate Rule 301 if he or she discloses confidential client information to the member's attorney, in court or in documents or proceedings in connection with an actual or threatened lawsuit or alternative dispute resolution proceeding relating to that client?

Rule 301 is not intended to prohibit a member from disclosing the information necessary to initiate, pursue, or defend him- or herself in such proceedings.

Termination of Engagement Prior to Completion

Does Rule 501 require a member to furnish a tax return or supporting detail to a client if the engagement to prepare the tax return is terminated prior to its completion?

Interpretation 501-1 states that if an engagement is terminated by either the member or the client prior to completion, the member is required to return or furnish copies of only those records originally given to the member by the client. Therefore, if a member has been engaged to prepare a tax return and the client or the member terminates the engagement before the tax return is delivered to the client, the member's responsibility is to return only those records originally provided to the member by the client. *