April 2001
Ethics and Regulations Q & As
The New York State Society of CPAs is at your service to answer questions on ethics and regulation. Contact Ann Spaulding at (212)
719-8348, (800) NYSSCPA (697-7272), or aspaulding@nysscpa.org or direct a letter of inquiry to the Professional Ethics Committee at the Society’s address for a written response.
Bank Director
Q: May a member in public practice serve as a director of a bank?
A: Yes. However, before accepting a bank directorship, the member should carefully consider the implications of such service if the member has clients who are customers of the bank.
These implications fall into two categories:
Confidential Client Information. Rule 301 provides that a member in
public practice shall not disclose any confidential client information
without the specific consent of the client. This ethical requirement applies
even though failure to disclose information may constitute a breach of
the member’s fiduciary responsibility as a director.
Conflicts of Interest. Interpretation 102-2 provides that a
conflict of interest may occur if a member performs a professional service
(including service as a director) for an entity that the member or his
or her firm has a relationship with and could, in the member’s professional
judgment, be viewed by appropriate parties as impairing the member’s objectivity.
If the member believes that professional service can be performed with
objectivity and the relationship is disclosed to and consent is obtained
from all appropriate parties, performance of the service shall not be
prohibited.
Therefore, it generally is not desirable for a member in public practice to accept a position as a bank director when the member’s clients are likely to engage in significant transactions with the bank. If a member is engaged in public practice, the member should avoid the high probability of a conflict of interest and the appearance that the member’s fiduciary obligation and responsibilities to the bank may conflict with the member’s ability to serve the client’s interest objectively and in complete confidence.
The general knowledge and experience of CPAs in public practice may be very helpful to a bank in formulating policy matters and making business decisions; however, in most instances, it would be more appropriate for the member as part of the member’s public practice to serve as a consultant to the bank’s board. Under such an arrangement, the member could limit activities to ones that did not involve conflicts of interest or confidentiality problems.
Association of Accountants Not Partners
Q: If two members are not partners but share an office, have the
same employees, have a joint bank account, and work together on each
other’s engagements, is it proper to have a joint letterhead listing
both names, with “Certified Public Accountants” included?
A: Under these circumstances the public would assume that a partnership existed. If any reports were to be issued under the joint heading, Rule 505 would be violated.
