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BOARD RULES & PRACTICE MANAGEMENT FIRM REGISTRATION AUDITS If you perform audits, compilations or reviews in Texas you need to perform the attest service through a registered firm. Even if you are practicing in Texas under the “Practice Privilege” provisions of the Public Accountancy Act, you need to practice through a registered firm. The Practice Privilege, aka Mobility, was created in 2007 by the legislature and allows an out of state CPA to come into Texas on a temporary basis to provide accounting services without an individual license so long as the CPA does not perform attest work. When the out of state CPA comes into Texas to perform this attest work, they aren’t required to have an individual license but they are required to provide the service through a registered firm. NON-ATTEST If your work consists exclusively of tax work and bookkeeping you are not required to practice through a registered firm so long as you do not hold out to be a CPA. If you do hold out you may still practice through an unregistered firm if you use the disclaimer “This firm is not a CPA firm” and the disclaimer is in conspicuous proximity to the firm name. FIRM NAME The general rule in a firm name is that it must have the name or surname of a current or former CPA owner of the firm or the firm’s predecessor and the name must not be misleading. MISLEADING A firm name is presumed misleading if: 1. it contains the name of a non-owner, unless it’s the name of a former owner; 2. states or implies quality of services, special expertise, expectation of favorable outcomes, or misleading geographic areas; 3. includes the name of a non-owner; 4. implies licensing recognition not supported in fact; 5. includes designations that implies more than one CPA. PRESUMED NOT-MISLEADING IF IT: 1. contains the name or initials of current or former CPA owners; 2. states or implies a limitation on the type of services offered; 3. indicates the legal organization of the firm. SOLE PROPRIETORS 1. must contain the surname of the sole proprietor as it appears on the CPA certificate; 2. upon death of the sole proprietor the firm may operate for up to 15 months under another CPA with a power of attorney. PARTNERSHIPS AND CORPORATIONS 1. a partner surviving the death of the others may continue to practice up to 2 years under the name; 2. may not use the name of a CPA prohibited from practicing; 3. any change in the legal organization of the firm must be reported to the Board within 30 days. CONFIDENTIALITY Information communicated to you by your client in connection with the services you provide is confidential information and must not be disclosed without the client’s consent except: 1. when provided for by the professional standards for reporting on the examination of a financial statement; 2. pursuant to a summons issued pursuant to the authority of the IRS Code or Securities Act or Securities Exchange Act or a court order; 3. in response to an investigation conducted by the Board; 4. in response to an ethical investigation conducted by a professional organization of Certified Public Accountants; 5. in the course of a Peer Review. AUDITS-SUBSEQUENTLY DISCOVERED FACTS Being an auditor is counterintuitive. You aren’t necessarily working for the person that employed you. You’re providing the public with the assurance that it can rely on your client’s financial statements. AU Section 561 requires an auditor who becomes aware of information subsequent to the offer of his opinion that would affect the opinion he offered, to advise his client to make disclosures to persons who would likely rely on his opinion. If the client refuses to make the disclosures then the auditor is obligated to disclose to appropriate regulatory authorities and persons likely to rely on his opinion. A proposed Board rule addresses this situation. UNAUTHORIZED PRACTICE OF PUBLIC ACCOUNTANCY The following licensees are engaged in the unauthorized practice of public accountancy. 1. Licensees performing an audit without a firm registration; 2. Licensees that provide accounting services when their license has been suspended; Accounting services include: a. issuing a report on financial statements; b. preparing a tax return; c. providing advice in a tax matter; d. providing management or financial advisory or consulting services; e. recommending the sale of a product if the recommendation requires or implies accounting or auditing skill; f. providing forensic accounting services; and g. providing internal auditing services. 3. Non-licensees may not hold out to the public as an accountant, auditor or assert an expertise in accounting or auditing nor assume or use the title CPA or any other title, designation, or abbreviation likely to be confused with Certified Public Accountant. Surveys have demonstrated that the public believes that a person using the term accountant, offering accounting services or auditing services is a CPA. REPORTABLE EVENTS 1. A licensee shall report in writing to the board the occurrence of any of the following events within 30 days of the date the licensee has knowledge of these events: (A) the conviction or imposition of deferred adjudication of the licensee of any of the following: (1) a felony; (2) a crime of moral turpitude; (3) any crime of which fraud or dishonesty is an element or that involves alcohol abuse or controlled substances; and (4) any crime related to the qualifications, functions, or duties of a certified public accountant, or to acts or activities in the course and scope of the practice of public accountancy or as a fiduciary. (5) the cancellation, revocation, or suspension of a certificate, other authority to practice or refusal to renew a certificate or other authority to practice as a certified public accountant or a public accountant, by any state, foreign country or other jurisdiction; (6) the cancellation, revocation, or suspension of the right to practice as a certified public accountant or a public accountant before any governmental body or agency or other licensing agency; (7) an un-appealable adverse finding in any state or federal court or an agreed settlement in a civil action against the licensee concerning professional accounting services or professional accounting work; or (8) the loss of a professional license from another state or federal regulatory agency such as an insurance license or a securities license, resulting from an un- appealable adverse finding.
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