Authority
The Rules of Professional Conduct are promulgated under the authority granted under sections 12-20-204 and 12-100-105(1)(c), C.R.S., to establish and maintain high standards of competence and integrity in the public accounting profession. The Rules of Professional Conduct apply with equal force to all licensees, except where the wording of a specific rule indicates otherwise. As specifically provided in Rules 1.12 and 1.12, these Rules incorporate by reference additional standards and rules from other entities. All licensees must comply with the Board's Rules of Professional Conduct in addition to all standards and rules incorporated by reference. If a Rule of the State Board of Accountancy is inconsistent or otherwise differs from the materials incorporated by reference herein, the Rule of the State Board of Accountancy governs.
Applicability
Title 12, Article 100 of the C.R.S., requires that all licensees adhere to the Rules of Professional Conduct.
The Rules of Professional Conduct that follow apply to all services performed except (a) where the wording of the rule indicates otherwise and (b) that a licensee who is practicing outside the United States will not be subject to discipline for departing from any of the rules stated herein as long as the licensee's conduct is in accord with the rules of the organized accounting profession in the country in which the licensee is practicing. However, where a licensee's name is associated with financial statements under circumstances that would entitle the reader to assume that United States practices were followed, the licensee must comply with the requirements of Rules 1.12(B), 1.12(E), and 1.12(F).
A.DEFINITIONS1. Integrity An element of character fundamental to professional recognition which requires a licensee to:
(1) be honest and candid within the constraints of client confidentiality;(2) observe both the form and the spirit of technical and ethical standards; and(3) keep service and the public trust above personal gain and advantage. It is the quality from which the public trust derives and the benchmark against which a licensee must ultimately test all decisions. It can accommodate the inadvertent error and the honest difference of opinion. It cannot accommodate dishonesty, deceit, or subordination of principle.2. Objectivity Requires a licensee to:
(1) be impartial, intellectually honest, and free of conflicts of interest, except as otherwise provided under Rule 1.12 (5); (2) protect the integrity of their work regardless of service or capacity; and(3) avoid any subordination of their judgment.3. Independence The absence of relationships that impair or appear to impair a licensee's objectivity in performing an engagement in which the licensee will issue an attestation report or opinion, unless the lack of independence is disclosed in the report or opinion.
4. Due Care The discharge of responsibilities to clients, employers, and the public with diligence and competence which requires a licensee to:
(1) render services carefully and in a timely manner; (3) observe applicable technical and ethical standards; and(4) plan and supervise adequately any professional activity for which the licensee is responsible.5. Competence The knowledge and ability to assure that the quality of the services rendered meets professional standards. It requires a licensee to:
(1) be responsible for assessing and evaluating whether the education, experience, and judgment of the licensee and/or the personnel providing the services is adequate for the responsibility assumed; and(2) maintain a commitment to learning and professional improvement that continues throughout a licensee's professional life.6. Contingent Fee A fee established for the performance of any service pursuant to an arrangement in which no fee will be charged unless a specific finding or result is attained, or in which the amount of the fee is otherwise dependent upon the finding or result of such service. Solely for purposes of these Rules, fees are not regarded as being contingent if fixed by courts or governmental entities acting in a judicial or regulatory capacity, or in tax matters if determined based upon the results of judicial proceedings or the findings of governmental agencies acting in a judicial or regulatory capacity, or there is a reasonable expectation of substantive review by a taxing authority.
B.INDEPENDENCEWhen a licensee provides auditing or other attestation services, they shall be independent in fact and appearance and shall conform to the independence standards provided in the AICPA Professional Standards, whether or not the individual CPA or Firm are members of the AICPA. When the licensee performs services regulated by the SEC, PCAOB, or the U.S. General Accounting Office (GAO), they also shall conform to the independence standards established by those bodies for those services in effect and incorporated by reference in Rule 1.4(C).
C.INTEGRITY AND OBJECTIVITYIn the performance of any professional service, licensees shall maintain objectivity and integrity, shall be free of conflicts of interest except as otherwise provided in paragraph (5) of this Rule 1.12(C), and shall not knowingly misrepresent facts or subordinate their judgment to others.
1. A licensee shall not engage in fraud, deceit, or any form of dishonesty in connection with or relating to offering or providing a professional service, including, but not limited to, knowingly obtaining or exercising control over anything of value without authorization, as a result of, in connection with, or otherwise relating to offering or providing a professional service.2. A licensee shall not engage in fraud, deceit, or any form of dishonesty in relation to the Board, including, but not limited to, any act or omission, any response, representation, application, form, or communication with or to the Board whether oral or written.3. A licensee shall not knowingly misrepresent facts or subordinate his judgment to others. a. Misrepresentations of fact or subordination of judgment include, but are not limited to: (1) Knowingly making, or permitting or directing another to make, false or misleading entries in an entity's financial statements or records;(2) Misrepresenting or failing to disclose material facts to an external or internal auditor, or accountant; and Taking a position in a tax return or advising a tax client to take a position that does not have a realistic possibility of being sustained on its merits in an administrative or judicial review unless the position is not frivolous and is adequately disclosed as provided in the AICPA Professional Standards, Statements on Standards for Tax Services.
4.Subordination of judgment or principle. When disagreements and disputes arise in the course of providing professional services by a licensee related to the recording of transactions or preparing financial statements, a licensee shall determine whether (a) the entry or the failure to record a transaction in the records, or (b) the financial statement presentation or the nature or omission of disclosure in the financial statements, as proposed, represents the use of an acceptable alternative and does not materially misrepresent the facts. a. If, after appropriate research or consultation, the licensee concludes that the matter has authoritative support or does not result in a material misrepresentation, the licensee need do nothing further.b. If the licensee concludes that the matter results in a material misrepresentation or misstatement, the licensee shall make any concerns known to the appropriate higher level(s) of management within the organization (for example, the supervisor's immediate superior, senior management, the audit committee or equivalent, the board of directors, or the company's owners). Licensees shall document their understanding of the facts, the accounting principles involved, the application of those principles to the facts, and the parties with whom these matters were discussed.c. If, after discussing their concerns with the appropriate person(s) in the organization, the licensee concludes that appropriate action was not taken, he must assess his continuing relationship with the client or employer.d. The licensee also must assess any responsibility that may exist to communicate to third parties, such as regulatory authorities or the client or employer's (former employer's) external accountant.5.Conflict of Interest. A conflict of interest may occur if a licensee performs a professional service for a client or employer and the licensee has a relationship with another person, product, or service that could, in the licensee's professional judgment, be viewed by the client, employer, or other appropriate party as impairing the licensee's objectivity. a. The licensee may perform the professional service if:(1) The licensee reasonably believes that the professional service can be performed with objectivity;(2) The relationship is comprehensively disclosed to the client, employer, or other appropriate party; and(3) The licensee obtains the informed written consent of the client, employer, or other appropriate party.b. Certain professional engagements, including audits, reviews, and other attest services require Independence. Independence impairments cannot be eliminated by disclosure and consent.D.COMMISSIONS, REFERRAL FEES, AND CONTINGENT FEES1.Permitted Commissions and Contingent Fees. A licensee who holds out and who is not otherwise prohibited by this Rule from receiving a commission or contingent fee shall disclose to the recipient of professional services or the buyer of a product, in writing, the nature, amount, and source of any contingent fee or commission prior to performing the professional services or making the sale that generates the commission or contingent fee.2.Referral Fees. A licensee who holds out and who accepts a referral fee for recommending or referring a service or product, or who pays a referral fee to obtain a client, shall disclose to that client, or the client or other person receiving the service or product, in writing, the nature, amount, and source of the referral fee. The written notification shall be provided to the client or other person prior to the time the client or other person engages the licensee or other service provider or makes the purchase that generates the referral fee.3.Contingent Fees in Tax Matters. A licensee shall not prepare an original or amended tax return or claim for refund for a contingent fee. For purposes of this Rule, fees are not regarded as contingent if fixed by courts or other public authorities, or if based on the results of judicial proceedings or the findings of governmental agencies. A fee is considered to be based on the findings of a governmental agency if, at the time of a fee arrangement, a licensee can demonstrate a reasonable expectation of substantive consideration by an agency with respect to the licensee's client. In the case of the preparation of an original tax return, such expectation is not deemed reasonable.4.Prohibited Commissions and Contingent Fees. A licensee that performs: (1) an audit or review of a financial statement; (2) a compilation of a financial statement when the licensee expects, or reasonably might expect, that a third party will use the financial statement when the licensee's compilation report does not disclose a lack of independence; or(3) an examination of prospective financial information, shall not: a. Receive a commission or, for a commission, recommend or refer to that client any product or service, or, for a commission, recommend or refer to any person any product or service to be supplied by that client; orb. Receive a contingent fee for performing the services listed in paragraph (4) of this Rule 1.12, nor shall the licensee perform for that client any other professional service for a contingent fee. This prohibition on commissions and contingent fees shall apply during the fee period in which the licensee is or was engaged to perform any of the services listed in paragraph (4) of this Rule 1.12 and the period covered by any historical financial statements involved in such services.
E.PROFESSIONAL COMPETENCE AND COMPLIANCE WITH APPLICABLE TECHNICAL STANDARDSA licensee shall comply with the following:
1. General Standards. a.Professional Competence- A licensee shall undertake only those professional services that the licensee can reasonably expect to complete with professional competence.b.Due Care- A licensee shall exercise due care in the performance of professional services.c.Planning and Supervision- A licensee shall adequately plan and supervise the performance of services.d.Sufficient Relevant Data- A licensee shall obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to any professional service performed.2. Auditing Standards. A licensee shall not permit the licensee's name to be associated with financial statements in such a manner as to imply that the licensee is acting as an independent certified public accountant, unless the licensee has complied with all applicable auditing standards. Applicable auditing standards shall include those defined as generally accepted auditing standards by the AICPA, such as Statements on Auditing Standards and Government Auditing Standards as promulgated by the GAO or standards of any successor organizations, including interpretations.
3. Accounting Principles. If financial statements or other financial data contain any material departure from an accounting principle(s) promulgated by the Financial Accounting Standards Board (FASB), the Government Accounting Standards Board (GASB), their predecessor entities and other entities having similar generally recognized authority or jurisdiction to establish such principle(s), a licensee shall not:
a. Express an opinion or state affirmatively that the financial statements or other financial data of any entity are presented in conformity with generally accepted accounting principles; orb. State that the licensee is not aware of any material modifications that should be made to such statements or data for them to be in conformity with generally accepted accounting principles. If, however, the statements or data contain such a departure and the licensee can demonstrate that unusual circumstances would have caused the financial statements to be otherwise misleading, the licensee can comply with this Rule by conspicuously disclosing and describing in the workpapers the departure, its approximate effects if practicable, and the reasons why compliance with the principle would result in a misleading statement.
4. Prospective Financial Information. Licensees shall not permit their name to be used in conjunction with any prospective financial information in a manner that may lead to the belief that the licensees vouch for the achievability of the prospective financial information. Licensees must comply with standards in this area promulgated by the AICPA or by other entities having similar generally recognized authority or jurisdiction over the service provided.
5. Other Attestation Standards. Licensees shall not permit their name to be associated with assertions or conclusions about the reliability of a written representation of another party unless they have complied with the Statements on Standards for Attestation Engagements (SSAE) promulgated by the AICPA or by other entities having similar generally recognized authority or jurisdiction over the service provided.
F.OTHER PROFESSIONAL STANDARDSIn performing tax services, accounting, review and compilation services, attestation engagements, personal financial planning, business valuation, litigation support and expert witness services, and consulting services, a licensee shall conform with Rule 1.12, any other professional standards applicable to such services as contained in the AICPA Professional Standards, and any other rules established or incorporated by reference herein.
G.ACTING THROUGH OTHERSLicensees shall not knowingly permit others to carry out on their behalf, either with or without compensation, acts or omissions that, if carried out by the licensees, would place them in violation of these Rules or the Act. Similarly, in supervising subordinates, licensees shall not accept or condone conduct in violation of these Rules or the Act.
H.CONFIDENTIAL CLIENT AND EMPLOYER INFORMATION1. General Rule. A licensee shall not without the specific consent of their client or employer disclose or use for his own benefit any personal or business related information pertaining to a client or the employer of the licensee, which information is obtained from any source or developed by the licensee in the course of employment or performing professional services. Such information is deemed confidential. Information obtained as part of a proposed acquisition or in evaluating the acquisition or merger of an accounting practice shall not be disclosed or used to the licensee's benefit.
2.Acceptable Disclosures. Rule 1.12(H)(1) shall not apply: a. If information is disclosed with the specific consent of the client or the employer of the licensee.b. If information is disclosed pursuant to a subpoena or summons issued with respect to the licensee or an entity with which the licensee is associated, where the subpoena or summons has been determined to be legally enforceable; or if information is disclosed to permit a licensee's compliance with applicable laws and government rules and regulations.c. If information is disclosed as part of the public record in a civil lawsuit (legal action) between the licensee and the client or employer.d. If information is disclosed in the course of a peer review of a licensee's professional services. Professional practice reviewers shall not disclose any confidential client information which comes to their attention from licensees in carrying out their responsibilities, except that they may furnish such information in response to a formal request from an investigative or disciplinary body of the kind referred to in paragraph (e) of this Rule 1.12(H)(2).e. If information is disclosed as part of the process of initiating a complaint with, or responding to an inquiry made by, the Board and the disclosure to the Board is in accordance with statutes regarding accountant-client privilege or the client waives the privilege; or if information is disclosed as part of the process of initiating a complaint with or responding to an investigative or disciplinary body established by law or formally recognized by the Board. Members of the Board shall not disclose or use for their own benefit any confidential client information that comes to their attention from licensees in disciplinary proceedings or otherwise in carrying out their responsibilities.f. If information is disclosed pursuant to a signed nondisclosure agreement as part of an acquisition or merger or proposed acquisition or merger of an accounting practice.I.ISSUING COPIES OF REPORTS, TAX RETURNS, OR OTHER DOCUMENTS1. Unless otherwise prohibited by law, upon request and reasonable notice, a licensee must furnish to a client or former client a copy of any report, tax return, or other documents filed or issued (Documents Filed or Issued) by the licensee to or for such client during the preceding sixty months. The licensee must furnish these copies in a timely manner. Unpaid fees for professional services do not constitute justification for withholding copies of these items.2. The licensee may charge for the reasonable cost of providing the copies and may withhold such copies until that cost is paid. Costs include the time necessary to locate, retrieve, prepare, and deliver the requested Documents Filed or Issued.3. Client for the purposes of this Rule 1.12 includes persons who are current owners or who were owners during the time period addressed by the Documents Filed or Issued, unless otherwise restricted by contract or law.4. Records maintained solely in electronic form may be provided in a retrievable electronic form that includes information about the software used and passwords provided, if applicable.J.CLIENT RECORDS1. Client records are: a. Accounting or other records belonging to the client that are obtained from or on behalf of the client, or that are otherwise within a licensee's possession or control.b. Licensee's workpapers or records that contain data that should properly be reflected in the client's books and records, including, but not limited to: (1) Adjusting, closing, combining, or consolidating journal entries; and(2) Information normally contained in the books of original entry and general ledgers or subsidiary ledgers, such as accounts receivable, job costs, and equipment ledgers, or depreciation records.c. Computer files that include client information normally contained in the books of original entry and general ledgers or subsidiary ledgers.2. Obligation to retain, return, and provide Client records a. A licensee must retain copies of documentation of work performed that constitute client records, including any Document Filed or Issued by the licensee, for a period of sixty months from the date the Document was Filed or Issued. If original client records, in paper or electronic form, or copies of client records are retained by the licensee, they must also be retained for a period of sixty months.b. A licensee must return or make available client records upon request and reasonable notice from a client or former client. If the records cannot be returned or made available to the client, former client, or his designee promptly, the licensee must immediately notify the client, former client, or designee of the date the records will be returned or made available. The licensee must return or make these records available in a timely manner.c. A licensee must not retain client records in an attempt to force payment of any kind.d. Upon completion of an engagement wherein the client's records have been returned to the client, any duplicate records requested by the client or former client must be furnished to the client upon reasonable notice for a reasonable charge. Such charge must be set to reflect the reasonable cost of providing the copies. A licensee may require that such charge be paid prior to the time duplicate records are provided to the client.3. Workpapers belonging to the Licenseea. A licensee is not required to furnish to the client any workpapers developed by the licensee that do not result in changes to the client's records or are not in themselves part of the records ordinarily maintained by a client.b. Licensee's workpapers are solely the property of the licensee and are not the property of the client even if developed with the assistance of the client. For example, the licensee may make extensive analyses of inventory or other accounts as part of the selective audit procedures. These analyses are a part of the licensee's workpapers, even if client personnel has prepared the analyses at the request of the licensee. Only to the extent these analyses result in changes to the client's records would the licensee be required to furnish the details from the workpapers in support of the journal entries recording the changes. The licensee is not required to furnish such details if the journal entries themselves contain all necessary details.4.Termination of Engagement. If an engagement is terminated prior to the completion of work, and the licensee's work product has neither been issued nor paid for by the client, the work product is solely and exclusively the property of the licensee.5.Timely Manner. Unless otherwise provided, "timely manner" shall be within forty-five business days.K.SAFEGUARDING CLIENT RECORDS AND PROPERTY1. Every certificate holder has a duty to safeguard client records, funds, and property in the certificate holder's possession or control in the event that the certificate holder is incapacitated, disappears, or dies.2. The certificate holder shall provide for continuing services to a client or ensure that, in the event that the certificate holder is incapacitated, disappears, or dies: a. Clients are promptly notified;b. Client records, property, and funds belonging to a client are securely maintained; andc. Those client records, property, and funds are made available or returned to the respective clients within thirty to forty-five days in the absence of extenuating circumstances.L.SOLICITATIONA licensee shall not solicit an engagement to perform professional services by any communication or other means that:
1. Is false, misleading, or deceptive;2. Would: (1) create false or unjustified expectations; (2) imply an ability to influence any court, tribunal, regulatory agency, or similar body or official; (3) contain a representation of unrealistic future fees; or(4) contain a representation likely to be misunderstood by a reasonable person;3. Creates or uses coercion, duress, compulsion, intimidation, threats, overreaching, vexatious, or harassing conduct; or4. Contains untruthful statements about the professional work product or competence of another licensee.M.INCORPORATION OF AICPA CODE OF PROFESSIONAL CONDUCT1. In addition to these Rules of Professional Conduct, the Board adopts and incorporates by reference the AICPA Code of Professional Conduct included in the AICPA Professional Standards, as provided in Rule 1.4 . All licensees must comply with the Board's Rules of Professional Conduct and the AICPA Code of Professional Conduct in the performance of professional services.2. When the AICPA Code of Professional Conduct refers to "Member" it is understood that the references apply to all licensees, regardless of whether the licensee is a member of the AICPA. When the AICPA Code of Professional Conduct uses the terms "should," "obligated," or "required", those terms are deemed mandatory and mean "must" for the purposes of these Rules.3. If a Rule of the State Board of Accountancy is inconsistent or otherwise differs from the materials incorporated by reference herein, the Rule of the State Board of Accountancy governs.4. In applying these Rules to deliberations in disciplinary or other proceedings, the Board may disregard or may consider as persuasive, but not necessarily conclusive, applicable interpretations and rulings in the AICPA Code of Professional Conduct.N.INCORPORATION OF STANDARDS1. Licensees must also comply with the requirements of the U.S. GAAS, U.S. GAAP, SEC, PCAOB, IRS, U.S. Government Accountability Office (GAO), Financial Accounting Standards Board (FASB), the Governmental Accounting Standards Board (GASB), the Cost Accounting Standards Board (CASB), the Federal Accounting Standards Advisory Board (FASAB), and the Federal Office of Management and Budget (OMB) as described in the AICPA Professional Standards and as provided in Rule 1.4.2. Licensees must comply with the AICPA Professional Standards and the following standards if such standards are applicable to the Professional Services being performed:a. Statements of Governmental Accounting and Financial Reporting Standards issued by GASB;b. Accounting Standards recognized by FASB;c. Governmental Auditing Standards issued by GAO;d. SEC Rules, Concept Releases, Interpretative Releases, and Policy Statements; and3. If the professional services are governed by standards not included in this Rule 1.12, certificate holders and registrants, and all licensees who offer or render professional services in this state or for clients located in this state, must: a. Maintain documentation of the justification for the departure from the standards listed in this Rule 1.12(N);b. Determine and document what standards are applicable; andc. Demonstrate compliance with the applicable standards.44 CR 03, February 10, 2021, effective 3/2/202144 CR 20, October 25, 2021, effective 11/14/202145 CR 11, June 10, 2022, effective 6/30/202245 CR 17, September 10, 2022, effective 9/30/202245 CR 20, October 25, 2022, effective 11/14/2022