California Society of CPAs Code of
Composition, Applicability and Compliance
The Code of Professional Conduct (the
"Code of Professional Conduct") of the California Society of Certified
Public Accountants ("CalCPA") consists of two sections: (1) Principles,
and (2) Rules. The Principles and Rules conform to the Principles and
Rules set forth in the Code of
Professional Conduct of the American Institute of Certified Public
Accountants (the "Institute") and the California
State Board of Accountancy. The Principles provide the framework
for the Rules, which govern the performance of professional services by
members. CalCPA is authorized to designate bodies to promulgate
technical standards under the Rules. In the absence of specific
designation by CalCPA or another authority, CalCPA authorizes the
governing Council of the American Institute of Certified Public Accountants (the "Council") to designate bodies
to promulgate technical standards under the Rules. The Bylaws
of CalCPA require adherence to those Rules and standards. The
Bylaws and the Code of Professional Conduct are enforced pursuant to the
terms of the Enforcement Procedures adopted by the Council
The Code of Professional Conduct was
adopted by the membership of CalCPA to provide guidance and rules to all
members -- those in public practice, industry, government, and
education -- in the performance of their professional responsibilities.
Compliance with the Code of
Professional Conduct, as with all standards in an open society, depends
primarily on members' understanding and voluntary actions, secondarily
on reinforcement by peers and public opinion, and ultimately on
disciplinary proceedings, when necessary, against members who fail to
comply with the Rules.
Section I - Principles
Membership in CalCPA is voluntary. By
accepting membership, a certified public accountant assumes an
obligation of self-discipline above and beyond the requirements of laws
These Principles of the Code of
Professional Conduct of CalCPA express the profession's recognition of
its responsibilities to the public, clients and colleagues. They guide
members in the performance of their professional responsibilities and
express the basic tenets of ethical and professional conduct. The
Principles call for an unswerving commitment to honorable behavior, even
at the sacrifice of personal advantage.
Article 1 - Responsibilities
In carrying out their
responsibilities as professionals, members should exercise sensitive
professional and moral judgments in all their activities.
As professionals, certified public
accountants perform an essential role in society. Consistent with that
role, members of CalCPA have responsibilities to all those who use their
professional services. Members also have a continuing responsibility to
cooperate with each other to improve the art of accounting, maintain
the public's confidence and carry out the profession's special
responsibilities for self-governance. The collective efforts of all
members are required to maintain and enhance the traditions of the
Article II - The Public Interest
Members should accept the obligation
to act in a way that will serve the public interest and demonstrate
commitment to professionalism.
A distinguishing mark of a profession
is acceptance of its responsibility to the public. The accounting
profession's public consists of clients, credit grantors, governments,
employers, investors, the business and financial community and others
who rely on the objectivity and integrity of certified public
accountants to maintain the orderly functioning of commerce. This
reliance imposes a public interest responsibility on certified public
accountants. The public interest is defined as the collective well being
of the community of people and institutions the profession serves.
In discharging their professional
responsibilities, members may encounter conflicting pressures from among
each of those groups. In resolving those conflicts, members should act
with integrity, guided by the precept that when members fulfill their
responsibility to the public, clients' and employers' interests are best
Those who rely on certified public
accountants expect them to discharge their responsibilities with
integrity, objectivity, due professional care and a genuine interest in
serving the public. They are expected to provide quality services, enter
into fee arrangements and offer a range of services–all in a manner
that demonstrates a level of professionalism consistent with these
Principles of the Code of Professional Conduct.
All who accept membership in CalCPA
commit themselves to honor the public trust. In return for the faith
that the public reposes in them, members should seek continually to
demonstrate their dedication to professional excellence.
Article III - Integrity
To maintain and broaden public
confidence, members should perform all professional responsibilities
with the highest sense of integrity.
Integrity is an element of character
fundamental to professional recognition. It is the quality from which
the public trust derives and the benchmark against which a member must
ultimately test all decisions. Integrity requires a member to be, among
other things, honest and candid within the constraints of client
Service and the public trust should
not be subordinated to personal gain and advantage. Integrity can
accommodate the inadvertent error and the honest difference of opinion;
it cannot accommodate deceit or subordination of principle.
Integrity is measured in terms of
what is right and just. In the absence of specific rules, standards, or
guidance, or in the face of conflicting opinions, a member should test
decisions and deeds by asking: "Am I doing what a person of integrity
would do? Have I retained my integrity?" Integrity requires a member to
observe both the form and the spirit of technical and ethical standards;
circumvention of those standards constitutes subordination of judgment.
Integrity also requires a member to observe the principles of
objectivity and independence and of due care.
Article IV - Objectivity and Independence
A member should maintain objectivity
and be free of conflicts of interest in discharging professional
responsibilities. A member in public practice should be independent in
fact and appearance when providing auditing and other attestation
Objectivity is a state of mind, a
quality that lends value to a member's services. It is a distinguishing
feature of the profession. The principle of objectivity imposes the
obligation to be impartial, intellectually honest and free of conflicts
of interest. Independence precludes relationships that may appear to
impair a member's objectivity in rendering attestation services.
Members often serve multiple
interests in many different capacities and must demonstrate their
objectivity in varying circumstances. Members in public practice render
attest, tax and management advisory services. Other members prepare
financial statements in the employment of others, perform internal
auditing services and serve in financial and management capacities in
industry, education and government. They also educate and train those
who aspire to admission into the profession. Regardless of service or
capacity, members should protect the integrity of their work, maintain
objectivity, and avoid any subordination of their judgment.
For a member in public practice, the
maintenance of objectivity and independence requires a continuing
assessment of client relationships and public responsibility. Such a
member who provides auditing and other attestation services should be
independent in fact and appearance. In providing all other services, a
member should maintain objectivity and avoid conflicts of interest.
Although members not in public
practice cannot maintain the appearance of independence they
nevertheless have the responsibility to maintain objectivity in
rendering professional services. Members employed by others to prepare
financial statements or to perform auditing, tax or consulting services
are charged with the same responsibility for objectivity as members in
public practice and must be scrupulous in their application of generally
accepted accounting principles and candid in all their dealings with
members in public practice.
Article V- Due Care
A member should observe the
profession's technical and ethical standards, strive continually to
improve competence and quality of services, and discharge professional
responsibility to the best of the member's ability.
The quest for excellence is the
essence of due care. Due care requires a member to discharge
professional responsibilities with competence and diligence. It imposes
the obligation to perform professional services to the best of a
member's ability with concern for the best interest of those for whom
the services are performed and consistent with the profession's
responsibility to the public.
Competence is derived from a
synthesis of education and experience. It begins with a mastery of the
common body of knowledge required for designation as a certified public
accountant. The maintenance of competence requires a commitment to
learning and professional improvement that must continue throughout a
member's professional life. It is a member's individual responsibility.
In all engagements and in all responsibilities, each member should
undertake to achieve a level of competence that will assure that the
quality of the member's services meets the high level of professionalism
required by these Principles.
Competence represents the attainment
and maintenance of a level of understanding and knowledge that enables a
member to render services with facility and acumen. It also establishes
the limitations of a member's capabilities by dictating that
consultation or referral may be required when a professional engagement
exceeds the personal competence of a member or a member's firm. Each
member is responsible for assessing his or her own competence–of
evaluating whether education, experience and judgment are adequate for
the responsibility to be assumed.
Members should be diligent in
discharging responsibilities to clients, employers and the public.
Diligence imposes the responsibility to render services promptly and
carefully, to be thorough and to observe applicable technical and
Due care requires a member to plan
and supervise adequately any professional activity for which he or she
Article VI - Scope and Nature of Services
A member in public practice should
observe the Principles of the Code of Professional Conduct in
determining the scope and nature of services to be provided.
The public interest aspect of
certified public accountants services requires that such services be
consistent with acceptable professional behavior for certified public
accountants. Integrity requires that service and the public trust not be
subordinated to personal gain and advantage. Objectivity and
independence require that members be free from conflicts of interest in
discharging professional responsibilities. Due care requires that
services be provided with competence and diligence.
Each of these Principles should be
considered by members in determining whether or not to provide specific
services in individual circumstances. In some instances, they may
represent an overall constraint on the non-audit services that might be
offered to a specific client. No hard-and-fast rules can be developed to
help members reach these judgments, but they must be satisfied that
they are meeting the spirit of the Principles in this regard.
To accomplish this, members should:
Practice in firms that have in
place internal quality-control procedures to ensure that services are
competently delivered and adequately supervised.
Determine, in their individual
judgments, whether the scope and nature of other services provided to an
audit client would create a conflict of interest in the performance of
the audit function for that client.
Assess, in their individual
judgments, whether an activity is consistent with their role as
professionals (for example, is such activity a reasonable extension or
variation of existing services offered by the member or others in the
Section II - Rules
The Bylaws of the California Society
of Certified Public Accountants require that members adhere to the rules
of the Code of Professional Conduct. Members must be prepared to
justify departures from these rules.
RULE 101. A member
in public practice shall be independent in the performance of
professional services as required by standards promulgated by bodies
designated by CalCPA.
Integrity and Objectivity
RULE 102. In the
performance of any professional service, a member shall maintain
objectivity and integrity, shall be free of conflicts of interest and
shall not knowingly misrepresent facts or subordinate his or her
judgment to others.
RULE 201. A member
shall comply with the following standards and with any interpretations
thereof by bodies designated by CalCPA.
- Professional competence.
Undertake only those professional services that the member or the
member's firm can reasonably expect to be completed with professional
- Due professional care. Exercise
due professional care in the performance of professional services.
- Planning and supervision.
Adequately plan and supervise performance of professional services.
- Sufficient relevant data. Obtain
sufficient relevant data to afford a reasonable basis for conclusions or
recommendations in relation to any professional services performed.
Compliance In Standards
RULE 202. A member
who performs auditing, review, compilation, management consulting, tax
or other professional services shall comply with standards promulgated
by bodies designated by CalCPA.
RULE 203. A member
shall not (1) 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 or (2)
state that he or she 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 such statements or
data contain any departure from an accounting principle promulgated by
bodies designated by CalCPA to establish such principles that have a
material effect on the statements or data taken as a whole. If, however,
the statements or data contain such a departure and the member can
demonstrate that due to the unusual circumstances the financial
statements or data would otherwise have been misleading, the member can
comply with the rule by describing the departure, its approximate
effects, if practicable, and the reasons why compliance with the
principle would result in a misleading statement.
Confidential Client Information
RULE 301. A member
in public practice shall not disclose any confidential client
information without the specific consent of the client.
This rule shall not be construed (1)
to relieve a member of his or her professional obligations under Rules
202 and 203, (2) to affect in any way the member's obligations to comply
with a validly issued and enforceable subpoena or summons, or to
prohibit a member's compliance with applicable laws and government regulations, (3) to prohibit review of a member's
professional practice under AICPA or CalCPA or Board of Accountancy
authorization, or (4) to preclude a member from initiating a complaint
with, or responding to any inquiry made by, the ethics division or trial
of the AICPA or a duly constituted investigative or disciplinary body
of CalCPA or State Board of Accountancy.
Members of any of the bodies
identified in (4) above and members involved with professional practice
reviews identified in (3) above shall not use to their own advantage or
disclose any member's confidential client information that comes to
their attention in carrying out those activities. This prohibition shall
not restrict members' exchange of information in connection with the
investigative or disciplinary proceedings described in (4) above or the
professional practice reviews described in (3) above.
Rule 302: A member in public practice shall
Perform for a contingent fee any
professional services for, or receive such a fee from, a client for whom
the member or the member's firm performs:
- An audit or review of a
financial statement; or
- A compilation of a financial
statement when the member expects or reasonably should expect that a
third party will use the financial statement and the member's
compilation report does not disclose a lack of independence; or
- An examination of prospective
financial information; or
- Any other attest engagement
when the member expects or reasonably should expect that a third party
will use the related attestation report; or
- Any other services requiring
Prepare an original tax return
for a contingent fee for any client.
Prepare an amended tax return,
claim for tax refund, or perform other similar tax services for a
contingent fee for any client.
Perform an engagement as a
testifying expert for a contingent fee.
The prohibition in (1) above applies
during the period in which the member or the member's firm is engaged to
perform any of the services listed under (1) above and the period
covered by any historical financial statements involved in any such
Except as stated in the next
paragraph, a contingent fee is 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
Solely for purposes of this rule,
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.
A member's fees may vary depending, for example, on the complexity of services rendered.
RULE 501. A member
shall not commit an act discreditable to the profession.
Advertising and Other Forms of Solicitation
RULE 502. A member
in public practice shall not seek to obtain clients by advertising or
other forms of solicitation in a manner that is false, misleading or
deceptive. Solicitation by the use of coercion, over-reaching or
harassing conduct is prohibited.
Commissions and Referral Fees
Rule 503: Except as expressly permitted by this
rule, a member engaged in the practice of public accounting shall not
(1) pay a fee or commission to obtain a client or (2) accept a fee or
commission for referring a client to the products or services of a third
A member engaged in the practice of
public accountancy who is not performing any of the services set forth
in subdivision (A) and who complies with the disclosure requirements of
subdivision (B) may accept a fee or commission for providing a client
with the products or services of a third party where the products or
services of a third party are provided in conjunction with professional
services provided to the client by the member engaged in the practice of
public accountancy. Nothing in this rule shall be construed to permit
the solicitation or acceptance of any fee or commission solely for the
referral of a client to a third party.
- A member engaged in the practice
of public accountancy is prohibited from performing services for a
client for a commission or from receiving a commission from a third party for providing the products and services of that third party to a client
during the period in which the member also performs for that client any
of the services listed below and during the period covered by any
historical financial statements involved in those listed services:
- An audit or review of a
- A compilation of a financial
statement when the member expects, or reasonably might expect, that a
third party will use the financial statement and the compilation report
does not disclose a lack of independence.
- An examination of prospective
- A member engaged in the practice
of public accountancy who is not prohibited from performing services for
a commission, or from receiving a commission, and who is paid or
expects to be paid a commission, shall disclose that fact to any client
or entity to whom the member engaged in the practice of public
accountancy recommends or refers a product or service to which the
Disclosure shall include, at a
minimum, all of the following:
- Be in writing and be clear
- Be signed by the recipient of
the product or service.
- State the amount of the
commission or the basis on which it will be computed.
- Identify the source of the
payment and the relationship between the source of the payment and the
person receiving the payment.
- Be presented to the client at
or prior to the time the recommendation of the product or service is
- For purposes of this rule, "fee"
includes, but is not limited to, a commission, rebate, preference,
discount, or other consideration, whether in the form of money or
It is not the intent of CalCPA to
diminish in any manner the duties of certified public accountants to
clients, nor abrogate rules relating to objectivity.
Form of Organization and Name
RULE 505. A member
may practice public accounting only in a form of organization permitted
by state law or regulation whose characteristics conform to the
resolutions of CalCPA.
A member shall not practice public
accounting under a firm name that is misleading. Names of one or more
past owners may be included in the firm name of a successor
A firm may not designate itself as
"Members of the California Society of Certified Public Accountants"
unless all of its CPA owners are members of CalCPA.
In accordance with the Bylaws of
CalCPA, the Council of CalCPA has adopted the following
Enforcement Procedures to enforce the Bylaws and the Code of
Professional Conduct of CalCPA:
Any complaint filed against a member
under the Bylaws or the Code of Professional Conduct shall be submitted
in writing and referred to the state board of accountancy.
Neither CalCPA nor any of its
members, agents or representatives shall be deemed to have made any
representation as to the accuracy or completeness of any such complaint
or other related documents or materials so submitted to the state board
of accountancy and shall have no liability as a result of or in
connection with any such submission or any proceedings by the state
board of accountancy or its equivalent.
Revised June 2010