Section 193A.13.4. Rules applicable to all CPAs and LPAs.

         13.4(1) Integrity, objectivity and conflicts of interest.

            a.               A CPA or LPA shall not knowingly misrepresent facts and, when engaged in the performance of professional services, shall not subordinate judgment to others or allow professional judgment and objectivity to be impaired by self-interest or by a conflict of interest between the licensee and a client or between clients. In tax practice, a licensee may resolve doubt in favor of the client as long as there is reasonable support for that position.

            b.               When offering or rendering accounting or related financial, tax, or management advice, a CPA or LPA shall be objective and shall not place the CPA’s or LPA’s own financial interests or the financial interests of a third party ahead of the legitimate financial interests of the client or the public in any context in which a client or the public can reasonably expect objectivity from one using the CPA or LPA title.

            c.               When faced with a conflict of interest that may impair professional judgment and objectivity, the licensee shall decline or cease the engagement, take steps to remove the conflict or, when reasonably feasible and appropriate under the circumstances and consistent with independence requirements, disclose the conflict or potential conflict and secure from all clients informed consent to proceed with the engagement. In no event, however, shall a licensee proceed with an engagement through informed consent when the nature of the conflict impairs the licensee’s objectivity whether or not the client consents.

            d.               A conflict of interest may arise, for instance, when a licensee represents multiple clients whose interests are adverse to each other. Whether a licensee can provide competent, diligent, and objective representation to clients whose interests are or may be adverse to each other’s interests or the interests of the licensee, with informed consent, will depend on the factual circumstances of the engagement. Licensees are cautioned that, when in doubt as to whether informed consent will effectively address an actual or potential conflict of interest, the most prudent course is to decline or cease the engagement and to advise one or more of the multiple clients to seek alternative professional representation.

         13.4(2) Professional competencies and compliance with applicable technical standards. A CPA or LPA who accepts a professional engagement implies that the CPA or LPA has the necessary competence to complete the engagement according to professional standards. All CPAs and LPAs shall comply with the following general standards as interpreted by bodies designated by the American Institute of Certified Public Accountants and must justify any departure.

            a.                Professional competence. A CPA or LPA shall undertake only those engagements which the CPA, LPA or firm can reasonably expect to complete with professional competence. Competence relates both to knowledge of the profession’s standards, techniques and the technical subject matter involved and to the capability to exercise sound judgment in applying such knowledge to each engagement.

            b.                Due professional care. A CPA or LPA shall exercise due professional care in the performance of an engagement.

            c.                Planning and supervision. A CPA or LPA shall adequately plan and supervise an engagement.

            d.                Sufficient relevant data. A CPA or LPA shall obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to an engagement.

         13.4(3) Engagement standards. Unless they have complied with applicable generally accepted engagement standards, CPAs and LPAs shall not permit their names to be linked with a report associated with any attest or compilation service. The board will consider the American Institute of Certified Public Accountants Professional Standards, Public Company Accounting Oversight Board, International Accounting Standards Board, Statements on Auditing Standards, and Statements on Standards for Accounting and Review Services as sources of interpretations of generally accepted engagement standards.

         13.4(4) Discreditable conduct. A CPA or LPA shall not commit any act that reflects adversely on the CPA’s or LPA’s fitness to engage in the practice of public accountancy. The board may consider discipline by any other agency or jurisdiction when determining probable cause to take action against a CPA or LPA for acts discreditable. Conduct discreditable to the public accounting profession is further defined in 193A—subrule 14.3(12).

         13.4(5) Requirements of governmental bodies, commissions, or other regulatory agencies.

            a.               Many governmental bodies, commissions, or other regulatory agencies have established requirements, such as audit standards, guides, rules and regulations, that CPAs are required to follow in preparation of reports, financial statements or related information, such as management’s discussion or analysis, and in performing attest or similar services for entities subject to the jurisdiction of the governmental bodies, commissions, or regulatory agencies. For example, the Securities and Exchange Commission, Government Accountability Office, office of auditor of state, state insurance division and other regulatory agencies have established such requirements.

            b.               A CPA shall not prepare reports, financial statements or related information for the purposes of reporting to such bodies, commissions, or regulatory agencies, unless the CPA agrees to follow the requirements of such organizations in addition to generally accepted auditing standards, where applicable, unless the CPA discloses in the financial statements or the accountant’s report that such requirements were not followed.

         13.4(6) Confidentiality. A CPA or LPA shall not, without the consent of the client, disclose any confidential information pertaining to the client obtained in the course of performing professional services. This rule does not:

            a.               Relieve a CPA or LPA of any obligations under subrules 13.4(3) (engagement standards) and 13.4(16) (accounting principles); or

            b.               Affect in any way a CPA’s or LPA’s obligation to comply with a validly issued subpoena or summons enforceable by order of a court; or

            c.               Prohibit disclosures in the course of a peer review of a CPA’s or LPA’s professional services; or

            d.               Preclude a CPA or LPA from responding to any inquiry made by the board or any investigative or disciplinary body established by law or formally recognized by the board. Members of the board and its peer reviewers, staff and other agents shall not disclose any confidential information which comes to their attention from a CPA or LPA in disciplinary proceedings or otherwise in carrying out their responsibilities, except that they may furnish such information to an investigative or disciplinary body.

         13.4(7) Records.

            a.                Definitions.

“Client-provided records” means all documents or written or electronic material provided to the licensee, or obtained by the licensee in the course of the licensee’s representation of the client, that preexisted the retention of the licensee by the client.

“Client records prepared by the licensee” means accounting or other records (tax returns, general ledgers, subsidiary journals, and supporting schedules such as detailed employee payroll records and depreciation schedules) that the licensee was engaged to prepare for the client.

“Licensee’s working papers” means, but is not limited to, supporting records, audit programs, analytical review schedules, and statistical sampling results, analyses, and schedules prepared by the client at the request of the licensee.

“Supporting records” means information not reflected in the client’s books and records that are otherwise not available to the client with the result that the client’s financial information is incomplete. For example, supporting records include adjusting, closing, combining, or consolidating journal entries (including computations supporting such entries) that are produced by the licensee during an engagement (for example, an audit).

            b.                Furnishing client records.

             (1)             A CPA or LPA shall furnish within a reasonable time of a client’s or former client’s request:

            1.      All client-provided records, including any accounting or other records belonging to, or obtained from or on behalf of, the client which the CPA or LPA removed from the client’s premises or received for the client’s account, including a copy of all disclosures required by subrule 13.4(19). The CPA or LPA may make and retain copies of such documents when they form the basis for work done by the CPA or LPA.

            2.      All client records prepared by the CPA or LPA and supporting records to the extent that such records would ordinarily constitute part of the client’s books and records and are not otherwise available to the client or easily reconstructed by the client or successor CPA or LPA. Examples of such records include depreciation schedules and LIFO inventory work papers. Whether a particular record falls into this category is a mixed question of law and fact. When requested by a client or former client, the CPA or LPA has the burden to demonstrate that a particular record does not fall within this category.

             (2)             A “reasonable time” for furnishing clients or former clients the records described in paragraph 13.4(7)“a” is dependent upon the facts and circumstances. A CPA or LPA shall strive to be as responsive as the situation requires in light of the possible adverse consequence of delay to the client or former client. As a general rule, the CPA or LPA shall provide such records within 30 days of a written request.

         13.4(8) Records retention. A CPA or LPA shall comply with all professional standards on records retention applicable to particular engagements including, but not limited to, standards adopted by recognized standards-setting bodies such as the American Institute of Certified Public Accountants, the Public Company Accounting Oversight Board, the Comptroller General of the United States, the Auditing Standards Board, the Internal Revenue Service, or other applicable regulatory body.

         13.4(9) Nonpayment of fees.

            a.                General rule. A CPA or LPA shall not withhold the records described in paragraph 13.4(7)“b” from a client or former client based on nonpayment of fees. However, if a CPA or LPA has already issued a tax return, report or other record to a client or former client, the CPA or LPA may, but is not required to, request payment of outstanding fees prior to providing a second copy of such records.

            b.                Copy expenses. A licensee may, but is not required to, charge the actual cost of furnishing electronic or paper copies of records if consistent with the engagement arrangements with the client.

            c.                Incomplete engagement. Nothing in this subrule requires a licensee to complete an engagement if, under the engagement arrangement, completion is contingent upon payment of fees. For example, if a client engages a licensee to complete a tax return and the completion of the engagement is contingent upon payment of fees, the licensee is not required to complete the engagement and furnish the client records prepared by the licensee or associated supporting records if the client does not pay as agreed. In that event, the licensee is only required to return to the client those records constituting client-provided records. If, however, the licensee completes the engagement and furnishes the client a tax return to file or files the tax return with taxing authorities, the licensee is required to comply with paragraph 13.4(9)“a” whether or not fully paid.

         13.4(10) Cooperation with board inquiry. A CPA or LPA shall, when requested, respond to communications from the board within 30 days of the mailing of such communications by certified mail.

         13.4(11) Violation of tax laws. A CPA or LPA shall not violate any tax laws in handling the CPA’s or LPA’s personal business affairs, or the business affairs of an employer or client, or the business affairs of any company owned by the CPA or LPA.

         13.4(12) Reporting convictions, judgments, and disciplinary actions. In addition to any other reporting requirement in Iowa Code chapter 542 or these rules, a CPA or LPA shall notify the board within 30 days of:

            a.               Imposition upon the CPA or LPA of discipline including, but not limited to, censure, reprimand, sanction, probation, civil penalty, fine, consent decree or order, or suspension, revocation or modification of a license, certificate, permit or practice rights by:

             (1)             The SEC, Public Company Accounting Oversight Board, or IRS (by the Director of Practice); or

             (2)             Another state board of accountancy for cause other than failure to pay a professional fee by the due date or failure to meet the continuing education requirements of another state board of accountancy; or

             (3)             Any other federal or state agency regarding the CPA’s or LPA’s conduct while rendering professional services; or

             (4)             Any foreign authority or credentialing body that regulates the practice of accountancy;

            b.               Occurrence of any matter that must be reported by the CPA or LPA to the Public Company Accounting Oversight Board pursuant to Sarbanes-Oxley Section 102(b)(2)(f) and Public Company Accounting Oversight Board rules and forms adopted pursuant thereto;

            c.               Any judgment, award or settlement of a civil action or arbitration proceeding in which the CPA or LPA was a party if the matter included allegations of gross negligence, violation of specific standards of practice, fraud, or misappropriation of funds in the practice of accounting; provided, however, licensed firms shall notify the board regarding civil judgments, settlements or arbitration awards directly involving the firm’s practice of public accounting in this state; or

            d.               Criminal charges, deferred prosecution or conviction or plea of no contest to which the CPA or LPA is a defendant if the crime is:

             (1)             Any felony under the laws of the United States or any state of the United States or any foreign jurisdiction; or

             (2)             Any crime, including a misdemeanor, if an essential element of the offense is dishonesty, deceit or fraud, as more fully described in Iowa Code section 542.5, subsection 2.

         13.4(13) Firm’s duty to report. The CPA or LPA designated by each firm as responsible for the proper licensure of the firm or registration of an office of the firm shall report any matter reportable under this rule to which a nonlicensee owner with a principal place of business in this state is a party.

         13.4(14) Advertising. A CPA or LPA shall not use or participate in the use of any form of public communication having reference to professional services that contains a false, fraudulent, misleading, deceptive or unfair statement or claim. A false, fraudulent, misleading, deceptive or unfair statement or claim includes, but is not limited to, a statement or claim which:

            a.               Contains a misrepresentation of fact; or

            b.               Is likely to mislead or deceive because it fails to make full disclosure of relevant facts; or

            c.               Contains any testimonial or laudatory statement, or other statement or implication that the CPA’s or LPA’s professional services are of exceptional quality; or

            d.               Is intended to likely create false or unjustified expectations of favorable results; or

            e.               Implies educational or professional attainments or licensing recognition not supported in fact; or

            f.                States or implies that the CPA or LPA has received formal recognition as a specialist in any aspect of the practice of public accountancy, if this is not the case; or

            g.               Represents that professional services can or will be competently performed for a stated fee when this is not the case or makes representations with respect to fees for professional services that do not disclose all variables affecting the fees that will in fact be charged; or

            h.               Contains other representations or applications that in reasonable probability will cause an ordinarily prudent person to misunderstand or be deceived.

         13.4(15) Misleading firm names.

            a.               A firm name is misleading within the meaning of Iowa Code section 542.13 if, among other things:

             (1)             The firm name implies the existence of a corporation when the firm is not a corporation.

             (2)             The firm name implies the existence of a partnership when there is not a partnership (e.g., “Smith & Jones, CPAs” or “Smith and Jones, LPAs”).

             (3)             The CPA firm name includes the name of a person who is not a CPA if the title “CPAs” or “Certified Public Accountants” is included in the firm name.

             (4)             The LPA firm name includes the name of a person who is not an LPA if the title “LPAs” or “Licensed Public Accountants” is included in the firm name.

             (5)             The firm name contains any wording that would be a violation of subrule 13.4(14) (advertising).

            b.               Names of one or more past partners or shareholders may be included in the firm name of a partnership or corporation or its successor, and a partner surviving the death or withdrawal of all other partners may continue to practice under a partnership name for up to two years after becoming a sole practitioner.

         13.4(16) Accounting principles. A CPA or LPA shall not state in the CPA’s or LPA’s report that the financial or other information is presented in conformity with generally accepted accounting principles if such report contains any departure from such accounting principles which has a material effect on the report taken as a whole, unless the CPA or LPA can demonstrate that by reason of unusual circumstances the report would otherwise have been misleading. In such cases, the accountant’s report must describe the departure, the approximate effects thereof, if practicable, and the reasons why compliance with the principle(s) would result in a misleading statement. The board will consider the pronouncements issued by the Financial Accounting Standards Board and its predecessor entities as sources of interpretations of generally accepted accounting principles.

         13.4(17) Forecasts. A CPA or LPA shall not in the performance of professional services permit the CPA’s or LPA’s name to be used in conjunction with any forecast of future transactions in a manner which may lead to the belief that the CPA or LPA vouches for the achievability of the forecast.

         13.4(18) Competence. A CPA or LPA shall not undertake any engagement for the performance of professional services which the CPA or LPA or the CPA’s or LPA’s firm cannot reasonably expect to complete with due professional competence, including compliance, where applicable, with subrules 13.4(3) (engagement) and 13.4(16) (accounting principles). A CPA or LPA who accepts a professional engagement implies that the CPA or LPA has the necessary competence to complete the engagement according to professional standards, applying the CPA’s or LPA’s knowledge and skill with reasonable care and diligence, but the CPA or LPA does not assume a responsibility for infallibility of knowledge or judgment.

         13.4(19) Commissions. A CPA or LPA may accept a commission subject to the prohibitions set forth in Iowa Code section 542.13(15) and the restrictions set forth in these rules.

            a.               A CPA or LPA engaged in the practice of public accounting must act in the best interests of the client and shall not allow integrity, objectivity or professional judgment to be impaired by the self-interest a commission-based fee may create.

            b.               A CPA or LPA who anticipates receiving a commission in connection with the recommendation, referral or sale of a product or service must establish such procedures as are reasonably necessary to avoid the prohibitions set forth in Iowa Code section 542.13(15).

            c.               A CPA or LPA engaged in the practice of public accounting who is paid or expects to be paid a commission shall disclose that fact to any person or entity to which the CPA or LPA recommends, refers or sells a product or service to which the commission relates.

            d.               To ensure full and effective disclosure, a CPA or LPA shall substantially adhere to the following guidelines when recommending, referring or selling a product or service to which a commission relates:

             (1)             The disclosure shall be in writing, signed and dated by the person to whom a product or service is recommended, referred or sold, and a copy shall be provided to the client.

             (2)             The disclosure shall be made at or prior to the time the product or service is recommended, referred or sold.

             (3)             The disclosure shall be legible, clear and conspicuous, and on a separate form.

             (4)             A copy of the disclosure shall be retained by the CPA or LPA for as long as the CPA or LPA deems appropriate to the transaction; however, the board recommends a minimum of three years.

             (5)             In the event of a continuing engagement or series of related transactions involving similar products or services, one written disclosure may cover more than one recommendation, referral or sale as long as the disclosure is provided at least annually and is not misleading.

            e.               This rule does not prohibit payments for the purchase of all, or a material part, of an accounting practice, or retirement payments to persons formerly engaged in the practice of public accountancy, or payments to heirs or estates of such persons.

         13.4(20) Contingent fees. A CPA or LPA may accept contingent fees as defined in Iowa Code section 542.3(9) subject to the prohibitions set forth in Iowa Code section 542.13(15) and restrictions set forth in these rules.

         13.4(21) Solicitation. A CPA or LPA shall not by any direct personal communication solicit an engagement to perform professional services:

            a.               If the communication would violate subrule 13.4(14) (advertising) if it were a public communication; or

            b.               By the use of coercion, duress, compulsion, intimidation, threats, overreaching, or harassing conduct; or

            c.               If the solicitation communication contains proposals which would improperly disclose confidential information or violate a professional standard established in this chapter.

         13.4(22) Discrimination and harassment in employment practices. Whenever a CPA or LPA is determined by a court of competent jurisdiction to have violated any of the antidiscrimination laws of the United States or any state or municipality thereof, including those related to sexual and other forms of harassment, or has waived or lost the CPA’s or LPA’s right of appeal after a hearing by an administrative agency, the CPA or LPA will be presumed to have committed an act discreditable to the profession.

         13.4(23) Preparation of financial statements or records. A CPA or LPA shall not:

            a.               Make, or permit or direct another to make, materially false or misleading entries in the financial statements or records of an entity;

            b.               Fail to correct an entity’s financial statements that are materially false or misleading when the CPA or LPA has the authority to record an entry; or

            c.               Sign, or permit or direct another to sign, a document containing materially false or misleading information.

         13.4(24) Solicitation or disclosure of CPA examination questions and answers. A CPA or LPA who solicits or knowingly discloses a Uniform CPA Examination question(s) or answer(s) without the written authorization of the American Institute of Certified Public Accountants shall be considered to have committed an act discreditable to the profession.

         13.4(25) Falsely reporting continuing professional education (CPE). A CPA or LPA shall be considered to have committed an act discreditable to the profession when the CPA or LPA falsely reports CPE credits during the CPA’s or LPA’s required reporting renewal or board CPE audit.

         13.4(26) Mandatory ethics continuing professional education. Every CPA certificate holder or LPA license holder shall complete a minimum of four hours of continuing professional education devoted to ethics and rules of professional conduct during the three-year period ending December 31 or June 30, prior to the July 1 annual renewal date. This requirement is more fully described in 193A—subrule 10.7(2).

[ARC 9003B, IAB 8/11/10, effective 1/1/11; ARC 2152C, IAB 9/30/15, effective 11/4/15]