21 NCAC 08N .0201 Integrity
The reliance of the public and the business community on sound financial reporting and advice on business affairs imposes on the accounting profession an obligation to maintain high standards of technical competence, morality, and integrity. A CPA shall at all times maintain independence of thought and action, hold the affairs of clients in strict confidence, strive continuously to improve professional skills, observe generally accepted accounting principles and standards, promote sound and informative financial reporting, uphold the dignity and honor of the accounting profession, and maintain high standards of personal conduct.
21 NCAC 08N .0202 Deceptive Conduct Prohibited
- A CPA shall not engage in deceptive conduct. “Deception” means any fraud, misrepresentations, representations, or omissions that a CPA either knew or should have known to have a capacity or tendency to be misleading. Deceptive conduct shall be prohibited whether or not anyone has actually been deceived.
- Prohibited conduct under this Section includes deception in:
- obtaining or maintaining employment;
- obtaining or keeping clients;
- obtaining or maintaining certification, inactive status, or exemption from peer review;
- reporting CPE credits;
- certifying the character or experience of exam or certificate applicants;
- implying abilities not supported by education, professional attainments, or licensing recognition;
- asserting that services or products sold in connection with use of the CPA title are of a particular quality or standard when they are not;
- creating false or unjustified expectations of favorable results;
- using or permitting another to use the CPA title in a form of business not permitted by the accountancy statutes or rules;
- permitting anyone not certified in this State (including one licensed in another jurisdiction) to unlawfully use the CPA title in this State or to unlawfully operate as a CPA firm in this State; or
- falsifying a review, report, or any required program or checklist of any peer review program.
21 NCAC 08N .0203 Discreditable Conduct Prohibited
- A CPA shall not engage in conduct discreditable to the accounting profession.
- Prohibited discreditable conduct includes:
- acts that reflect adversely on the CPA’s honesty, integrity, trustworthiness, good moral character, or fitness as a CPA;
- stating or implying an ability to improperly influence a governmental agency or official;
- failing to comply with any order issued by the Board;
- failing to fulfill the terms of a peer review engagement contract;
- misrepresentation in reporting CPE credits;
- entering into any settlement or other resolution of a dispute that purports to keep its contents confidential from the Board; or
- failing to participate in a peer review program pursuant to 21 NCAC 08M .0105.
21 NCAC 08N .0204 Discipline by Federal and State Authorities
- Violations of Other Authorities’ Laws or Rules. A CPA shall not act in a way that would cause the CPA to be disciplined by federal or state agencies or boards for violations of laws or rules on ethics. CPAs who engage in activities regulated by other federal or state authorities (may include the following agencies: Internal Revenue Service, Department of Revenue, U.S. Securities and Exchange Commission, State Bar, North Carolina Secretary of State, Public Company Accounting Oversight Board, National Association of Securities Dealers, Department of Insurance, Government Accountability Office, U.S. Department of Housing and Urban Development, State Auditor, State Treasurer, or Local Government Commission) shall comply with all such authorities’ ethics laws and rules.
- Prima Facie Evidence. A conviction or final finding of unethical conduct by a competent authority is prima facie evidence of a violation of this Rule.
- Notice to the Board Required. A CPA shall notify the Board in writing within 30 days of any conviction or finding against him or her of unlawful conduct by any federal or state court or regulatory authority.
21 NCAC 08N .0205 Confidentiality
- Nondisclosure. A CPA shall not disclose any confidential information obtained in the course of employment or a professional engagement except with the consent of the employer or client.
- Exceptions. This Rule shall not be construed:
- to relieve a CPA of any reporting obligations pertaining to Section .0400 of this Subchapter;
- to affect in any way the CPA’s compliance with an order of a court or a validly issued subpoena by this Board;
- to preclude the CPA from responding to any inquiry made by the AICPA Ethics Division or Trial Board, by a duly constituted investigative or disciplinary body of a state CPA society, or under state statutes;
- to preclude the disclosure of confidential client information necessary for the peer review process;
- to preclude the CPA from assisting the Board in enforcing the accountancy statutes and rules;
- to affect a CPA’s disclosure of confidential information to state or federal authorities when the CPA concludes in good faith based upon professional judgment that a crime is being or is likely to be committed;
- to affect a CPA’s disclosure of confidential information when such disclosure is required by state or federal laws or regulations; or
- to prohibit a CPA from revealing information:
- in order to establish a claim or defense on behalf of the CPA in a controversy between the CPA and a client;
- to establish a defense to a criminal charge or civil claim against the CPA based upon conduct in which the client was involved; or
- to respond to allegations in any proceeding concerning the CPA’s professional services to the client.
21 NCAC 08N .0206 Cooperation with Board Inquiry
A CPA shall provide full cooperation in connection with any inquiry made by the Board. Full cooperation includes responding within 21 days to all inquiries of the Board or representatives of the Board and claiming Board correspondence from the U.S. Postal Service, private delivery service, or personal delivery.
21 NCAC 08N .0207 Violation of Tax Laws
A CPA shall not knowingly violate any state or federal tax laws or regulations in handling the CPA’s personal business affairs, the business affairs of an employer or client, or the business affairs of any company owned by the CPA.
21 NCAC 08N .0208 Reporting Convictions, Judgments, and Disciplinary Actions
- Criminal Actions. A CPA shall notify the Board within 30 days of any conviction or finding of guilt of, pleading of nolo contendere, or receiving a prayer for judgment continued to any criminal offense.
- Civil Actions. A CPA shall notify the Board within 30 days of any judgment or settlement in a civil suit, bankruptcy action, administrative proceeding, or binding arbitration that:
- is grounded upon an allegation of professional negligence, gross negligence, dishonesty, fraud, misrepresentation, incompetence, or violation of any federal or state tax law and
- was brought against either the CPA or a North Carolina office of a CPA firm of which the CPA was a managing owner.
- Settlements. A CPA shall notify the Board within 30 days of any written settlement in which a client or former client releases the CPA from liability that is grounded upon an allegation of professional negligence; gross negligence; dishonesty; fraud; misrepresentation; incompetence; or violation of any federal, state, or local law, regardless of whether the client or former client has filed a civil suit or criminal charge.
- Investigations. A CPA shall notify the Board within 30 days of any inquiry or investigation by the criminal investigation divisions of the Internal Revenue Service (IRS) or any state department of revenue pertaining to any personal or business tax matters.
- Liens. A CPA shall notify the Board within 30 days of the filing of any liens by the Internal Revenue Service (IRS) or any state department of revenue regarding the failure to pay or apparent failure to pay for any amounts due for any tax matters.
21 NCAC 08N .0209 Accounting Principles
- Generally Accepted Accounting Principles. A CPA shall not express an opinion that financial statements are presented in conformity with generally accepted accounting principles if such statements contain any departure from an accounting principle that has a material effect on the statements taken as a whole, unless the CPA can demonstrate that due to unusual circumstances the financial statements would otherwise have been misleading. In such cases the CPA’s report shall describe the departure, the approximate effects thereof, if practicable, and the reasons why compliance with the principle would result in a misleading statement.
- Financial Accounting Standards Board Accounting Standards Codification. The Financial Accounting Standards Board Accounting Standards Codification is incorporated by reference, including subsequent amendments and editions and shall be considered generally accepted accounting principles for the purposes of Paragraph (a) of this Rule. This document may be accessed at https://asc.fasb.org at no cost.
21 NCAC 08N .0211 Responsibilities in Tax Practice
- Standards for Tax Services. A CPA shall not render services in the area of taxation unless the CPA has complied with both the Statements on Standards for Tax Services and the Treasury Department Circular 230 as defined in this Section. In the event that there is a conflict between the Statements on Standards for Tax Services and Treasury Department Circular 230, the CPA shall comply with Treasury Department Circular 230.
- Statements on Standards for Tax Services. The Statements on Standards for Tax Services issued by the AICPA are incorporated by reference, including subsequent amendments and editions. This document may be accessed at https://www.aicpa.org/resources/toolkit/statements-on-standards-for-tax-services at no cost.
- Treasury Department Circular 230. The Treasury Department Circular 230 is incorporated by reference, including subsequent amendments and editions. This document may be accessed at https://www.irs.gov/pub/irs-pdf/pcir230.pdf at no cost.
21 NCAC 08N .0212 Competence
A CPA shall perform professional services competently and shall:
- undertake only those engagements that the CPA or CPA’s firm can expect to complete with professional competence;
- exercise due professional care in the performance of an engagement;
- adequately plan and supervise an engagement; and
- obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to an engagement.
21 NCAC 08N .0213 Other Rules
A CPA shall not willfully violate any other rule in this Chapter nor any other provision of the Accountancy Statutes, the Professional Corporation Act, the Partnership Act, or the North Carolina Limited Liability Company Act.
21 NCAC 08N .0214 Outsourcing to Third-Party Service Providers
- A CPA shall provide a written disclosure in advance of the outsourcing to the client that he or she is using a third-party provider to assist the CPA in providing any professional services to the client.
- A CPA outsourcing professional services to a third-party provider shall be responsible for ensuring a third-party provider is in compliance with all rules of Professional of Conduct and Ethics in this Subchapter.
21 NCAC 08N .0215 International Financial Accounting Standards
- International Financial Accounting Standards. A CPA shall not express an opinion that financial statements are presented in accordance with international financial accounting standards if such statements contain any departure from an accounting standard that has a material effect on the statements, taken as a whole, unless the CPA can demonstrate that due to unusual circumstances the financial statements would otherwise have been misleading. In such cases, the CPA’s report shall describe the departure, the approximate effect thereof if practicable, and the reason why compliance with the standard would result in a misleading statement.
- International Financial Accounting Standards consist of the following:
- International Financial Reporting Standards (IFRS) issued after 2003;
- International Accounting Standards (IAS) issued before 2004;
- Interpretations originated from the International Financial Reporting Interpretations Committee (IFRIC) issued after 2003; and
- Standing Interpretations Committee (SIC) issued before 2003.
- Copies of Standards. Copies of International Financial Accounting Standards issued by IFRS are incorporated by reference, including subsequent amendments and editions. The documents may be accessed at https://www.ifrs.org/issued-standards/list-of-standards/ at no cost.