Section .0300 – Rules Applicable to all CPAs Who Use the CPA Title in Offering or Rendering Products or Services to Clients

21 NCAC 08N .0301 Professional Judgment

1. Professional Judgment.  A CPA shall not subordinate the CPA’s professional judgment to non‑CPAs.
2. Tax Practice.  In tax practice, the CPA may resolve doubt in favor of the CPA’s client as long as there is reasonable support for the CPA’s position.

21 NCAC 08N .0302 Forms of Practice

1. Authorized Forms of Practice. A CPA who uses CPA in or with the name of the business or offers or renders audits, reviews, compilations, agreed-upon procedure or engagement services performed in accordance with the standards in 21 NCAC 08A .0301(b)(5) in the public practice of accountancy to clients shall do so only through a registered sole proprietorship, partnership, Professional Corporation, Professional Limited Liability Company, or Registered Limited Liability Partnership.
2. Authorized Ownership. A CPA firm may have an ownership of up to 49 percent by non-CPAs. A CPA firm shall have ownership of at least 51 percent and be controlled in law and fact by holders of valid CPA certificates who have the unrestricted privilege to use the CPA title and to practice public accountancy in a jurisdiction and at least one of whom shall be licensed by this Board.
3. CPA Firm Registration Required. A CPA shall not offer or render professional services through a CPA firm that is in violation of the registration requirements of 21 NCAC 08J .0108, 08J .0110, or 08M .0105.
4. Supervision of CPA Firms. Every North Carolina office of a CPA firm registered in North Carolina shall be actively and locally supervised by a designated actively licensed North Carolina CPA whose primary responsibility and a corresponding amount of time shall be work performed in that office.
5. CPA Firm Requirements for CPA Ownership. A CPA firm and its designated supervising CPA shall be accountable for the following in regard to a CPA owner:
   1. a CPA owner shall be a natural person or a general partnership or a limited liability partnership directly owned by natural persons;
   2. a CPA owner shall actively participate in the business of the CPA firm; and
   3. a CPA owner who, prior to January 1, 2006, is not actively participating in the CPA firm may continue as an owner until such time as his or her ownership is terminated.
6. CPA Firm Requirements for Non-CPA Ownership. A CPA firm and its designated supervising CPA owner shall be accountable for the following in regard to a non-CPA owner:
   1. a non-CPA owner shall be a natural person or a general partnership or limited liability partnership directly owned by natural persons;
   2. a non-CPA owner shall actively participate in the business of the firm or an affiliated entity as his or her principal occupation;
   3. a non-CPA owner shall comply with all applicable accountancy statutes and the rules as set forth in G.S. 93 and all rules in this Chapter.
   4. a non-CPA owner shall be of good moral character and shall be dismissed and disqualified from ownership for any conduct that, if committed by a licensee, would result in a discipline pursuant to G.S. 93-12(9); and
   5.  a non-CPA owner shall report his or her name, home address, phone number, social security number, and Federal Tax ID number (if any) on the CPA firm’s registration.

21 NCAC 08N .0303 Objectivity and Conflicts of Interest

1. Personal Financial Interest in Advice. When offering or rendering accounting or related financial, tax, or management advice, a CPA shall be objective and shall not place the CPA’s own financial interests nor the financial interests of a third party ahead of the legitimate financial interests of the CPA’s client or the public in any context in which a client or the public can reasonably expect objectivity from one using the CPA title.
2. Expectation of Objectivity Presumed. If the CPA uses the CPA title in any way to obtain or maintain a client relationship, the Board shall presume the reasonable expectation of objectivity.
3. Acceptance of a Commission or Referral Fee. A CPA shall not recommend or refer to a client any product or service for a commission; recommend or refer any product or service to be supplied by a client; or receive a commission, when the CPA also performs the following for the client:
   1. an audit or review of a financial statement;
   2. a compilation of a financial statement when the CPA expects, or reasonably might expect, that a third party will use the financial statement and the CPA’s compilation report does not disclose a lack of independence; or
   3. an examination of prospective financial information.
4. This prohibition applies during the period in which the CPA is engaged to perform any of the services listed in Paragraph (c) of this Rule and the period covered by any historical financial statements involved in such listed services.
5. Acceptance of a Contingent Fee.
   1. The offering or rendering of professional services for, or the receipt of, a contingent fee by a CPA shall not be prohibited except for engaging to render or rendering by a CPA:
      1. of professional services for any person for whom the CPA also performs attest services, during the period of the attest services engagement, and the period covered by any historical financial statements involved in such attest services; and
      2. for the preparation of original or amended tax returns or claims for tax refunds.
   2. Fees shall not be regarded as being contingent if fixed by courts or other public authorities or, in tax matters, if determined based on the results of judicial proceedings or the findings of governmental agencies.
6. A CPA shall communicate in advance to a client the scope of services or products to be rendered or referred for which the CPA will receive a commission, referral, or contingent fee. A CPA shall provide disclosure in a written statement within ten business days of the service or product to be rendered or referred with the commission, referral, or contingent fee to be charged or received by the CPA.

21 NCAC 08N .0304 Consulting Services Standards

1. Standards for Consulting Services. A CPA shall not render consulting services unless the CPA has complied with the Statements on Standards for Consulting Services.
2. Statements on Standards for Consulting Services. The Statements on Standards for Consulting Services including the definition of such 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/download/statement-on-standards-for-consulting-services-no-1 at no cost.

21 NCAC 08N .0305 Retention of Client Records

1. A CPA shall return client-provided records in the CPA’s custody or control to the client at the client’s request. Client-provided records are accounting or other records, including hardcopy and electronic reproductions of such records, belonging to the client that were provided to the CPA by, or on behalf of, the client.
2. Unless a CPA and the client have agreed to the contrary, when a client makes a request for CPA-prepared records or a CPA’s work products that are in the CPA’s custody or control that have not previously been provided to the client, the CPA shall respond to the client’s request as follows:
   1. The CPA shall provide CPA prepared records relating to a completed and issued work product to the client, except that such records may be withheld if fees are due to the CPA for that specific work product; and
   2.  The CPA’s work products shall be provided to the client, except that such work products may be withheld:
      1.  if fees are due to the CPA for the specific work product;
      2.  if the work product is incomplete;
      3.   if for purpose of complying with professional standards. For example, withholding an audit report due to outstanding audit issues; or
      4.  if threatened or outstanding litigation exists concerning the engagement or CPA’s work.
3. CPA-prepared records are accounting or other records that the CPA was not specifically engaged to prepare and that are not in the client’s books and records or are otherwise not available to the client, thus rendering the client’s financial information incomplete. Examples include adjusting, closing, combining, or consolidating journal entries including computations supporting such entries and supporting schedules and documents that the CPA proposed or prepared as part of an engagement, an audit being an example. CPA’s work products are deliverables set forth in the terms of the engagement, such as tax returns.
4. Once a CPA has complied with the requirements described in Paragraphs (a) and (b) of this Rule, he or she shall not be under any further ethical obligation to:
   1. comply with any subsequent requests to again provide records or copies of records described in Paragraphs (a) and (b) of this Rule. If subsequent to complying with a request, a client experiences a loss of records due to a natural disaster, the CPA shall comply with an additional request to provide such records that are in possession of the CPA; and
   2.  retain records for periods that exceed applicable professional standards, state and federal statutes and regulations, and contractual agreements relating to the service performed.
5. A CPA who has provided records to an individual designated or held out as the client’s representative, such as the general partner, or majority shareholder, shall not be obligated to provide such records to other individuals associated with the client. However, in the case of joint individual tax returns, each named taxpayer on that return shall be entitled to a copy of the tax returns and supporting schedules from the CPA.
6. Work papers shall be the CPA’s property, and the CPA is not required to provide such information to the client. However, state and federal statutes and regulations and contractual agreements may impose additional requirements on the CPA.
   1. In fulfilling a request for client-provided records, CPA-prepared records, or a CPA’s work products, the CPA may:
   2.  charge the client a fee for the time and expense incurred to retrieve and copy such records and require that the client pay the fee before the CPA provides the records to the client;
   3.  provide the requested records in any format usable by the client. The CPA is not required to convert records that are not in electronic format to electronic format. If the client requests records in a specific format and the records are available in such format within the CPA’s custody and control, the client’s request shall be honored. In addition, the CPA is not required to provide the client with formulas, unless the formulas support the client’s underlying accounting or other records or the CPA was engaged to provide such formulas as part of a completed work product. The CPA is not required to provide electronic data files to a client if they were created with tax preparation software owned or licensed by the CPA; and
   4. make and retain copies of any records that the CPA returned or provided to the client.
7. A CPA who is required to return or provide records to the client shall comply with the client’s request as soon as practicable, but no later than 45 days after the request is made.

21 NCAC 08N .0306 Advertising or Other Forms of Solicitation

1. Deceptive Advertising. A CPA shall not seek to obtain clients by advertising or using other forms of solicitation in a manner that is deceptive.
2. Specialty Designations. A CPA may advertise the nature of services provided to clients, but the CPA shall not advertise or indicate a specialty designation or other title unless the CPA has met the requirements of the granting organization for the separate title or specialty designation and the individual is currently on active status and in good standing with the granting organization for the separate title or specialty designation.
3. The CPA firm shall offer to perform or perform professional services only in the exact name of the CPA firm as registered with the Board. The exact CPA firm name as registered with the Board shall be used on the following documents:
   1. letterhead;
   2. contracts;
   3. engagement letters;
   4. tax returns; and
   5. all professional services reports.
4. The CPA firm may advertise professional services using the exact name of the CPA firm, a portion of the CPA firm name, or initials or acronyms derived from the exact CPA firm name as registered with the Board.
5. Any CPA or CPA firm offering to or performing professional services via the Internet shall include the following information on the Internet:
   1. CPA business or CPA firm name as registered with the Board;
   2. principal place of business;
   3. business phone number; and
   4. North Carolina certificate number and North Carolina as jurisdiction of certification.
6. The use of the phrase “certified public accountant(s)” or “CPA(s)” in the name of any business entity on letterhead, professional services reports, business cards, brochures, building signage, office signs, telephone directories, contracts, engagement letters, tax returns, Internet directories, or any other advertisements or forms or solicitation shall be prohibited except for registered CPA firms.

21 NCAC 08N .0307 CPA Firm Names

1. Registration of Firm Names. A business may not use a CPA firm name unless that name has been registered with the Board.
2. Misleading Names Prohibited. A CPA firm shall not trade upon the CPA title through use of any name that is misleading. A misleading CPA firm name is one which:
   1.  Implies the existence of a partnership or registered limited liability partnership or a professional corporation or professional limited liability company if the firm is not, in fact, one of those entities;
   2. Includes the name of an individual who is not a CPA if the words “certified public accountants” or “CPAs” are included in the firm name;
   3.  Includes information about or indicates an association with persons who are not current or former members of the firm, unless the name is that of a firm network;
   4. Includes the terms “& Company”, “& Associates”, or “Group”, but the firm does not include, in addition to the named partner, shareholder, owner, or member, at least one other unnamed partner, shareholder, owner, member, or staff employee;
   5. Contains any representation that would be likely to cause a reasonable person to have a false or unjustified expectation of favorable results or capabilities, including names indicating qualitative superiority or pricing differences;
   6. Claims or implies the ability to influence a regulatory body or official; or
   7.  Includes the name of an owner whose license has been revoked for disciplinary reasons by the Board, whereby the licensee has been prohibited from practicing public accountancy or prohibited from using the title CPA or holding themselves out as a Certified Public Accountant.
3. Permissible Firm Names: The following is a non-exhaustive list of types of CPA firm names that are not in and of themselves misleading and are permissible so long as they do not violate other firm name provisions:
   1. A firm name that includes the names or initials of one or more former or current owners;
   2. A firm name that excludes the names of one or more former or current owners;
   3. A firm name that uses the “CPA” title as part of the firm name when all named individuals are owners of the firm who hold the CPA title or are former owners who held the CPA title at the time they ceased to be owners of the firm; or
   4.  A firm name that includes the name of a non-CPA owner if the words “certified public accountant” or “CPA” title are not a part of the firm name.
4. Any CPA firm registered in another jurisdiction that provides notification of intent to practice pursuant to G.S. 93-10(c)(3) may practice under the name as registered with that jurisdiction.

21 NCAC 08N .0308 Valuation Services Standards

1. Standards for Valuation Services. A CPA shall not render valuation services of a business, a business ownership interest, security, or intangible asset unless the CPA has complied with the Statements on Standards for Valuation Services.
2. Statements on Standards for Valuation Services. The Statements on Standards for Valuation Services, including the definition of such 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/download/statement-on-standards-for-valuation-services-vs-section-100 at no cost.

21 NCAC 08N .0309 Personal Financial Planning Services

1. Statement on Standards on Personal Financial Planning Services. A CPA shall not render personal financial planning services unless the CPA has complied with the Statement on Standards on Personal Financial Planning Services.
2. Statement on Standards on Personal Financial Planning Services. The Statement on Standards on Personal Financial Planning Services, including the definition of such services, issued by the AICPA are incorporated by reference, including subsequent amendments and editions. This document may be accessed at https://aicpa.org/resources/download/statement-on-standards-in-personal-financial-planning-services at no cost.