54 MODULE 21 PROFESSIONAL RESPONSIBILITIES

Interpretation 301-3. A member who is considering selling his/her practice, or merging with an-
other CPA, may allow that CPA to review confidential client information without the specific con-
sent of the client.
(1) The member should take appropriate precautions (e.g., obtain a written confidentiality agree-
ment) so that the prospective purchaser does not disclose such information.
NOTE: This exception only relates to a review in conjunction with a purchase or merger. It does not apply to the re-
view ofworking papers after a CPA has purchased another's practice. AU 315, discussed in detail later in this module,
requires that the successor who wishes to review predecessor auditor working papers should request the client to au-
thorize the predecessor to make such working papers available.
Rule 302 Contingent Fees.
(1) A member in public practice shall not
(a) Perform for a contingent fee any professional setvices when the member or member's
firm also performs any of the following services for that client:
1] Audits or reviews of financial statements
2] Compilations when the member is independent and expects that a third party may use
the financial statements
3] Examinations of prospective financial information
(b) Prepare an original or amended tax return or claims for a tax refund for a contingent fee
for any client '
(2) Solely for purposes of this rule, (a) fees fixed by courts or other public authorities, or (b) in tax
matters, fees determined based on the results of a judicial proceeding or findings of govern-
mental agency, are not regarded as contingent and are therefore permitted. '
Interpretation 302-1. Contingent fees in tax matters
(1) A contingent fee would be permitted in various circumstances in which the amounts due are
not clear; examples are'
(a) Representing a client in an examination by a revenue agent
(b) Filing amended tax returns based on a tax issue that is the subject of a test case involving
a different taxpayer or where the tax authority isdeveloping a position.
(c) Representing a taxpayer in getting a private ruling
(2) A contingent fee would not be permitted for preparing an amended tax return for a client
claiming a refund that is clearly due to the client because of an inadvertent omission.
Rule 301, 302 Ethics Rulings confidential information about other clients or non-
1. A member may utilize outside computer services clients.
to 7. If the member has conducted a similar consulting
process tax returns as long as there is no release of services study with a negative outcome, the member
confidential information. ' should advise potential clients of the previous prob-
2. With client permission, a member may provide lems providing that earlier confidential relationships
P&L are not disclosed. If the earlier confidential relation-
ship may be disclosed (through client knowledge of
percentages to a trade association.
other clients), the member should seek approval from
3. A ePA withdrawing from a tax engagement due to the first client.
irregularities on the client's return should urge suc-
cessor ep A to have client grant permission to reveal
8. In divorce proceedings a member who has prepared
reasons for withdrawal.
joint tax returns for the couple should consider both
4. A member may be engaged by a municipality to individuals to be clients for purposes of requests for
ver- confidential information relating to prior tax returns.
ify taxpayer's books and records for the purpose of Under such circumstances the ep A should consider
assessing property tax. The member must maintain reviewing the legal implications of disclosure with an
confidentiality. ' attorney.
5. Members may reveal the names of clients without 9. A contingent fee or a commission is considered to
cli- be
ent consent unless such disclosure releases confiden- "received" when the performance of the related ser-
tial information. vices is complete and the fee or commission is de-
6. A member has a responsibility to honor confidential termined:
10. Identical to Ruling 85 under Rule 101.
relationships with nonclients. Accordingly, members
may have to withdraw from consulting services en-
gagements where the client will not permit the mem-
ber to make recommendations without disclosing