2007 California Business and Professions Code Article 3.5. Standards Of Professional Conduct

CA Codes (bpc:5060-5063.3)

BUSINESS AND PROFESSIONS CODE

SECTION 5060-5063.3




5060.  (a) No person or firm may practice public accountancy under
any name which is false or misleading.
   (b) No person or firm may practice public accountancy under any
name other than the name under which the person or firm holds a valid
permit to practice issued by the board.
   (c) Notwithstanding subdivision (b), a sole proprietor may
practice under a name other than the name set forth on his or her
permit to practice, provided the name is registered by the board, is
in good standing, and complies with the requirements of subdivision
(a).
   (d) The board may adopt regulations to implement, interpret, and
make specific the provisions of this section including, but not
limited to, regulations designating particular forms of names as
being false or misleading.


5061.  (a) Except as expressly permitted by this section, a person
engaged in the practice of public accountancy 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 party.
   (b) A person engaged in the practice of public accountancy who is
not performing any of the services set forth in subdivision (c) and
who complies with the disclosure requirements of subdivision (d) 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 person engaged in the practice of
public accountancy.  Nothing in this subdivision 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.
   (c) A person engaged in the practice of public accountancy is
prohibited from performing services for a client, or an officer or
director of a client, or a client-sponsored retirement plan, for a
commission or from receiving a commission from a third party for
providing the products or services of that third party to a client,
or an officer or director of a client, or a client-sponsored
retirement plan, during the period in which the person also performs
for that client, or officer or director of that client, or
client-sponsored retirement plan, any of the services listed below
and during the period covered by any historical financial statements
involved in those listed services:
   (1) An audit or review of a financial statement.
   (2) A compilation of a financial statement when that person
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.
   (3) An examination of prospective financial information.
   For purposes of this subdivision, "director" means any person as
defined under Section 164 of the Corporations Code and "officer"
means any individual reported to a regulatory agency as an officer of
a corporation.  However, "director" and "officer" does not include a
director or officer of a nonprofit corporation, or a corporation
that meets the board's definition of small business, as specified by
regulation.
   (d) A person 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 person engaged in the practice of public accountancy recommends
or refers a product or service to which the commission relates.
   (e) The board shall adopt regulations to implement, interpret, and
make specific the provisions of this section including, but not
limited to, regulations specifying the terms of any disclosure
required by subdivision (d), the manner in which the disclosure shall
be made, and other matters regarding the disclosure that the board
deems appropriate.  These regulations shall require, at a minimum,
that a disclosure shall comply with all of the following:
   (1) Be in writing and be clear and conspicuous.
   (2) Be signed by the recipient of the product or service.
   (3) State the amount of the commission or the basis on which it
will be computed.
   (4) Identify the source of the payment and the relationship
between the source of the payment and the person receiving the
payment.
   (5) Be presented to the client at or prior to the time the
recommendation of the product or service is made.
   (f) For purposes of this section, "fee" includes, but is not
limited to, a commission, rebate, preference, discount, or other
consideration, whether in the form of money or otherwise.
   (g) This section shall not prohibit payments for the purchase of
any accounting practice or retirement payments to individuals
presently or formerly engaged in the practice of public accountancy
or payments to their heirs or estates.



5062.  A licensee shall issue a report which conforms to
professional standards upon completion of a compilation, review or
audit of financial statements.


5062.2.  A licensee shall not accept employment with a publicly
traded corporation or its affiliate within  12 months of the date of
issuance of a financial statement report if both of the following
criteria are met:
   (a) The licensee has participated in an audit engagement for the
corporation and held responsibility, with respect to the audit
engagement, requiring the licensee to exercise significant judgment
in the audit process.  Responsibilities meeting the requirements of
this subdivision include, but are not limited to, positions, however
titled, where the licensee was the person in charge of the fieldwork,
up through positions where the licensee was a partner on the
engagement.
   (b) The employment would permit the licensee to exercise
significant authority over accounting or financial reporting,
including authority over the controls related to those functions.




5063.  (a) A licensee shall report to the board in writing of the
occurrence of any of the following events occurring on or after
January 1, 1997, within 30 days of the date the licensee has
knowledge of these events:
   (1) The conviction of the licensee of any of the following:
   (A) A felony.
   (B) Any crime related to the qualifications, functions, or duties
of a public accountant or certified public accountant, or to acts or
activities in the course and scope of the practice of public
accountancy.
   (C) Any crime involving theft, embezzlement, misappropriation of
funds or property, breach of a fiduciary responsibility, or the
preparation, publication, or dissemination of false, fraudulent, or
materially misleading financial statements, reports, or information.

   As used in this section, a conviction includes the initial plea,
verdict, or finding of guilt, pleas of no contest, or pronouncement
of sentence by a trial court even though that conviction may not be
final or sentence actually imposed until appeals are exhausted.
   (2) The cancellation, revocation, or suspension of a certificate,
other authority to practice or refusal to renew a certificate or
other authority to practice as a certified public accountant or a
public accountant, by any other state or foreign country.
   (3) The cancellation, revocation, or suspension of the right to
practice as a certified public accountant or a public accountant
before any governmental body or agency.
   (b) A licensee shall report to the board in writing the occurrence
of any of the following events occurring on or after January 1,
2003, within 30 days of the date the licensee has knowledge of the
events:
   (1) Any restatement of  a financial statement and related
disclosures by a client audited by the licensee.
   (2) Any civil action settlement or arbitration award against the
licensee relating to the practice of public accountancy where the
amount or value of the settlement or arbitration award is thirty
thousand dollars (,000) or greater and where the licensee is not
insured for the full amount of the award.
   (3) Any notice of the opening or initiation of a formal
investigation of the licensee by the Securities and Exchange
Commission or its designee.
   (4) Any notice from the Securities and Exchange Commission to a
licensee requesting a Wells Submission.
   (5) Any notice of the opening or initiation of an investigation by
the Public Company Accounting Oversight Board or its designee, as
defined pursuant to subdivision (g).
   (c) A licensee shall report to the board in writing, within 30
days of the entry of the judgment, any judgment entered on or after
January 1, 2003, against the licensee in any civil action alleging
any of the following:
   (1) Dishonesty, fraud, gross negligence, or negligence.
   (2) Breach of fiduciary responsibility.
   (3) Preparation, publication, or dissemination of false,
fraudulent, or materially misleading financial statements, reports,
or information.
   (4) Embezzlement, theft, misappropriation of funds or property, or
obtaining money, property, or other valuable consideration by
fraudulent means or false pretenses, or other errors or omissions.
   (5) Any actionable conduct by the licensee in the practice of
public accountancy, the performance of bookkeeping operations, or
other professional practice.
   (d) The report required by subdivisions (a), (b), and (c) shall be
signed by the licensee and set forth the facts which constitute the
reportable event.  If the reportable event involves the action of an
administrative agency or court, then the report shall set forth the
title of the matter, court or agency name, docket number, and dates
of occurrence of the reportable event.
   (e) A licensee shall promptly respond to oral or written inquiries
from the board concerning the reportable events, including inquiries
made by the board in conjunction with license renewal.
   (f) Nothing in this section shall impose a duty upon any licensee
to report to the board the occurrence of any of the events set forth
in subdivision (a), (b), or (c) either by or against any other
licensee.
   (g) The board may adopt regulations to further define the
reporting requirements of this section.



5063.1.  Within 10 days of entry of a conviction described in
paragraph (1) of subdivision (a) of Section 5063 or a judgment
described in subdivision (c) of Section 5063 by a court of this
state, the court that rendered the conviction or judgment shall
report that fact to the board and provide the board with a copy of
the conviction or judgment and any orders or opinions of the court
accompanying or ordering the conviction or judgment.



5063.2.  Within 30 days of payment of all or any portion of any
civil action settlement or arbitration award against a licensee of
the board in which the amount or value of the settlement or
arbitration award is thirty thousand dollars (,000) or greater,
any insurer or licensed surplus broker providing professional
liability insurance to that licensee shall report to the board the
name of the licensee, the amount or value of the settlement or
arbitration award, the amount paid by the insurer or licensed surplus
broker, and the identity of the payee.


5063.3.  (a) No confidential information obtained by a licensee, in
his or her professional capacity, concerning a client or a
prospective client shall be disclosed by the licensee without the
written permission of the client or prospective client, except the
following:
   (1) Disclosures made by a licensee in compliance with a subpoena
or a summons enforceable by order of a court.
   (2) Disclosures made by a licensee regarding a client or
prospective client to the extent the licensee reasonably believes it
is necessary to maintain or defend himself or herself in a legal
proceeding initiated by the client or prospective client.
   (3) Disclosures made by a licensee in response to an official
inquiry from a federal or state government regulatory agency.
   (4) Disclosures made by a licensee or a licensee's duly authorized
representative to another licensee in connection with a proposed
sale or merger of the licensee's professional practice.
   (5) Disclosures made by a licensee to either of the following:
   (A) Another licensee to the extent necessary for purposes of
professional consultation.
   (B) Organizations that provide professional standards review and
ethics or quality control peer review.
   (6) Disclosures made when specifically required by law.
   (7) Disclosures specified by the board in regulation.
   (b) In the event that confidential client information may be
disclosed to persons or entities outside the United States of America
in connection with the services provided, the licensee shall inform
the client in writing and obtain the client's written permission for
the disclosure.

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