Enforcement FAQs

Are complaints filed against a licensee public information?

No. Complaints are not public information. However, if a complaint results in a citation or enforcement action, the citation or enforcement action is public information.

Are CBA citations and enforcement actions public information?

Yes. An enforcement action may result from the CBA filing an accusation seeking to revoke, suspend, or otherwise impose discipline upon a license or certificate.

The CBA may also issue a citation for violation of various provisions of the Business and Professions Code (BPC) or the California Code of Regulations, Title 16 (California Code of Regulations (CCR)). Accusations, disciplinary orders, and citations are posted on the CBA website and are also provided to the public upon request.

I prepared income tax returns for a former client and provided him the original returns for filing with the taxing agencies and a copy for his records. He is now requesting an additional copy of the returns. Assuming that I still have copies, am I required to provide this former client with an additional copy of the income tax returns?

No. A licensee who was engaged and prepared income tax returns for a client and provided the client with a copy of the income tax returns, as defined under Internal Revenue Code Section 6107(a), is not required to provide additional copies under applicable BPC and California Code of Regulations (CCR). Licensees are, however, required to return tax records provided by the client and provide a copy of the licensee's working papers that support information on the tax returns.

Under BPC section 5037:
(b) A licensee shall furnish to his or her client or former client, upon request and reasonable notice:
(1) A copy of the licensee's working papers to the extent that those working papers include records that would ordinarily constitute part of the client's records and are not otherwise available to the client.
(2) Any accounting or other records belonging to, or obtained from or on behalf of, the client which the licensee removed from the client's premises or received for the client's account. The licensee may make and retain copies of documents of the client when they form the basis for work done by him or her.

Will I be in violation of the BPC or California Code of Regulations (CCR) if I allow my CPA license to expire, and I continue to practice public accounting as a CPA?

Yes. BPC section 5050 requires that certified public accountants and public accountants licensed by the CBA maintain a current, active license to practice public accountancy, as defined under BPC section 5051.

When a license expires, practice rights end. No certified public accountant or public accountant with an expired license can engage in the practice of public accountancy in California.

If a licensee continues to practice with an expired license, the licensee may be subject to an enforcement action.

If reissuing an audit report on financial statements that includes the correction of an error in financial statements previously issued to the client, or adjustment to opening balances due to errors in a previous period, what are my reporting obligations under the BPC and California Code of Regulations (CCR)?

BPC section 5063 (b) in conjunction with section 5063.10 and California Code of Regulations (CCR) section 59 requires a licensee to report to the CBA in writing any restatement of a financial statement reporting the correction of any error in a previously issued financial statement of a client that is:

A governmental agency located in California when the restatement(s) exceeds the planning materiality used in conjunction with the current year audit.
A charitable organization registered by the Office of the General's Registry of Charitable Trusts, when the restatement has resulted in the filing of an amended or superseding Internal Revenue Service Form 990 or 990PF.

The report required under BPC section 5063 shall be made by the licensee issuing the report on the restatement even if the licensee did not perform the original audit. The report must be provided to the CBA within 30 days of issuance of the restatement, be signed by the licensee, and set forth the facts constituting the reportable event.

BPC section 59 requires that the report of restated financial statements for governmental agencies must include copies of the original and the restated financial statements. The report involving a charitable organization should include only those portions of the original and amended Forms 990 or 990PF related to the reissued financial statements.

If a CPA uses an external service provider (separate legal entity) to process confidential information such as tax returns, will written permission from the client be required?

What constitutes written permission?

Any reasonable written document that acknowledges the client is aware that the information may be disclosed and confirms in writing the client's permission for the disclosure. The approval should always be secured in advance of the disclosure. Written consent may be through an engagement letter or in a separate consent agreement. Written permission includes faxes and emails.

Can the written permission be obtained through the use of an engagement letter that discloses the anticipated use of the external service provider?

If tax or accounting software is typically used wholly within the CPA firm's office, but confidential client information needs to be disclosed to an external technician or software vendor in order to resolve software problems, will written permission from the client be required?

If a CPA anticipates that he or his external service provider will disclose confidential client information to persons or entities outside the U.S., will the fact of anticipated disclosure require specific informed written consent of the client?

Yes. Disclosure of confidential information to persons or entities outside the U.S. will require written client notification and permission, even if the information will be going to persons within the same firm.
CPAs who use external service providers should always inquire regarding the provider's transfer of information to persons or entities outside the U.S. If it is anticipated that this will occur (CPA or external service provider will disclose), under BPC section 5063.3 and California Code of Regulations (CCR) section 54.1, the CPA must inform the client in writing and obtain the client's written permission for the disclosure.

Would written permission from the client be required if a CPA "stored" confidential client documents or information on an Internet file server?

If a client telephones his or her CPA and requests that the CPA provide confidential client information such as a tax return to the client's bank, is written permission from the client required?

I hold a California CPA license to perform general accounting services. Because I do not have the authority to sign reports on attest engagements, can I perform a compilation?

Yes. A compilation is not defined as an attest service under California Code of Regulations (CCR) section 2.4; therefore, a CPA licensee who does not have the authority to sign reports on attest engagements is allowed to sign compilation reports. The licensee would be required to undergo a peer review and to fulfill the accounting and auditing and fraud continuing education requirements. A CPA licensee who does not have the authority to sign reports on attest engagements is not allowed to perform the attest function, which includes issuing audit and review reports.

Can I accept a commission for referral of a client to the products or services of a third party?

A licensee may accept commissions in limited situations. Per BPC section 5061 and California Code of Regulations (CCR) sections 56 to 56.4, a licensee may accept commission-based compensation for defined services as long as the fees are disclosed in writing and various prohibited services are not performed. However, a licensee still is prohibited from accepting any fee or commission solely for referral of a client to a third party.

California has disclosure rules for consumer protection which must be in detailed written form.

The disclosure must:

Be in writing and be clear and conspicuous.
Be signed by the recipient of the product of service.
State the amount of the commission or the basis on which it is computed.
Identify the source of the payment.
Identify the relationship between the source and the person receiving the payment.

Can a licensee pay a referral fee or commission to obtain a client?

Can I practice under a namestyle other than what is printed on my certificate?

Yes. A sole proprietor who wishes to practice under a fictitious name must register with, and be approved by, the CBA before practicing and holding out to the public.

Per BPC section 5060, a licensee may not practice public accounting using a name other than the one printed on his wall certificate unless they also have a registered fictitious name with the CBA. A fictitious name will not be issued to an accountancy corporation or accountancy partnership.

Information and the Fictitious Name Registration Application for Sole Practitioner are available on the CBA website at http://www.cba.ca.gov/licensees/fictapp.pdf.