Texas State Board of Accountancy
TEXAS STATE BOARD OF
PUBLIC ACCOUNTANCY
CHAPTER 501
RULES OF PROFESSIONAL CONDUCT
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RULE §501.51 Preamble and General Principles
(a) These rules of professional conduct were promulgated under the Public
Accountancy Act, which directs the Texas
State Board of Public Accountancy to
promulgate rules of professional conduct “in order to establish and maintain
high standards of competence and integrity
in the practice of public accountancy
and to insure that the conduct and competitive practices of licensees serve the
purposes of the Act and the best interest of the public.”
(b) The services usually and customarily performed by those in the public,
industry, or government practice of accountancy involve a high degree of skill,
education, trust, and experience which are professional in scope and nature. The
use of professional designations carries an implication of possession of the
competence associated with
a profession. The public, in general, and the
business community, in particular, rely
on this professional competence by
placing confidence in reports and other
services of accountants. The public’s
reliance, in turn, imposes obligations on persons utilizing professional
designations, both to their clients and to the public in general. These obligations
include maintaining independence of thought and action, continuously
improving professional
skills, observing generally accepted accounting
principles and generally accepted aud
iting standards, pr
omoting sound and
informative financial reporting, holding the affairs of clients in confidence,
upholding the standards of the public accountancy profession, and maintaining
high standards of personal and professional conduct in all matters.
(c) The board has an underlying duty to the public to insure that these
obligations are met in order to achieve and maintain a vigorous profession
capable of attracting the bright minds essential to serving adequately the public
interest.
(d) These rules recognize the First Ame
ndment rights of the general public as
well as licensees and do not restrict
the availability of accounting services.
However, public accountancy, like othe
r professional services, cannot be
commercially exploited without the public being harmed. While information as
to the availability of accounting services and qualifications of licensees is
desirable, such information should not be transmitted to the public in a
misleading fashion.
(e) The rules are intended to have application to all kinds of professional
services performed in the practice of
public accountancy, including services
relating to:
(1) accounting, auditing and other assurance services,
(2) taxation,
(3) financial advisory services,
(4) litigation support,
(5) internal auditing,
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(6) forensic accounting, and
(7) management advice and consultation.
(f) Finally, these rules also recognize th
e duty of certified public accountants to
refrain from committing acts discreditable
to the profession. These acts, whether
or not related to the accountant’s practice, impact negatively upon the public’s
trust in the profession.
(g) In the interpretation and enforcement
of these rules, the board may consider
relevant interpretations, rulings, and opinions issued by the boards of other
jurisdictions and appropriate committees of professional organizations, but will
not be bound thereby.
(h) Interpretive Comment: Outsourced internal audit services are considered
engagements in the client practice of
public accountancy as defined in
§501.52(9) of this title (relating to Definitions).
Source Note: The provisions of this §501.51 adopted
to be effective June 11, 2000, 25 TexReg 5334;
amended to be effective Febr
uary 4, 2004, 29 TexReg 963
RULE §501.52 Definitions
The following words and terms, when used in title 22, part 22 of the Texas
Administrative Code relating to the Texas State Board of Public Accountancy,
shall have the following meanings,
unless the context clearly indicates
otherwise. The masculine shall be construed to include the feminine or neuter
and vice versa, and the singular shall be
construed to include the plural and vice
versa.
(1) “Act” means the Public Accountancy Act, Chapter 901, Occupations Code;
(2) “Advertisement” means a message which is transmitted to persons by, or at
the direction of, a certificate or regist
ration holder and which has reference to
the availability of the certificate or regi
stration holder to perform Professional
Services;
(3) “Affiliated entity” means an entity controlling or being controlled by or
under common control with another entity, directly or indirectly, through one or
more intermediaries;
(4) “Attest Service” means:
(A) an audit or other engagement required by the board to be performed in
accordance with the auditing
standards adopted by the American Institute of
Certified Public Accountants or another national accountancy organization
recognized by the board;
(B) a review, compilation or other engagement required by the board to be
performed in accordance with standards for accounting and review services
adopted by the American Institute of Ce
rtified Public Accountants or another
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national accountancy organization recognized by the board;
(C) an engagement required by the
board to be performed in accordance with
standards for attestation engagements adopted by the American Institute of
Certified Public Accountants or another national accountancy organization
recognized by the board; or
(D) any other assurance service required by the board to be performed in
accordance with professional standards ad
opted by the American Institute of
Certified Public Accountants or another national accountancy organization
recognized by the board;
(5) “Board” means the Texas Stat
e Board of Public Accountancy;
(6) “Certificate or registration holder”
the holders of all currently valid:
(A) certificates issued to individuals who have been awarded the designation
certified public accountant by the board pu
rsuant to the Act, or pursuant to
corresponding provisions of a prior Act;
(B) registrations with the board under §901.355 of the Act; and
(C) firm licenses or registrations;
(7) “Charitable Organization” means an organization which has been granted
tax-exempt status under the Internal Revenue Code of 1986, §501(c), as
amended;
(8) “Client” means a person who enters
into an agreement with a license holder
or a license holder’s employer to recei
ve a professional accounting service;
(9) “Client Practice of Public Accountancy” is the offer to perform or the
performance by a certificate or registration holder for a client or a potential
client of a service involving the use of
accounting, attesting, or auditing skills.
The phrase “service involving the use of accounting, attesting, or auditing skills”
includes:
(A) the issuance of reports on, or the preparation of, financial statements,
including historical or prospective financ
ial statements or any element thereof;
(B) the furnishing of management or financial advisory or consulting services;
(C) the preparation of tax returns or the furnishing of advice or consultation
on tax matters;
(D) the advice or recommendations in connection with the sale or offer for
sale of products (including the design and implementation of computer
software), when the advice or recommendations routinely require or imply the
possession of accounting or auditing skills
or expert knowledge in auditing or
accounting; and/or
(E) the performance of litigation support services;
(10) “Commission” means compensation for recommending or referring any
product or service to be supplied by another person;
(11) “Contingent fee” means a fee for any service where no fee will be charged
unless a specified finding or result is attained, or in which the amount of the fee
is otherwise dependent upon the finding or result of such service. However, a
certificate or registration holder’s non-Contingent fees may vary depending, for
example, on the complexity
of the services rendered. Fees are not contingent if
they are fixed by courts or governmental entities acting in a judicial or
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regulatory capacity, or in tax matters if determined based on the results of
judicial proceedings or the findings of
governmental agencies
acting in a judicial
or regulatory capacity, or if there is
a reasonable expectation of substantive
review by a taxing authority;
(12) “Financial Statements” means a presentation of financial data, including
accompanying notes, derived from acc
ounting records and intended to
communicate an entity’s economic resources or obligations at a point in time, or
the changes therein for a period of tim
e, in accordance with generally accepted
accounting principles. Incidental financia
l data to support recommendations to a
client or in documents for which the reporting is governed by Statements or
Standards for Attestation Engagements and tax returns and supporting schedules
do not constitute financial statements for the purposes of this definition;
(13) “Firm” means a proprietorship, partnership, limited liability partnership,
limited liability company, or professional or other corporation, or other business
engaged in the practice of public accountancy;
(14) “Good standing” means complia
nce by a certificate with the board’s
licensing rules, including the mandatory continuing education requirements and
payment of the annual license fee, and any penalties and other costs attached
thereto. In the case of board-imposed
disciplinary or administrative sanctions,
the certificate or registration holder must be in compliance with all the
provisions of the board order to be considered in good standing;
(15) “Licensee” means the holder of
a license issued by the board to a
certificate or registration holder pursuant to the Act, or pursuant to provisions of
a prior Act;
(16) “Peer review” or “Quality Review”
means the study, appraisal, or review
of the professional accounting work of a public accountancy firm that performs
attest services by a certificate holder
who is not affiliated with the firm;
(17) “Person” means an individual, partnership, corporation, registered limited
liability partnership, or limited liability company;
(18) “Practice unit” means an office of a firm required to be licensed with the
board for the purpose of practicing public accountancy;
(19) “Professional services” or “pro
fessional accounting wo
rk” means services
or work that requires the specialized
knowledge or skills associated with
certified public accountants, including:
(A) issuing reports on financial statements;
(B) providing management or financial advisory or consulting services;
(C) preparing tax returns; and
(D) providing advice in tax matters;
(20) “Report” means, when used with
reference to financial statements, either
an engagement performed through the application of procedures under the
Statement on Standards for Accounting an
d Review Services or any opinion,
report, or other form of language that states or implies assurance as to the
reliability of any financial statements a
nd/or includes or is accompanied by any
statement or implication that the person
or firm issuing it has special knowledge
or competence in accounting or auditing. Such a statement or implication of
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special knowledge or competence may arise
from use by the issuer of the report
of names or titles indicating
that he or it is an accountan
t or auditor or from the
language of the report itself. The term “report” includes any form of language
which disclaims an opinion when such form of language is conventionally
understood to imply any assurance as to the reliability of the financial statements
to which reference is made. It also includes any form of language conventionally
used with respect to a compilation or
review of financial statements, and any
other form of language that implies such special knowledge or competence;
(21) Interpretive Comment: The practice of public accountancy is defined in
§901.003 of the Act (relating to the Practice of Public Accountancy).
Source Note:
The provisions of this §501.52 adopted to be effective June 11, 2000, 25 TexReg
5334; amended to be effective December 6,
2001, 26 TexReg 9857; amended to be effective
February 4, 2004, 29 TexReg 963; amended to
be effective June 9, 2004, 29 TexReg 5625
RULE §501.53 Applicability of
Rules of Professional
Conduct
(a) All of the rules of professional conduct shall apply to and must be observed
by a certificate or registration holder engaged in the client practice of public
accountancy.
(b) No certificate or registration holder sh
all issue, or otherwise be associated
with, financial statements that do not conform to the accounting principles
described in Section 501.61 of this title (relating to Accounting Principles).
(c) The following rules of professional conduct shall apply to and be required to
be observed by certificate or registration holders when not employed in the
client practice of public accountancy:
(1) Section 501.73 of this title (relating to Integrity and Objectivity);
(2) Section 501.74 of this title (relating to Competence);
(3) Section 501.77 of this title (relating to Acting through Others);
(4) Section 501.78 of this title (re
lating to Withdrawal or Resignation);
(5) Section 501.90 of this title (relating to Discreditable Acts);
(6) Section 501.91 of this title (relating to Reportable Events);
(7) Section 501.92 of this title (relating to Frivolous Complaints);
(8) Section 501.93 of this
title (relating to Responses); and
(9) Section 501.94 of this title (relating to Mandatory Continuing Education
Reporting).
Source Note:
The provisions of this §501.53 adopted to be effective June 11, 2000, 25 TexReg
5336; amended to be effective December 19,
2000, 25 TexReg 12392; amended to be effective
February 6, 2002, 27 TexReg 747; amended to
be effective June 9, 2004, 29 TexReg 5626
