Article 3.5 - Standards of Professional Conduct

California Business and Professions Code — §§ 5060-5063.10

Sections (9)

Amended by Stats. 2023, Ch. 510, Sec. 73. (SB 887) Effective January 1, 2024.

(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 their 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

Amended by Stats. 2003, Ch. 807, Sec. 4. Effective January 1, 2004.

(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

Added by Stats. 1990, Ch. 1393, Sec. 1.3.

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

§ 5062.2

Added by Stats. 2002, Ch. 232, Sec. 1. Effective January 1, 2003.

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.

§ 5062.3

Added by Stats. 2024, Ch. 586, Sec. 7. (AB 3251) Effective January 1, 2025.

For purposes of an enforcement action taken by the board, an accounting firm providing attestation services where none of the licensee owners of the firm have authority to sign reports on attest engagements, the licensee owners shall be held to the same level of responsibility as the licensee or licensees who performed the engagement.

§ 5062.4

Added by Stats. 2024, Ch. 586, Sec. 8. (AB 3251) Effective January 1, 2025.

If a licensee is no longer employed with an accounting firm, the accounting firm shall make all working papers available to a licensee who signed a report on an attest engagement upon request by the board for purposes of conducting an investigation. The licensee shall return the working papers upon direction by the board and shall keep no copies.

§ 5063

Amended by Stats. 2002, Ch. 231, Sec. 6. Effective January 1, 2003.

(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 ($30,000) 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

Added by Stats. 2002, Ch. 231, Sec. 7. Effective January 1, 2003.

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.

§ 5063.10

Added by Stats. 2011, Ch. 448, Sec. 7. (SB 543) Effective January 1, 2012.

(a)Any restatement of a financial statement that is included in any report filed with the United States Securities and Exchange Commission shall be exempt from the requirement described in paragraph (1) of subdivision (b) of Section 5063.

(b)Nothing in this section shall be construed to require the reporting of any restatement of a financial statement that is not required to be submitted to the board pursuant to the regulations adopted by the board in effect on the date this section becomes operative.