1.510.001 Contingent Fees Rule .01 A member in public practice shall not a. Perf
ID: 2464661 • Letter: 1
Question
1.510.001 Contingent Fees Rule
.01 A member in public practice shall not
a. Perform for a contingent fee any professional services for, or receive such a fee from a client for whom the member or the member’s firm performs,
i. an audit or review of a financial statement; or
ii. a compilation of a financial statement when the member expects, or reasonably might expect, that a third party will use the financial statement and the member’s compilation report does not disclose a lack of independence; or
iii. an examination of prospective financial information; or
b. Prepare an original or amended tax return or claim for a tax refund for a contingent fee for any client.
.02 The prohibition in a. above applies during the period in which the member or member’s firm is engaged to perform any of the services listed above and the period covered by any historical financial statements involved in any such listed services.
.03 Except as stated in the next sentence, a contingent fee is a fee established for the performance of any service pursuant to an arrangement in which 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. Solely for purposes of this rule, fees are not regarded as being contingent if fixed by courts or other public authorities, or, in tax matters, if determined based on the results of judicial proceedings or the findings of governmental agencies.
.04 A member’s fees may vary depending, for example, on the complexity of services rendered. [Prior reference: paragraph .01 of ET section 302]
Summarize in 1-2 pages (12-point, double spaced) and give an example of when a contingent fee would be permitted and another example of when a contingent fee would not be permitted under this rule. Please give different examples than the ones in the rule!
Explanation / Answer
A contigent fee is received from predetermined basis that too collected by the result of specified transactions only, this type of fee is not received from client for doing professional service like auditing the client financial statement and examine client financial statement, not to disclose member’s compilation report, prepare tax return and tax refund more ever client can asked auditor to review past financial statements.
A contigent fee can be determined by judicial proceedings or the findings of governmental agencies. Fee can't determined by courts or any other public authorities.
Contigent fee can be collected example:
When an auditor draft a lettter or obtain a letter behalf of her/his client to fulfill the statutory regulations requirement .
When an auditor represent her/his client for an examination before tax revenue agent during in the tax return time.
Contigent fee not to be collected example:
When a client forget or omitted to make deduction in the tax return that time auditor can refile the tax return by included omitted tax deduction amount to claim for refund.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.