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Chapter Accy 1
RULES OF CONDUCT
Subchapter I — Applicability and Definitions
Accy 1.001 Applicability of rules of conduct to certified public accountants.
Accy 1.002 Applicability of rules of conduct to certified public accountants who have a significant influence over a CPA-related business or who advertise as a CPA.
Accy 1.003 Definitions.
Subchapter II — Independence, Integrity and Objectivity
Accy 1.101 Independence standards.
Accy 1.102 Integrity and objectivity.
Subchapter III — Competence and Technical Standards
Accy 1.201 General standards.
Accy 1.202 Auditing standards.
Accy 1.203 Accounting principles.
Accy 1.204 Other technical standards.
Accy 1.205 Standards for auditing, accounting and review services, and attestation engagements.
Subchapter IV — Responsibilities to Clients
Accy 1.301 Confidential client information.
Accy 1.302 Contingent fees, commissions and referral fees.
Subchapter V — Other Responsibilities and Practices
Accy 1.401 Acts discreditable.
Accy 1.402 Advertising or other forms of solicitation.
Accy 1.404 Incompatible occupations.
Accy 1.405 Form of practice and name.
Accy 1.406 Practice while suspended.
Accy 1.407 Communications.
Accy 1.408 Ownership requirements.
Ch. Accy 1 Note Note: Chapter Accy 1 as it existed on June 30, 1974 was repealed and a new Chapter Accy 1 was created, Register, June, 1974, No. 222, effective July 1, 1974.
subch. I of ch. Accy 1 Subchapter I — Applicability and Definitions
Accy 1.001 Accy 1.001 Applicability of rules of conduct to certified public accountants.
Accy 1.001(1) (1)Chapters Accy 1 to 9 apply to a person who practices as a certified public accountant in this state.
Accy 1.001(2) (2) A certified public accountant may be held responsible for compliance with the rules of the examining board by any person associated with the certified public accountant in a firm who is either under his or her supervision or is a member of the firm.
Accy 1.001(3) (3) A certified public accountant shall not permit others to carry out acts on his or her behalf, either with or without compensation, which, if carried out by the certified public accountant, would violate chs. Accy 1 to 9.
Accy 1.001 History History: Cr. Register, June, 1974, No. 222, eff. 7-1-74; correction made under s. 13.93 (2m) (b) 1., Stats., Register, March, 1993, No. 447; CR 03-071: r. and recr. Register May 2004 No. 581, eff. 6-1-04.
Accy 1.002 Accy 1.002 Applicability of rules of conduct to certified public accountants who have a significant influence over a CPA-related business or who advertise as a CPA.
Accy 1.002(1)(1) A person licensed as a certified public accountant that has significant influence over a CPA-related business is considered to be practicing as a certified public accountant in the CPA-related business and all persons with ownership interest in the business shall follow the rules of the examining board in the operation of the CPA-related business.
Accy 1.002(2) (2) A person who operates a business and is licensed as a certified public accountant and who advertises or otherwise holds out as a certified public accountant shall follow the rules of the examining board in the operation of any business.
Accy 1.002 History History: Cr. Register, June, 1982, No. 318, eff. 7-1-82; CR 03-071: r. and recr. Register May 2004 No. 581, eff. 6-1-04.
Accy 1.003 Accy 1.003 Definitions. As used in chs. Accy 1 to 9:
Accy 1.003(1) (1) "Attest service" means any of the following:
Accy 1.003(1)(a) (a) An audit or any other engagement that is performed or intended to be performed in accordance with the statements incorporated by reference in s. Accy 1.205 (1).
Accy 1.003(1)(b) (b) A review of a financial statement that is performed or intended to be performed in accordance with the statements incorporated by reference in s. Accy 1.205 (2).
Accy 1.003(1)(c) (c) An examination of prospective financial information that is performed or intended to be performed in accordance with the statements incorporated by reference in s. Accy 1.205 (3).
Accy 1.003(2) (2) "Audit" means an examination of financial statements of a person by a certified public accountant, conducted in accordance with generally accepted auditing standards, to determine whether, in the opinion of the certified public accountant, the statements conform with generally accepted accounting principles or, if applicable, with another comprehensive basis of accounting.
Accy 1.003(3) (3) "Commission" means compensation, except a referral fee, for recommending or referring any product or service to be supplied by another person.
Accy 1.003(4) (4) "Compilation of a financial statement" means a presentation of information in the form of a financial statement that is the representation of any other person without the undertaking of the certified public accountant to express any assurance on the statement.
Accy 1.003(5) (5) "Contingent fee" means a fee established for the performance of any service according 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.
Accy 1.003(6) (6) "CPA-related business" means a business that performs for clients any of the professional services related to accounting, tax, personal financial planning, or litigation support services or those services for which standards are established relating to audits, compilations and reviews of financial statements and examinations or compilations of prospective financial information.
Accy 1.003(7) (7) "Examination of prospective financial information" means an evaluation by a certified public accountant of a forecast or projection, the support underlying the assumptions in the forecast or projection, whether the presentation of the forecast or projection is in conformity with professional presentation guidelines, or, whether the assumptions in the forecast or projection provide a reasonable basis for the forecast or projection.
Accy 1.003(8) (8) "Firm" means a proprietorship, partnership, limited liability partnership, corporation, service corporation, or limited liability company.
Accy 1.003(9) (9) "Forecast" means a prospective financial statement that presents, to the best of the responsible party's knowledge and belief, an entity's expected financial position, results of operations, and changes in financial position or cash flows that are based on the responsible party's assumptions reflecting conditions it expects to exist and the course of action it expects to take.
Accy 1.003(10) (10) "Member of a firm" means a director, manager, employee, officer, owner, shareholder, principal, or partner of a firm.
Accy 1.003(11) (11) "Person" means any natural person, firm, association, or other legal entity.
Accy 1.003(12) (12) "Projection" means a prospective financial statement that presents, to the best of the responsible party's knowledge and belief, given one or more hypothetical assumptions, an entity's expected financial position, results of operations, and changes in financial position or cash flows that are based on the responsible party's assumptions reflecting conditions it expects would exist and the course of action it expects would be taken given such hypothetical assumptions.
Accy 1.003(13) (13) "Referral fee" means compensation for recommending or referring any service of a certified public accountant to any person.
Accy 1.003(14) (14) "Review" means to perform an inquiry and analytical procedures that permit a certified public accountant to determine whether there is a reasonable basis for expressing limited assurance that there are no material modifications that should be made to financial statements in order for them to be in conformity with generally accepted accounting principles or, if applicable, with another comprehensive basis of accounting.
Accy 1.003(15) (15) "Significant influence" means the ability of an investor to exercise significant influence over operating and financial policies of an investee. The extent of ownership is not conclusive. Direct or indirect ownership of 20% or more of an investee creates a presumption that the investor has significant influence in an investee. Ownership of less than 20% of a CPA-related business creates a presumption that the certified public accountant does not have significant influence in the CPA-related business. An ability to exercise significant influence may be indicated in several ways: representation on the board of directors, participation in policy making processes, material intercompany transactions, interchange of managerial personnel, technological dependency, and the extent of ownership by an investor in relation to the concentration of other shareholdings.
Accy 1.003 Note Note: Examples of indications that an investor may be unable to exercise significant influence over the operating and financial policies of an investee include:
Accy 1.003 Note (a) Opposition by the investee, such as litigation or complaints to government regulatory authorities, challenges the investor's ability to exercise significant influence.
Accy 1.003 Note (b) The investor and investee sign an agreement under which the investor surrenders significant rights as a shareholder.
Accy 1.003 Note (c) Majority ownership of the investee is concentrated among a small group of shareholders who operate the investee without regard to the views of the investor.
Accy 1.003 Note (d) The investor needs or wants more financial information to apply the equity method than is available to the investee's other shareholders, for example, the investor wants quarterly financial information from an investee that publicly reports only annually, tries to obtain that information, and fails.
Accy 1.003 Note (e) The investor tries and fails to obtain representation on the investee's board of directors.
Accy 1.003 History History: CR 03-071: (2) to (5), (7), (9), and (11) to (14) renum. from Accy 1.302 (1) (b) to (k) and am. (2), (4), (7), (11), (13) and (14), cr. (intro.), (1), (6), (8), (10) and (15), Register May 2004 No. 581, eff. 6-1-04.
subch. II of ch. Accy 1 Subchapter II — Independence, Integrity and Objectivity
Accy 1.101 Accy 1.101 Independence standards. The following independence standards of the accounting profession are adopted by reference and shall be used by certified public accountants in Wisconsin:
The Code of Professional Conduct ET Section 101, including Sections ET 101.01 through ET 101.16 available on the Internet at http://www.aicpa.org/about/code/et101.htm#101-1 and published by the American Institute of Certified Public Accountants in print form as AICPA Professional Standards Volume 2 as of June 1, 2002. The printed volume is available at:
American Institute of Certified Public Accountants
1455 Pennsylvania Ave., NW
Washington, DC 20004-1081
Accy 1.101 Note Note: Definitions of terms used in the independence standards, ET Section 101, are included in ET Section 92 of the Code of Professional Conduct published by the American Institute of Certified Public Accountants and available at the Internet site http://www.aicpa.org/about/code/def92.htm and in the same printed volume as ET Section 101. Copies of the Standards described above are on file in the offices of the Accounting Examining Board and the Legislative Reference Bureau.
Accy 1.101 History History: Cr. Register, June, 1974, No. 222, eff. 7-1-74; cr. (2), Register, December, 1974, No. 228, eff. 1-1-75; cr. (2) (d), Register, February, 1976, No. 242, eff. 4-1-76; cr. (2) (e), Register, January, 1977, No. 253, eff. 3-1-77; r. and recr. (1) and cr. (2) (f), Register, July, 1979, No. 283, eff. 9-1-79; r. and recr. (2) (a), am. (2) (d) 2. intro. and d., cr. (2) (g), Register, July, 1980, No. 295, eff. 8-1-80; corrections made under s. 13.93 (2m) (b) 1. and 5., Stats., Register, March, 1993, No. 447; CR 02-120: r. and recr. Register November 2003 No. 575, eff. 12-1-03.
Accy 1.102 Accy 1.102 Integrity and objectivity. No person licensed to practice as a certified public accountant as defined in the statutes, shall knowingly misrepresent facts, and when engaged in the practice of public accounting, including the rendering of tax and management advisory services, shall not subordinate his or her judgment to others. In tax practice, a member may resolve doubt in favor of the client as long as there is reasonable support for that position.
Accy 1.102 History History: Cr. Register, June, 1974, No. 222, eff. 7-1-74; corrections made under s. 13.93 (2m) (b) 5., Stats., Register, March 1993, No. 447; CR 03-071: am. Register May 2004 No. 581, eff. 6-1-04.
Accy 1.102 Note Accy 1.103 Disclosure of interest. History: Cr. Register, June, 1974, No. 222, eff. 7-1-74; CR 03-071: r. Register May 2004 No. 581, eff. 6-1-04.
subch. III of ch. Accy 1 Subchapter III — Competence and Technical Standards
Accy 1.201 Accy 1.201 General standards.
Accy 1.201(1)(1) All persons licensed to practice as a certified public accountant, as defined in the statutes, shall comply with the following general standards as interpreted by bodies designated by the American Institute of Certified Public Accountants Council, and must justify any departures therefrom.
Accy 1.201(1)(a) (a) Professional competence. A certified public accountant shall undertake only those engagements which the certified public accountant or the firm can reasonably expect to complete with professional competence.
Accy 1.201(1)(b) (b) Due professional care. A certified public accountant shall exercise due professional care in the performance of an engagement.
Accy 1.201(1)(c) (c) Planning and supervision. A certified public accountant shall adequately plan and supervise an engagement.
Accy 1.201(1)(d) (d) Sufficient relevant data. A certified public accountant shall obtain sufficient relative data to afford a reasonable basis for conclusions or recommendations in relation to an engagement.
Accy 1.201(1)(e) (e) Forecasts. A certified public accountant shall not permit the certified public accountant's name to be used in conjunction with any forecast of future transactions in a manner which may lead to the belief that the certified public accountant vouches for the achievability of the forecast. This paragraph does not prohibit a certified public accountant from preparing, or assisting a client in the preparation of, forecasts of the results of future transactions. When a certified public accountant's name is associated with such forecasts, there shall be the presumption that such data may be used by parties other than the client. Therefore, full disclosure must be made of the sources of the information used and the major assumptions made in the preparation of the statements and analyses, and character of the work performed by the member, and the degree of the responsibility he or she is taking.
Accy 1.201(2) (2) Interpretations of s. Accy 1.201, not intended to be all-inclusive, are as follows:
Accy 1.201(2)(a) (a) A certified public accountant who accepts a professional engagement implies that he or she has the necessary competence to complete the engagement according to professional standards, applying the certified public accountant's knowledge and skill with reasonable care and diligence, but the certified public accountant does not assume a responsibility for infallibility of knowledge or judgment.
Accy 1.201(2)(b) (b) Competence in the practice of public accounting involves both the technical qualifications of the certified public accountant and his or her staff and the ability to supervise and evaluate the quality of the work performed. Competence relates both to knowledge of the profession's standards, techniques and the technical subject matter involved, and to the capability to exercise sound judgment in applying such knowledge to each engagement.
Accy 1.201(2)(c) (c) The certified public accountant may have the knowledge required to complete an engagement professionally before undertaking it. In many cases, however, additional research or consultation with others may be necessary during the course of the engagement. This does not ordinarily represent a lack of competence, but rather is a normal part of the professional conduct of an engagement.
Accy 1.201(2)(d) (d) However, if a certified public accountant is unable to gain sufficient competence through these means, he or she should suggest, in fairness to the client and the public, the engagement of someone competent to perform the needed service, either independently or as an associate.
Accy 1.201 History History: Cr. Register, June, 1974, No. 222, eff. 7-1-74; cr. (2), Register, December, 1974, No. 228, eff. 1-1-75; r. and recr. (1) and am. (2) (a), Register, July, 1979, No. 283, eff. 9-1-79; (1) (e) renum. from Accy 1.204 (2) and am., Register, July, 1980, No. 295, eff. 8-1-80; corrections made under s. 13.93 (2m) (b) 1., Stats., Register, March, 1993, No. 447; CR 03-071: am. (1) (intro.) to (d) and (2) (a) to (d), r. and recr. (1) (e) Register May 2004 No. 581, eff. 6-1-04.
Accy 1.202 Accy 1.202 Auditing standards. A person licensed to practice as a certified public accountant shall not permit the certified public accountant's name to be associated with financial statements in such a manner as to imply that the certified public accountant is acting as an independent public accountant unless the certified public accountant has complied with the applicable generally accepted auditing standards promulgated by the American Institute of Certified Public Accountants. Statements on auditing standards used by the American Institute of Certified Public Accountants auditing standards executive committee are, for purposes of this rule, considered to be interpretations of the generally accepted auditing standards, and departures from such statements must be justified by those who do not follow them.
Accy 1.202 History History: Cr. Register, June, 1974, No. 222, eff. 7-1-74; cr. (2), Register, February, 1976, No. 242, eff. 4-1-76; r. and recr. (1) Register, July, 1979, No. 283, eff. 9-1-79; CR 03-071: renum. (1) to be Accy 1.202 and am., r. (2) Register May 2004 No. 581, eff. 6-1-04.
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