Question

Marcella Armsburg, CPA, has been offered a fee from her client to be paid only if Marcella is able to get a city penalty waived. Which of the following is true?

1) This is prohibited if the client is a non-attest client.
2) This is not prohibited for neither attest nor non-attest clients.
3) This is prohibited if the client is an attest client.
4) This is prohibited if the client is either an attest or non-attest client.

Answer 1

The correct answer is that accepting a fee contingent on the outcome of services is prohibited if the client is an attest client (3). This is because such a fee arrangement could compromise the CPA's required objectivity and impartiality for attest services.

Step-by-step explanation:

The correct answer to the question is: 3) This is prohibited if the client is an attest client.

Contingent fees like the one offered to Marcella Armsburg, CPA, for professional services rendered are subject to specific ethical guidelines set forth by regulatory bodies such as the American Institute of Certified Public Accountants (AICPA). When dealing with attest clients—those for whom the CPA performs audit, review, or other assurance services—it is generally considered a breach of independence to accept contingent fees.

The risk here is that such a fee arrangement could influence the objectivity and impartiality required in attest services, potentially leading to a conflict of interest or the appearance of one. However, for non-attest clients, where the CPA does not provide services that require independence, contingent fees may be allowed as long as they comply with the AICPA’s Code of Professional Conduct and other applicable rules and regulations.