 In this presentation, we will discuss rules related to fees and commissions for a CPA firm, a public accounting firm engaged in audits and attestation arrangements, attestations agreements. We're going to start off with the contingent fees. First, a word from our sponsor. Well, actually, these are just items that we picked from the YouTube shopping affiliate program, but that's actually good for you because these aren't things that were just given to us from some large corporation which we don't even use in exchange for us selling them to you. These are things that we actually researched, purchased, and used ourselves. Bayer Dynamic? Not sure if I said that right, but this is the DT770 Pro 250 OHM Studio Reference Closed Back Headphones. I wear headphones basically every day for a large part of the day. They are important to me, therefore, I've gone through many different kinds of headphones. I've had these for some time and they've worked quite well. 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You can purchase one at a time or have a subscription model giving you access to all the courses, courses which are well organized, have other resources like excel files and PDF files to download and no commercials. Recalling what a contingent fee is, the fee is going to be contingent on something, typically some kind of future thing. The type of contingent fee that might come to mind is something like a lawyer, for example, who has a contingent fee on the outcome of the case. So their fee possibly being then contingent on the outcome of the case. That would be an example of a contingent fee. Now, note the problem with contingent fees is they could compromise our opinion on it, especially if we had a contingent fee, for example, in a similar situation with regards to the audit excel. If we had a contingent fee that basically said it's going to be contingent on the opinion we give, then that would give more pressure for us to give a favorable opinion because then that would be the opinion that would be needed to get the highest fee. So obviously, we don't really want if the good that we are given of the service that we are providing is the trust of the opinion that we're providing. We don't want that opinion to be contingent on a fee or the fee that we'd receive to be contingent on the outcome of the opinion, because that's going to give us more pressure to give a favorable opinion and it may look in appearance to be compromising independence. So therefore, whenever you think about these contingent fees, a kind of fee structure that's going to be contingent on some type of future event, I really want to think through that and see how it might compromise the work that is being performed in some way, especially if it's of course an opinion type of thing, it could really compromise the work that's being performed. So a member shall not perform for a contingent fee any professional service, notice it says any professional service for or receive such a fee from a client whom the member or the member's firm performs an audit or review of financial statements. So obviously an audit review is less substantial in terms of the opinion and the work that's done in the review, but still an attestation agreement. Then we have a compli- a compilation which is basically compiling the information into the financial statements of a financial statement expected to be used by third party if the compilation report does not disclose the lack of independence. So in that case, we may be able to compile which is not which is usually not anywhere near significant of the work that's going to be done in an audit as we compile the information. However, we would have to disclose that there's a lack of independence in that situation and examination of prospective financial information. A member shall also not prepare an original or amended tax return or claim for a tax refund for a contingent fee for any client. So notice this is another area within taxation where we want to really stay away from the contingent fees because again, you could see how it would compromise the tax preparation process. If we were to say, for example, our fee is going to be dependent on the type of refund that you're going to get or whether you owe taxes or not. That could compromise the tax preparation process and so we really just want to kind of stay away from that kind of contingent fee in those areas. Now we're going to consider commission and referrals fees starting with commissions, prohibited commissions. A member in public practice shall not for a commission recommend or refer to a client any product or service or receive a commission when a member or the member's firm also performs for that client, an audit or review of financial statements, a compilation of financial statements expected to be used by third party and the compilation report does not disclose a lack of independence and examination of prospective financial information. So we want to be again careful with the idea of commissions and with regards to audits probably stay away from the concept of commission with regards to clients that are going to be audit type clients because they can compromise the situation. Obviously our main goal is here is to be as straightforward as possible, not let the format of compensation compromise our independence. The best format then is typically going to be some kind of flat fee for the service that will be provided not being based on on an outcome and not and not having any commissions that could compromise or it can be seen as basically not transparent to basically be collecting a commission in some of some of those areas. So notice that it's common practice and other type of businesses to have kind of a commission set up but when we have the audit engagement client involved we don't want to have the commissions involved because it could compromise basically again the independence and the integrity of the opinion which is going to be the primary thing we're concerned about with the audit clients. Disclosure of permitted commissions a member in public practice who is not prohibited by this rule from performing services for or receiving commission and who is paid or expects to be paid a commission shall disclose that fact to any person or entity to whom the member recommends or refers the product or service to which the commission relates and I think this is basically a good general practice if you're going to be recommending something and you're going to be getting a commission from it then just basically as a general practice you want to disclose that you want to be able to say hey my opinion with regards to the the integrity or how good this good or service is you can consider it as somewhat compromised given the fact that I'm getting paid for it that doesn't mean that it's wrong or that the opinion is wrong but obviously if someone is is recommending some good or service and they're getting paid for that recommendation if you were to get that good or service that's going to you know compromise that opinion to some degree and you want to be making sure that if you're very straightforward with that upfront and and again in normal kind of business there's nothing necessarily wrong with that but there's certain types of situations especially when you just want an opinion where the commission base can compromise that opinion and you want to be clear you know when when it's okay to basically be collecting a commission and when it might cause damage to to the work you're doing in terms of the opinion that you're giving and then if you do have a commission at any given time it's best to be upfront and say hey look you know I have a relationship and I'm going to be getting you know a commission for this for this and then we have the referral fees any member who accepts a referral fee for recommending or referring any services of a CPA to any person or entity or who pays a referral fee to obtain a client shall disclose such acceptance or payment to the client again we need that that uh disclosure there you want to be as transparent as possible with these types of situations