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Texas State Board of Public Accountancy
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  William Treacy, Executive Director  
 

Frequently Asked Questions

The information contained on this page is just an opinion. It is subject to re-examination and change in the context of any specific dispute. It is not binding on the Board. You may request a formal opinion of the Board.

CPA Work Papers and Client Records:

Q. How long does a CPA firm have to save old client records and work papers before recycling them?

A. The Texas State Board of Public Accountancy's Rules state that work papers supporting an attest service belong to the accountancy firm that prepared them, and must be maintained by that firm for at least five years from the date of the attest report. See Board Rule 501.76(e). The Board has not established record retention guidelines for other services. You may also wish to consult with the Internal Revenue Service or other taxing authorities in order to determine their record retention regulations.

Q. Do CPA firms have to give their clients records and work papers on request?

A. A CPA must (promptly but not to exceed 10 business days) provide a client with the original documents that the client provided the CPA so that the CPA could perform a professional service. Examples of such documents include bank statements and W-2 forms. The CPA cannot charge a fee to return these documents and the documents must be returned to the client upon the client's request, even if the client has not paid the CPA for services rendered. The CPA can keep copies of those documents. See Board Rule 501.76(a).

If the CPA previously issued a document to a client, such as a client's tax return or an attest report, the CPA must provide additional copies to the client upon the client's request. The CPA can charge a reasonable fee for providing those copies. See Board Rule 501.76(a)(1-2).

Work papers developed by a CPA during the course of a professional engagement as a basis for, and in support of, an accounting, audit, consulting, tax, or other professional report prepared by the CPA for a client, shall be and remain the property of the CPA who developed the work papers. See Board Rule 501.76(b). Work papers that constitute client records must be provided to the client upon the client's request. Examples of work papers that constitute client records include documents in lieu of books of original entry such as listings and distributions of cash receipts or cash disbursements and consolidating or combining journal entries and documents and supporting detail in arriving at final figures incorporated in an end product such as financial statements or tax returns. A CPA can charge a reasonable fee for providing these documents to a client. SeeBoard Rule 501.76(a)(2).

Firm Names:

Q. How long after the death of a member of a Texas CPA firm may the firm continue to use the deceased person's name in the firm name?

A. A firm name may not violate Board Rules if it contains the name, surname or initials of a former owner of the firm. See Board Rule 501.83(a)(4)(A). However, this is only true so long as the former member is not "prohibited from practicing public accountancy and prohibited from using the title 'certified public accountant,' 'public accountant,' or any abbreviation thereof, unless specifically permitted by the board." See Board Rule 501.83(c).

This general rule does not apply under a few specific circumstances. See Board Rule 501.83(b)(2)(B) which states, "A partner surviving the death of all other partners may continue to practice under the partnership name for up to two years after becoming a sole proprietor..."

If the CPA firm is a sole proprietorship, Board Rule 513.16 may apply. This rule provides that a sole proprietorship may continue to operate for a period of up to 15 months following the death of the sole proprietor, under certain conditions.

Q. Can my firm name include my maiden name instead of my married name?

A. A firm name may not contain words, abbreviations or other language that are misleading to the public, or that may cause confusion to the public as to the legal form or ownership of the firm. See Board Rule 501.83(a)(1). Therefore, your firm name and the name on your license, business cards and letterhead should be the same. If you change your name in one of these documents, you must change it in all of the documents.

Activities That Do/Do Not Require a CPA License:

Q. Does providing bookkeeping services require a CPA license?

A.You need neither an individual license nor a firm license from the Board to provide bookkeeping services or prepare financial statements. However, if you do hold a personal license from the Board, any bookkeeping service you provide which includes compilations is considered to be the practice of public accountancy and is subject to the Board's regulation. See Sections 901.003 and 901.456 of the Public Accountancy Act; see also Board Rule 501.63 and discussion below.

Although a person may prepare financial statements without a license from the Board, a person must have personal and firm licenses from the Board in order to attach any attest report to financial statements or otherwise express an assurance about the reliability of financial statements. See Sections 901.0021, 901.456 and 901.460 of the Public Accountancy Act.

Q. Does tax return preparation require a CPA license?

A. You need neither an individual license nor a firm license from the Board to prepare tax returns.

Q. I have a Texas individual CPA license but no Texas firm license. What sort of work am I allowed to do in Texas?

A. With an individual Texas CPA certificate and license you may perform most services for clients while representing to the public that you are licensed by the Board. However, you may not provide attest services or represent that your firm is an accounting or CPA firm without a firm license issued by the Board. See Sections 901.003, 901.456 and 901.460 of the Public Accountancy Act. "Attest service" includes any service that must be performed in accordance with standards promulgated by the American Institute of Certified Public Accountants or other accountancy organization recognized by the Board. See Section 901.002(a)(1) of the Public Accountancy Act. In addition to traditional audits, reviews and compilations, financial statements submitted by CPAs to a client or third party are considered "attest services." See Board Rule 501.63. However, an employee or officer of a private or government entity may prepare the financial statements of the entity and may issue non-attest transmittals for the entity without a firm license. See Act 901.456(b)(2) and (3); see also Board Rule 501.63(b).

With an individual Texas CPA license but no firm license, you may use the term "CPA" or "Certified Public Accountant" in association with unlicensed firms that offer services such as financial consulting, tax preparation and bookkeeping services, in advertisements or written promotional material (e.g. business cards), so long as you include a written disclaimer: "this firm is not a CPA firm." This disclaimer must be included in conspicuous proximity to the name of the unlicensed entity and be printed in type not less bold than that contained in the body of the advertisement or written statement. See Board Rule 501.81(d).

Q. I am licensed in one of the other fifty U.S. states but I am not a licensed Texas CPA. What sort of work can I do in Texas?

A. If your principal place of business is one of the fifty U.S. states, you may enjoy all of the rights and privileges of being a CPA in Texas without obtaining a license from the Board, because your home state's qualifications for licensure are substantially equivalent to those in Texas.

If you provide attest services your work must be performed through a licensed Texas CPA firm.
If you permanently move to Texas, then you must obtain a personal license from the Board if you wish to practice or use your "CPA" designation in Texas.

You can find more information by clicking here. For more information about licenses for out-of-state firms, you can contact the Licensing Division at 512-305-7853 orlicensing@tsbpa.state.tx.us.

Advertising/Client Communication:

Q. Are CPAs allowed to advertise through direct mailings?

A. Direct mailings are permitted so long as they comply with the Board's rules and regulations regarding advertising. Under Board Rule 501.82(d), licensees who send out direct mailings must retain a copy of the mailing and the list of persons it was sent to for at least 36 months. The only exception to this rule is if the mailing is directed at an existing client, someone who is "seeking to secure the performance of professional services," or someone who invited the communication. Board Rule 501.82 generally sets forth the advertising standards that Texas CPAs must meet.

Q. I want to advertise my CPA firm on Linkedin, Twitter, and Facebook. What rules do I need to follow for my profile and newsfeed?

A. Texas accountancy firms may use websites such as Linkedin, Twitter, and Facebook, so long as they comply with all relevant rules and regulations.

Under Board Rule 501.82, "self-laudatory statements that are not based on verifiable facts" are not acceptable. Although the Board has the authority to recognize specializations in the practice of public accounting, it currently does not do so. See Section 901.157 of the Public Accountancy Act. Accordingly, a CPA should avoid the use of terms like "specialist" as it implies recognition by the Board. Additionally, under Board Rule 501.82(11), records of electronic communication to non-clients must be retained for at least 36 months.

A mutual decision to link to clients via Twitter, Linkedin, or Facebook does not violate client confidentiality rules. Although the identity of a client is not necessarily confidential information, any such confidentiality is expressly waived by the client when that client becomes your "friend" on a social networking site. However, the firm's online presence must not violate Board Rule 501.82(c) prohibiting unwanted solicitation of perspective clients.

Q. I am leaving my CPA firm. May I call my former clients and tell them that I am leaving? May I take some of their files with me when I go?

A. A CPA may contact clients and make them aware of the fact that she is leaving her firm (and providing them with contact information for after she leaves the firm). Board Rule 501.82(e) addresses communication with prospective and existing clients, and may be relevant. In some ways, the rules for communication with prospective and existing clients differ.

Absent an agreement between the CPA and her former firm, or between the client and the firm, the client and the work papers developed by the CPA for a firm's client belong to the firm.

CPA Rules of Professional Conduct Violations:

Q. I am a CPA facing a possible conflict of interest in my work. What should I do to protect my clients and myself?

A. Board Rule 501.73(b) states: "A conflict of interest may occur if a person performs a professional accounting service or professional accounting work for a client or employer and the person has a relationship with another person, entity, product, or service that could, in the person's professional judgment, be viewed by the client, employer, or other appropriate parties as impairing the person's objectivity. If the person believes that the professional accounting service or professional accounting work can be performed with objectivity, and the relationship is disclosed to and consent is obtained from such client, employer, or other appropriate parties, then this rule shall not operate to prohibit the performance of the professional accounting service or professional accounting work because of a conflict of interest." However, disclosure and consent will not suffice when the service requires independence. See Board Rule 501.73(c).

If you perform a service that requires independence, such as an audit or review, the Texas State Board of Public Accountancy recommends that you consult with the organization that promulgates the independence standards applicable to that type of work (be it the AICPA or the GAO) in order to obtain guidance specific to those standards.

Q. I am a CPA facing conviction for a felony, or a sentence of deferred prosecution or deferred adjudication. What will happen to my CPA license once I am convicted/sentenced?

A. Under Board Rule 501.90, a final felony conviction is a "discreditable act," which must be reported to the Board within 30 days (Board Rule 501.91(a)). See Board Rule 519.7 for a complete list of misdemeanor offenses that must be reported to the Board and may result in disciplinary action against a CPA. Deferred adjudication agreements concerning a felony, a crime of moral turpitude or crime involving fraud, dishonesty or abuse of alcohol or controlled substances must be reported to the Board.

Once the Board receives notice of the conviction or deferred adjudication, an investigation is opened and the matter is treated like any other complaint brought to the Board. More detail on this process can be found here.

Filing a Complaint:

Q. I have a problem with the person who does my bookkeeping/tax work. He isn't a CPA. Can the Texas State Board of Public Accountancy help?

A. The Texas State Board of Public Accountancy does not generally have jurisdiction over persons who are not licensed CPAs. The exception to this rule is that the Board is authorized to act against persons who practice public accountancy without licenses issued by the Board.

The Public Accountancy Act defines the practice of public accountancy as the performance for a client by a person who is certified, licensed, or registered by the Board (or a person who represents that he is licensed by the Board by using terms "accounting" or "auditing" or "accountant" or "certified public accountant,") of a service that involves the use of accounting, attesting, or auditing skills.

A person is engaged in the unauthorized practice of public accountancy in Texas if she does any of the following without a license from the Board: she offers services to the public as an "accountant" or a "CPA"; offers "accounting services" or "audit services" to the public; or performs an audit or other attest service.

If you have evidence that an individual is practicing public accountancy without a license from the Texas State Board of Accountancy, you are encouraged to contact the Board's investigator,Marissa Mahoney.

Q. How do I file a complaint with the Texas State Board of Public Accountancy?

A. Instructions and frequently asked questions on complaints can be found on the Board's website by clicking here.

Q. What if I have other questions?

A. If you have any further questions, please feel free to contact the Enforcement Division at:
     Enforcement Division
     Texas State Board of Public Accountancy
     333 Guadalupe, Tower 3, Suite 900
     Austin, Texas 78701-3900
     Phone: 512-305-7866
     Facsimile; 512-305-7854
     Email: enforcement@tsbpa.state.tx.us