The Professional Ethics Task Force of the Michigan Association of CPAs recently received an inquiry regarding the payment of finders’ fees in obtaining an audit client. The Task Force was also asked what ethical issues would be raised if a finder’s fee agreement had provisions requiring the CPA to provide the finder all engagement letters or correspondence pertaining to the engagement or related fees, as well as all invoices.

The inventory involves the following provisions included in the AICPA/MACPA Code of Professional Conduct:

1. Rule 503 – Paragraph .01: Referral Fees
2. Interpretation 502-5. Ethics Section 502, Paragraph .06: Engagements Obtained through Efforts of Third Parties
3.  Rule 301, Paragraph .01: Confidential Client Information

Referral Fees
Under Code Section 503, “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 of payment to the client.”

Therefore, entering into a finder’s agreement in which the agreement’s terms are in accordance with the AICPA/MACPA Code of Professional Conduct would be permissible as long as the member discloses the arrangement with the client.

In addition, the agreement would be expected to meet all legal requirements. A member should seek legal counsel pertaining to any legal matters related to the code provisions discussed in this article.

Engagements Obtained Through Efforts of Third Parties
Members are permitted to obtain engagements through the efforts of third parties. According to Interpretation 502-5, “the member has the responsibility to ascertain that all promotional efforts are within the bounds of the Rules of Conduct. Such action is required because the member will receive the benefits of such efforts by third parties, and members must not do through others what they are prohibited from doing themselves by the Rules of Conduct.”

A third party engaged in a marketing campaign on behalf of a member is only permitted to do what the member can do.

Confidential Client Information
Under Rule 301, Confidential Client Information, “a member in public practice shall not disclose any confidential information without the specific consent of the client.”

Any finder’s fee agreement should not have a provision in it that could even inadvertently result in disclosing confidential client information. Potential problems include, but are not limited to, the following:

1. Providing engagement letters which may directly or indirectly include information about a client.
2. Providing invoices showing work performed may indicate problematic areas or company plans.

Any member having questions regarding finders’ fees pertaining to the rules and interpretation as discussed in this article is invited to contact the MACPA Professional Ethics Task Force at 248-267-3700.

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