Zelada and Smith, CPAs, and their client, Harris Electrical, are discussing a possible advisory engagement in which the firm would review Harris’ accounts receivable system and recommend changes that would streamline the company’s collection process. Harris will pay Zelada and Smith a fee based on improved performance in accounts receivable collections.
Would this contingent fee arrangement raise any ethical concerns under the profession’s rules?
Yes, but only if Zelada and Smith was performing other services for Harris.
Yes, if Zelada and Smith also performed a review engagement for Harris.
No, but only if Harris is a publicly traded company subject to SEC and PCAOB rules.
No, provided Zelada and Smith documents the arrangement in the engagement letter.
The answer is Yes, if Zelada and Smith also performed a review engagement for Harris.