(a) As used in this section, “contingent fee” means a fee established for the performance of any service pursuant to an arrangement under which a fee will not be charged unless a specified finding or result is attained or under which the amount of the fee is otherwise dependent upon the finding or result of such service. “Contingent fee” does not mean a fee fixed by a court or other public authority or a fee related to any tax matter that is based upon the results of a judicial proceeding or the findings of a governmental agency.
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Terms Used In Tennessee Code 62-1-123

  • Board: means the state board of accountancy established under §. See Tennessee Code 62-1-103
  • Client: means a person or entity that agrees to receive any professional service from a licensee. See Tennessee Code 62-1-103
  • Dependent: A person dependent for support upon another.
  • Licensee: means the holder of a license. See Tennessee Code 62-1-103
  • Person: includes a corporation, firm, company or association. See Tennessee Code 1-3-105
  • Professional: means arising out of or related to the specialized knowledge or skills associated with CPAs. See Tennessee Code 62-1-103
  • State: means any state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands and Guam, except that "this state" means the state of Tennessee. See Tennessee Code 62-1-103
(b)

(1) A licensee shall not receive or agree to receive a contingent fee from a client for the following:

(A) Performance of any professional services for a client for whom the licensee or person associated with the licensee performs any of the following:

(i) An audit or review of a financial statement;
(ii) A compilation of a financial statement when the licensee expects, or reasonably might expect, that a third party will use the financial statement and the licensee’s compilation does not disclose a lack of independence; or
(iii) An examination of prospective financial information; or
(B) Preparation of an original tax return.
(2) This prohibition applies during the period in which the licensee is engaged to perform any of the services listed in subdivision (b)(1) and the period covered by any historical financial statements involved related to those services.
(c) Any licensee who accepts or agrees to accept a contingent fee shall disclose the terms of the contingent fee to the client in compliance with the requirements of this section.
(d) The board shall promulgate regulations specifying the terms of the disclosures required by subsection (c) and the manner in which the disclosures shall be made. The regulations shall comply with the following:

(1) The disclosure must be in writing and be clear and conspicuous;
(2) The disclosure must state the amount of the contingent fee or must state the basis on which the contingent fee will be computed; and
(3) The disclosure must be made at or prior to the time the licensee undertakes representation of or performance of the service upon which a contingent fee will be charged.
(e) Nothing in this section shall be construed to prohibit:

(1) Payments for the purchase of all, or a part, of an accounting practice;
(2) Retirement payments to persons formerly engaged in the practice of accountancy or payments to the heirs or estates of those persons; or
(3) Payments, including incentive or bonus payments, to employees or members of an accounting firm as compensation for their services.
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