If a retiring CPA sells their practice based on a percentage of future fees, is that practice considered ethical?

Selling a CPA practice based on a percentage of future fees can be considered ethical under specific circumstances. The primary concern in the ethical guidelines for CPAs revolves around client consent and the protection of the client's best interests.

If the retiring CPA informs clients about the sale, and clients agree to the arrangement knowing that a percentage of their future fees will go to the selling CPA, it aligns with ethical standards. This transparency and the choice provided to clients ensures that there is no breach of trust. The CPA must also ensure that the practice maintains its integrity and continues to provide quality service to the clients even after the transition.

Moreover, the practice should be regulated in a manner that does not mislead clients about who is handling their affairs and how their fees are being structured. In such a scenario, the method of compensation tied to future fees can be a straightforward way to facilitate the succession of a practice while keeping clients informed and allowing them to make a choice. As ethics for CPAs center on transparency, consent, and professionalism, selling the practice under these guidelines is indeed ethical.