Lesson: Contingent Fees

In this lesson, the concept of contingent fees is discussed, emphasizing the potential issues that may arise for a CPA in such situations. The negative impact of contingent fees on a CPA's independence and potential bias is highlighted, along with an example demonstrating the problem with contingent fees in audit services. However, the lesson also highlights an instance where contingent fees are permissible, specifically when seeking a private letter ruling from the IRS. This is explained through the rationale that when working on behalf of the client in disputing tax claims, an incentivized CPA may yield better results for the client. The lesson concludes by reiterating that contingent fees are not allowed for audit, review, or examination services, and that these services usually involve a set fee structure.