CPA Ethics Practice Exam 2025 – Complete Prep Guide

The choice indicating that retirement payments are allowed aligns with the provisions of the California Accountancy Act. According to this act, CPAs are permitted to establish retirement arrangements and structured payments to retired partners or members of the firm as part of their compensation agreement. This practice is designed to ensure that CPAs can effectively plan for their retirement while maintaining compliance with the ethical standards set forth by the accounting profession.

Retirement annuities do not constitute a commission as long as they are part of a defined compensation structure agreed upon prior to the retirement. Moreover, these arrangements help to ensure that CPAs can provide financial security during retirement, supporting both personal well-being and the continuous operation of their practices without ethical violations.

In this context, the other options suggesting that such arrangements are forbidden or require specific conditions misinterpret the provisions of the California Accountancy Act. It's crucial to understand that retirement payments, when structured properly and documented according to ethical guidelines, can be a valid and accepted practice within the profession.