Ethics for CPAs

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Ethics for CPAs

• Why are we here?

• To meet Tennessees CPE requirements more
  specifically, an hour of Tennessee Specific
  Ethics for CPAs!

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What happens when we Google Ethics?
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This Happens
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Ethics and Productivity
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A Few Definitions

• Ethics

• Denotes the theory of right action and the
  greater good (Ethical Standards Honesty,
  Compassion, and Loyalty).1

• The continuous effort of studying our own moral
  beliefs and our moral conduct, and striving to
  ensure that we, and the institutions we help to
  shape, live up to standards that are reasonable
  and solidly based.2

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More Definitions

• Morals

• Personal ethics signifies a moral code applicable
  to individuals, while social ethics means moral
  theory applied to groups

• Personal ethics signifies a moral code applicable
  to individuals. It indicates a person's
  comprehension of morality and the capacity to put
  it into practice, the ability to distinguish
  between right and wrong.

• Ethics is not limited to specific acts and
  defined moral codes, but encompasses the whole of
  moral ideals and behaviors, a person's philosophy
  of life1

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Ethics is not only a global concern. It
traversed history

• Socrates - posited that people will naturally do
  what is good, if they know what is right. Evil
  or bad actions are the result of ignorance. If a
  criminal were truly aware of the mental and
  spiritual consequences of his actions, he would
  neither commit nor even consider committing them
  (GUILT?) Any person who knows what is truly
  right will automatically do it, according to
  Socrates. While he equated knowledge with virtue,
  he similarly equated virtue with happiness. The
  truly wise man will know what is right, do what
  is good and therefore be happy.

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Still Another Definition

• Hedonism

• supported immediate gratification. "Eat, drink
  and be merry, for tomorrow we die." Even fleeting
  desires should be indulged, for fear the
  opportunity should be forever lost. There was
  little to no concern with the future, the present
  dominating in the pursuit for immediate pleasure.
  Cyrenaic hedonism encouraged the pursuit of
  enjoyment and indulgence without hesitation,
  believing pleasure to be the only good. (NO
  GUILT?) 1

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Definitions Provided by

• 1 Wikipedia
• 2 Ethics IIE V! N! (Fall 1987)

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CPE Requirements
40 hrs
4 hrs
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CPE Requirements Cont.
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CPE Requirements Cont.
http//www.tncpa.org/cpe/SelfStudyExam.aspx
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Tennessee Accountancy Act of 1998TCA 62-1-101
et seq

• RULES OF DEPARTMENT OF COMMERCE AND INSURANCE
• DIVISION OF REGULATORY BOARDS
• TENNESSEE STATE BOARD OF ACCOUNTANCY
•  
•  
• Chapters Title
• 0020-1...........................................B
  oard of Accountancy, Licensing and Registration
  Requirements
• 0020-2............................................
  .................................Educational and
  Experience Requirements
• 0020-3............................................
  ..................................................
  ...Rules of Professional Conduct
• 0020-4............................................
  .........................................Disciplin
  ary Action and Civil Penalties
• 0020-5............................................
  ..................................................
  .................Continuing Education
• 0020-6............................................
  ..................................................
  .................Peer Review Program
•  

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62-1-101.02 The Board of Accountancy

• 11 members are appointed by the governor
• 9 must be CPAs 3 from each grand divisions of the
  state
• 1 must be a licensed attorney
• 1 shall be a public member
• TSCPA provides a list of qualified CPAs from
  which the members are chosen
• Meet at least 4 times a year

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Housekeeping

• Chapter 0020-1

• 0020-1-.01 Definitions
• 0020-1-.02 Board Meetings
• 0020-1-.03 Board Officers
• 0020-1-.04 Fees
• 0020-1-.05 Applications
• 0020-1-.06 Examinations
• 0020-1-.07 Cheating
• 0020-1-.08 Renewal of
  Licenses
• 0020-1-.09 Denial of
  Certificate

• 0020-1-.10 Reinstatement of
  Revoked or Suspended
  Licenses
• 0020-1-.11 Application Renewal of CPA and
  PA Firm Permits
• 0020-1-.12 Notification of Firm
  Changes
• 0020-1-.13 Interstate Practice
• 0020-1-.14 International
  Reciprocity
• 0020-1-.15 Repealed

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0020-1-.08 Renewal of Licenses
See web site

• Licenses can be renewed on-line at the Board of
  Accountancys web site. http//tennessee.gov/comm
  erce/boards/tnsba/documents/2007renwalinstructions
  1_003.pdf - Instructionshttp//www.tennesseeanyt
  ime.org/cirens/ - renewal
• Need to provide satisfactory evidence that the
  continuing professional education requirements
  have been met T.C.A. 62-1-107(d) and Chapter
  0020-5 of the Boards rules 
• Additional evidence may be requested from
  licensees for continuing professional education
  requirements including continuing professional
  education audits (which require CPE course
  completion documentation)  
• Listings of CPE courses are not considered
  evidence for this rule.

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Renewal Instructions
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0020-1-.09 Denial of Certificate

• An applicant denied a certificate will be
  notified in writing by the Board of such denial
  and the reasons.
• The applicant may request an appearance before
  the Board to reconsider the denial at its next
  scheduled meeting.
• The request must be sent to the Executive
  Director within thirty (30) days of the date of
  the notice of denial.

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0020-1-.10 Reinstatement of Revoked or Suspended
Licenses

• If your license is revoked or suspended
  applicants must follow the Rules in section .10
  to request reinstatement.

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CHAPTER 0020-3RULES OF PROFESSIONAL CONDUCT

• 0020-3-.01 Definitions
• 0020-3-.02 Applicability
• 0020-3-.03 Independence
• 0020-3-.04 Integrity and Objectivity
• 0020-3-.05 Contingent Fees, Commissions and
  Other Consideration
• 0020-3-.06 Disclosures
• 0020-3-.07 Competence
• 0020-3-.08 Compliance with Standards

• 0020-3-.09 Accounting Principles
• 0020-3-.10 Confidential Client Information
• 0020-3-.11 Records
• 0020-3-.12 Discreditable Acts
• 0020-3-.13 Acting Through Others
• 0020-3-.14 Advertising and Other Forms of
  Solicitation
• 0020-3-.15 Firms
• 0020-3-.16 Notification to the Board
• 0020-3-.17 Retention of Records

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RULES OF PROFESSIONAL CONDUCT

• A licensee shall comply with the AICPA Code of
  Professional Conduct when these rules are silent
  on any matter.

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0020-3-.03 Independence

• Follow
• AICPA
• SEC or
• GAO Yellow Book

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0020-3-.04 Integrity and Objectivity

• In the performance of any professional service,
  a licensee shall maintain objectivity and
  integrity, shall be free of any undisclosed
  conflicts of interest, and shall not knowingly
  misrepresent facts or subordinate his or her
  judgment to others.

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0020-3.05 Contingent Fees, Commissions and Other
Consideration

• Do not pay any consideration or commission to
  obtain a client or for referral of a client to
  others if you perform for that client in any of
  the following

• Audit or review of a financial statement
• Compilation of a financial statement (for 3rd
  party use with no independence disclosure)
• An examination of prospective financial
  information

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0020-3.05 Contingent Fees, Commissions and Other
Consideration

• Do not pay any consideration or commission to
  obtain a client or for referral of a client to
  others if you perform for that client in any of
  the following

• If any consideration or commission is ever
  received for services or for referral of services
  disclosure must me made in compliance with T.C.A
  62-1-122 
• Never receive or agree to receive a contingent
  fee from a client for preparation of an original
  tax return. T.C.A 62-1-123

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0020-3.05 Contingent Fees, Commissions and Other
Consideration

• If payments of the aforementioned kind are
  received a form is provided by the Board that may
  be used to comply with disclosure requirements in
  section .06

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As a professional

• one should get paid for services rendered
• however, if the payment type might give the
  appearance of a conflict or give rise to an
  independence issue
• check with the board about disclosures.
• To quote and old cliché, it is better to be safe
  than sorry especially if you could lose your
  license.

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0020-3-.07 COMPETENCE

• Comply with the standards of governing bodies
  AICPA, GAO
• Professional Competence
• Due Professional Care
• Planning and Supervision
• Sufficient Relevant Data

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0020-3-.09 ACCOUNTING PRINCIPLES

• (1) A licensee shall not
•  
• (a) Express an opinion or state affirmatively
  that the financial statements or other financial
  data of any entity are presented in conformity
  with generally accepted accounting principles or
•  
• (b) State that he or she is not aware of any
  material modifications that should be made to
  such statements or data in order for them to be
  in conformity with generally accepted accounting
  principles if such statements or data contain any
  departure from an accounting principle
  promulgated by bodies designated by the AICPA to
  establish such principles, which departure has a
  material effect on the statements or data taken
  as a whole.

• Referenced TCA 62-1-111. Revocation, suspension
  or refusal to renew license Other penalties
  Hearings Procedure Costs.

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0020-3-.10 CONFIDENTIAL CLIENT INFORMATION.

• Do not disclose any confidential client
  information without the specific consent of the
  client.
• This does not  
• Relieve a licensee of his or her professional
  obligations
• Affect obligation to comply with subpoena or
  summons
• Prohibit review of professional practice
• Issuing a complaint with or responding to any
  investigative inquiry or disciplinary body
• Utilizing any such relevant information in the
  defense of a claim
• Restrict the exchange of information with a
  recognized investigative or disciplinary body.
• Recognized investigators, disciplinary bodies,
  and professional practice reviewers shall not use
  to their own advantage or disclose confidential
  client information that comes to their attention
  in carrying out their official responsibilities.

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0020-3-.11 RECORDS

• Furnish in a reasonable time
• Report or other documentation belonging to the
  client
• Accounting or other documents belonging to the
  client
• Working papers (if part of the clients books and
  records)

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0020-3-.12 DISCREDITABLE ACTS

• Reflects adversely on the profession.
•  
• If a CPA or candidate solicits, discloses, and/or
  uses information concerning the CPA exam, they
  will have committed an act discreditable to the
  profession. NO CHEATING!!!

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0020-3-.13 ACTING THROUGH OTHERS

• Can not permit others to carry out on your behalf
  any act that if you carried out would constitute
  a violation

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0020-3-.14 Advertising and Solicitation

• Do not use false, misleading or deceptive
  advertising
• Can not coerce or harass people to use you!

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0020-3-.15 FIRMS

• Must insure that firm name is not misleading
• Must be registered and approved by the board
• May be disproved by the board
• A CPA may practice under his/her own name or that
  of inactive or deceased partners who were CPAs. A
  partner surviving the death or withdrawal may
  continue to practice under the name for up to 2
  years after becoming a sole practitioner.
• A firm has 60 days to fix the name after a
  violation notification has been given

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0020-3-.16 Notification to the Board

• A CPA must notify the board IN WRITING within 30
  DAYS any change of
• Name
• Address
• Change of Employment
• respond in writing to any communication from the
  board within 30 days
• file a written answer to any complaint received
  by the board within 14 days.

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0020-3-.17 RETENTION OF RECORDS.

• A CPA shall maintain copies, or other obtainable
  facsimile records, or computer records, in
  whatever manner kept, of all work papers and work
  product used to render or support rendering
  public accounting services to a client for a
  period of five (5) years. The five (5) year
  period shall commence at the end of the fiscal
  period in which the engagement was conducted.
  Premature destruction of these records shall
  subject the licensee to disciplinary action.

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Disciplinary Action and Civil Penalties

• Board may assess penalties for violation of Law
• Impose fine from 0.00 to 1000.00 
• Grounds are set out in TCA 62-1-111 include
• Incompetence
• Dishonesty
• Concealment
• Attendees have been provided a copy of the Rules
  and TCA specific to Tennessee.

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Concluding Thoughts

• 73 percent of US workforce said they had
  witnessed unethical conduct
•  
• The unethical conduct contributed to an
  uninviting less productive workplace. Many
  workers were distracted by the conduct and told
  around 5 to 8 other people about the situation.
• It pays for a business to promote ethical
  behavior.
• Corporate ethics affects an employees
  productivity.
• By Pomeroy, Ann, HRMagazine, Sunday, July 1 2007

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Concluding Thoughts

• FAs Managements Guide to Risk Management and
  Internal Control has excellent questions for
  monitoring employees understanding of
  managements philosophy.
• Has managements philosophy been developed,
  understood, and embraced by its personnel?
• Has a method to monitor or test the attributes of
  managements philosophy been integrated into the
  entitys culture? i.e. survey 
•  

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Pilipino Government

• It states, there is a sense of hope and
  opportunity for us and the future generations.
  There is a growing sense of returning to the
  basics, to those time-honored values of quality
  and integrity and harnessing a community-based
  sense of ethics. There is a growing convergence
  of thought towards social responsibilities and
  commitment, of reaching beyond purely corporate
  and corporeal objectives. This awakening
  consciousness is nestled among more and more
  individuals, groups.

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• Is this true? in the United States? When law
  after law and rule after rule has to be passed to
  try and keep people and businesses ethical?
  Is it all talk and no action?

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Resources on the Web!!

• AICPA Code of Professional Conducthttp//www.aicp
  a.org/about/code/index.htm
• Tennessee Board of Accountancyhttp//tennessee.go
  v/commerce/boards/tnsba/
• Instructionshttp//tennessee.gov/commerce/boards/
  tnsba/documents/2007renwalinstructions1_003.pdf
• Renewalhttp//www.tennesseeanytime.org/cirens/