State Board Report

July 2011

Professional ethics issues currently being deliberated, the ongoing codification of existing ethics standards and what is meant by the public interest, standard setting for private companies, changes in the Uniform Accountancy Act and Model Rules were all topics presented at the 2011 Regional Meetings, held June 8-10 in Omaha, NE, and June 22-24 in Point Clear, AL. NASBA Chair Michael Daggett (AZ) told the meetings’ participants, “We need to hear from you to know we are representing you right. This meeting is not just for fun – but for you to give us feedback. We want to hear if you agree or disagree with the issues presented.” Documents from the meetings and videos of the presentations can be found here.

Ethics and Strategic Professional Issues Committee Chair Gaylen Hansen (CO) took the podium to explain what is being accomplished by the AICPA’s Code of Professional Conduct’s codification. He explained that each State Board has a version of the AICPA’s code, with some states adopting the entire code and others just parts. The current Code has been accumulated over a number of years and the intent of the AICPA’s codification efforts, a four-year project to be completed by the end of 2012, is to make the Code more user friendly, simpler and more intuitive but without changing its requirements and restrictions, a single source of all relevant guidance that is organized by topic. “In changing the geography, hopefully it will improve the final product,” Mr. Hansen said. Continuing convergence with international ethics standards is on the horizon, as the AICPA is a member of the International Federation of Accountants. In some areas the AICPA’s existing standards exceed those of the International Ethics Standards Board for Accountants’ and in others they are less rigorous. Currently the IESBA is working on a project balancing confidentiality with disclosure, another on inadvertent violations of ethical standards, and a third on conflicts of interest, Mr. Hansen, a member of the IESBA’s consultative group reported.

The AICPA’s Professional Ethics Executive Committee has created an outreach group to the State Boards, the State Board Advisory Group, to get the Boards’ feedback on the process. It includes Dan Sweetwood (NE), Edith Steele (OK), Kent Bailey (OR), Mark Crocker (TN), Rona Shor (NY) and Susan Harris (MS).

In response to a question about the AICPA sharing complaints against CPAs with the State Boards, AICPA Ethics Director Lisa Snyder said the Institute notifies the State Boards about any complaints the AICPA receives that result in their CPA’s admonishment, suspension or expulsion from the Institute. The AICPA does not report letters of corrective action to the Boards. A Board can request the AICPA’s investigative files, Ms. Snyder said. That information will be released once such a release is approved by the AICPA member.

Mr. Hansen called on PEEC Chairman Wes Williams to discuss network firm criteria, as described in the AICPA Code’s ET 101-17 which went into effect on July 1, 2011. “The fundamental rule is, if you are a network firm, you must be independent of clients of other network firms on audits and reviews. For other engagements, a threats and safeguards approach could be put in place, ” Mr. Williams explained. Firms could cooperate and be in an association, but to be considered “network firms” they would need to be independent and meet other criteria described in 101-17.

At the Eastern Regional meeting, NASBA Ethics Committee member Ray Johnson (OR) explained the difference between an “occupation” and a “profession” in large part is “the obligation to the public, that may transcend a contract with the client.” He asked the audience, “What is your firm’s balance between respecting the public interest and bringing in revenues?” He questioned if they were evenly balanced. NASBA Past Chair Atkinson said he regularly tells new CPAs: “Their responsibility is individual. Each has to ask himself or herself: Why am I doing this? Does it matter? Am I using the right resources? And is it right?”

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