Ethics for CPAs Why are we here? To meet Tennessee’s CPE requirements – more specifically, an hour of Tennessee Specific Ethics for CPAs!

Ethics for CPAs

• Why are we here?

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

What happens when we Google Ethics?

This Happens

Ethics and Productivity

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

More Definitions

Morals• 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.

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

• 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

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.

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

Definitions Provided by:

1 Wikipedia2 Ethics IIE V! N! (Fall 1987)

CPE Requirements

40 hrs

4 hrs

CPE Requirements Cont.

CPE Requirements Cont.

http://www.tncpa.org/cpe/SelfStudyExam.aspx

Tennessee Accountancy Act of 1998TCA §62-1-101 et seq

RULES OF DEPARTMENT OF COMMERCE AND INSURANCEDIVISION OF REGULATORY BOARDS

TENNESSEE STATE BOARD OF ACCOUNTANCY Chapters Title 0020-1...........................................Board of Accountancy, Licensing and Registration Requirements0020-2.............................................................................Educational and Experience Requirements0020-3.................................................................................................Rules of Professional Conduct0020-4.....................................................................................Disciplinary Action and Civil Penalties0020-5...............................................................................................................Continuing Education0020-6...............................................................................................................Peer Review Program

§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

HousekeepingChapter 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

0020-1-.08 Renewal of Licenses

• Licenses can be renewed on-line at the Board of Accountancy’s web site.

http://tennessee.gov/commerce/boards/tnsba/documents/2007renwalinstructions1_003.pdf -

Instructions

http://www.tennesseeanytime.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 Board’s 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.

See web site

Renewal Instructions

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.

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.

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

RULES OF PROFESSIONAL CONDUCT

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

0020-3-.03 Independence

Follow:

• AICPA

• SEC or

• GAO Yellow Book

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.

0020-3.05 Contingent Fees, Commissions and Other ConsiderationDo 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

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

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

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.

0020-3-.07 COMPETENCE

• Comply with the standards of governing bodies: AICPA, GAO

• Professional Competence

• Due Professional Care

• Planning and Supervision

• Sufficient Relevant Data

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.

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.

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 client’s books and records)

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!!!

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

0020-3-.14 Advertising and Solicitation

• Do not use false, misleading or deceptive advertising

• Can not coerce or harass people to use you!

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

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.

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.

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– ConcealmentAttendees have been provided a copy of the

Rules and TCA specific to Tennessee.

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 employee’s productivity.

By Pomeroy, Ann, HRMagazine, Sunday, July 1 2007

Concluding Thoughts• F&As Management’s Guide to Risk Management and

Internal Control has excellent questions for monitoring employees understanding of management’s philosophy.

• Has management’s philosophy been developed,

understood, and embraced by its personnel?

• Has a method to monitor or test the attributes of management’s philosophy been integrated into the entity’s culture? i.e. survey

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”.

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?

Resources on the Web!!• AICPA Code of Professional Conduct

http://www.aicpa.org/about/code/index.htm

• Tennessee Board of Accountancyhttp://tennessee.gov/commerce/boards/tnsba/

• Instructionshttp://tennessee.gov/commerce/boards/tnsba/documents/2007renwalinstructions1_003.pdf

• Renewalhttp://www.tennesseeanytime.org/cirens/