Ethics for Nebraska CPAs – 4 Hours

Nebraska asks for four hours of ethics in every two-year renewal period, and this four-hour course is built to that requirement. It covers the Rules of the Nebraska Board of Public Accountancy at Title 288, Chapter 5 — the Rules of Professional Conduct — together with Chapter 11 on public accounting partnerships and professional corporations and Chapter 13 on peer review, alongside the AICPA Code of Professional Conduct.

The Nebraska rules are covered rule by rule. Independence comes first, with the circumstances the Board treats as impairing it: direct or material indirect financial interests, service as trustee of a trust or personal representative of an estate holding such an interest, joint closely held business investments material to either party, loans to or from the enterprise or its officers, directors or principal stockholders with the narrow exceptions for ordinary bank lending, connection with the enterprise as promoter, underwriter, voting trustee, director or officer, and service as trustee of a pension or profit-sharing trust. Integrity and objectivity follow, including the prohibition on subordinating judgment to others.

Competence and technical standards cover the rule that a licensee may undertake only engagements they or someone in the firm is qualified by experience or education to handle, together with auditing standards, accounting principles, other professional standards, and the rule that a licensee may not permit their name to be used with a forecast in a manner suggesting they vouch for its achievability.

Responsibility to clients is where Nebraska is most specific. Confidential client information is covered with its four exceptions. On records, the rule states that a licensee shall furnish the client's tax returns, reports, records obtained from or on behalf of the client, and working papers constituting part of the client's books — regardless of unpaid fees outstanding — though the licensee may retain copies and charge reasonable expenses for furnishing them. Contingent fees carry an unusual procedural requirement: any licensee accepting or expecting a contingent fee must give written disclosure of the fee and the basis for determining it, on the Board's own prescribed form, executed in duplicate with a signed and dated client acknowledgement, retained for five years and subject to random Board audit. The same written disclosure regime applies to commissions and referral fees.

Advertising and solicitation covers the six categories Nebraska treats as false, fraudulent, misleading, deceptive or unfair, and the separate prohibition on communications accomplished by coercion, duress, compulsion, intimidation, threats or harassing conduct. Other responsibilities and practices covers acts discreditable, permitted forms of practice, misleading firm names including the conditions attached to “& Associates”, “& Company” and “Group”, the two-year window a surviving sole permit holder has, professional corporations and the requirement that the principal executive officer be a licensed CPA shareholder and director, the thirty-day deadline for responding to Board communications, and the thirty-day duty to notify the Board of any change of address or employment.

Chapter 11 covers non-licensee ownership, including the forty-nine per cent ceiling on equity, voting rights, profits and headcount, the restriction on how a non-CPA owner may describe themselves, the sixty-day divestment order that follows a determination of ineligibility, parent company ownership, and employee stock ownership plans. Chapter 13 covers peer review — enrolment for any practice unit performing attest engagements or compilations, the three-year-and-six-month cycle, PCAOB-inspected firms, the exemption for practice units performing only SSARS preparation engagements, and the thirty-day deadline for submitting peer review documents to the Board.

The AICPA Code is then covered across all three of its parts — members in public practice, members in business, and other members — including the conceptual framework of threats and safeguards with worked illustrations of each threat category, integrity and objectivity, preparing and reporting information, responding to noncompliance with laws and regulations, independence, the general standards, compliance with standards and accounting principles rules, acts discreditable, contingent fees, commissions and referral fees, advertising, confidential client information, and form of organization and name.

The reasoning behind the rules gets equal weight, with the Publicity Standard and the Person Looking Over Your Shoulder Standard offered as practical tests and the motivations that precede most ethical lapses examined. Arthur Andersen at Enron, the audit of Bernard Madoff Investment Securities, and Phar-Mor anchor the discussion of public expectations. Six Nebraska case studies apply the rules directly: a firm that issued a review report while one of its partners served as executor of an estate holding shares in the client; an audit client asking for a smaller bad debt adjustment to clear a loan covenant; a tax practitioner with no audit experience considering audit work; an unpaid auditor holding client records; a fee quoted as the greater of a fixed amount or a percentage of a tax refund; and a practitioner who performed one compilation as a favour.

Learning objectives

Upon completion of this course, participants will be able to:

1. Recognize ethics from an overall and professional perspective.
2. Recognize the ethical standards contained in the Nebraska Board of Public Accountancy rules and regulations.
3. Recognize the ethical standards contained in the AICPA Code of Professional Conduct.