Ethics for North Carolina CPAs – 1 Hours

North Carolina asks for at least 50 minutes of regulatory or behavioural professional ethics every year, and requires that it be offered by a CPE sponsor registered with NASBA. This one-hour course is built to that requirement and covers Subchapter 08N of Title 21 of the North Carolina Administrative Code — the Rules of Professional Ethics and Conduct — as adopted by the North Carolina State Board of CPA Examiners.

What distinguishes this course is that it teaches the rules through real North Carolina disciplinary actions. Eight worked examples run alongside the rules, each showing which provisions the Board actually charged: a firm that fell behind on its own payroll tax remittances; a CPA found liable for breach of fiduciary duty and fraud, then held in contempt; a licensee who certified 40 CPE hours she could not substantiate on audit and then stopped responding; a CPA who issued Forms 1099 the IRS disregarded as fictitious; a firm whose peer review was downgraded from pass-with-deficiencies to fail; a practitioner who neither completed returns nor returned records; and a firm that took a contingent consulting fee from an audit client.

The rules are covered in the four sections the Code uses. Section .0100 sets out scope and the responsibility a CPA and firm carry for compliance by partners, employees, agents and anyone they supervise. Section .0200 applies to all CPAs whether or not in public practice: integrity; the eleven categories of prohibited deceptive conduct, including misreporting CPE and implying abilities not supported by attainment; the seven categories of discreditable conduct, including entering a settlement that purports to keep its contents confidential from the Board; discipline by other federal and state authorities and the thirty-day notice that follows; confidentiality and its eight exceptions; cooperation with a Board inquiry, which requires a response within 21 days; violation of tax laws; the reporting obligations at .0208 covering criminal convictions, civil judgments and settlements, written releases from liability, IRS criminal investigations and tax liens — each within thirty days; accounting principles; responsibilities in tax practice, where Circular 230 prevails over the Statements on Standards for Tax Services in any conflict; competence; and outsourcing to third-party service providers, which requires written disclosure to the client in advance and leaves the CPA responsible for the provider's compliance with the whole Subchapter.

Section .0300 applies to CPAs using the CPA title with clients: professional judgment and the prohibition on subordinating it to non-CPAs; forms of practice, the 51 per cent CPA ownership requirement and the local supervision every North Carolina office must have; objectivity and conflicts of interest, including commissions, contingent fees, and the requirement to disclose any commission, referral or contingent fee in a written statement within ten business days; consulting, valuation and personal financial planning services standards; retention of client records, covering what must be returned, what may be withheld for unpaid fees, what remains the CPA's property, and the 45-day deadline for complying with a request; advertising, including the requirement to use the exact registered firm name on letterhead, contracts, engagement letters, tax returns and reports, and the four items that must appear when offering services over the internet — including the North Carolina certificate number; and CPA firm names.

Section .0400 applies to attest services: public reliance, independence with North Carolina's own definition of a covered person and its specific 10 per cent and 5 per cent ownership thresholds, and the auditing, accounting and review, governmental, attestation, peer review, government auditing, international, Single Audit and forensic services standards.

Five case studies close the course: a fee quoted as the greater of a fixed amount or a percentage of a tax refund; a CPA with no audit experience proposing to trade as Audit Experts and Associates; an unpaid auditor holding client-provided records; an audit client asking for a smaller bad debt adjustment to clear a loan covenant; and a CPA who has resigned a difficult client and then receives a Board letter.

Learning objectives

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

1. Define ethics from an overall and professional perspective.
2. Describe the rules of professional ethics and conduct contained in the North Carolina Administrative Code, Title 21, Subchapter 08N.