Ethics for Pennsylvania CPAs – 4 Hours

Pennsylvania asks for not less than four hours of professional ethics in every two-year licence period, within an eighty-hour continuing education requirement. This four-hour course is built to that requirement and covers the Pennsylvania Board of Accountancy regulations at Title 49, Chapter 11 of the Pennsylvania Code, together with the relevant sections of the CPA Law and the AICPA Code of Professional Conduct.

The rules on relations with clients and the public are covered section by section: independence, which Pennsylvania defines by reference to whichever recognised standard-setting body applies — the AICPA, PCAOB, SEC, GAO or Department of Labor; integrity and objectivity; competence; commissions and referral fees, including the requirement to report the receipt of commissions on the biennial renewal application, to hold any other licence a different regulator requires before receiving them, to make the statutory disclosure in an engagement or representation letter signed by the client, and to maintain workpapers documenting the client's investment needs, the strategies considered and the basis for the one recommended; contingent fees; incompatible occupations; auditing, technical and accounting standards; forecasts; confidential client information; records; acting through others; advertising, with the seven categories Pennsylvania treats as false or misleading; solicitation; form of practice; and business names, including the rule that a sole practitioner using “and company” or “and associates” must disclose sole-practitioner status in writing to a client before renewing an engagement and to a prospective client before entering one.

The course gives particular attention to competence to supervise attest services under section 11.23a. A licensee may not supervise attest work or sign an accountant's report for it unless they either have at least 400 hours of attest experience within the previous five years plus 24 hours of accounting, auditing or attest CPE in the preceding 24 months, or are a member of or employed by a Board-registered firm that has met the peer review requirement — and have maintained the education, experience and professional conduct applicable professional standards require.

Ownership and return of working papers is covered through both the regulation and Section 11 of the CPA Law: what remains the licensee's property, the four categories that must be furnished to a client or former client on request, the point at which fees due on completed engagements may be required before working papers are provided, the rule that client-provided records must be returned regardless of unpaid fees, and the seven-year retention period Pennsylvania imposes.

Continuing education is covered in full: the eighty-hour biennial requirement with its twenty-hour annual minimum, the seven subject areas and the minimums that attach to accounting and attest and to professional ethics, the sources of CPE hours and how each is credited, the sharply different treatment of interactive and noninteractive individual study, the forty-hour ceilings that apply to individual study, instruction and authorship, the reporting and documentation requirements including the seven items a certificate of completion must show, the five-year retention rule, and the disciplinary consequences of a CPE deficiency including the six-month make-up deadline and the suspension that follows missing it. Peer review is covered at sections 11.81 to 11.86, including the distinction between engagement and system reviews, the eighteen-month deadline for a new firm or a firm beginning attest work, the three statutory exemptions and what must be filed to claim each, administering organisations, reviewer qualifications, and confidentiality of peer review reports.

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 and the audit of Bernard Madoff Investment Securities anchor the discussion of public expectations. Three Pennsylvania case studies apply the rules directly: 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 an unpaid auditor holding client records who is also asked to vouch for the achievability of a forecast for the client's bank.

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 Pennsylvania Board of Accountancy rules.
3. Recognize the ethical standards contained in the AICPA Code of Professional Conduct.