Ethics for California CPAs – 4 Hours

California asks more of its licensees than most states, and this course is built around what the Board actually enforces. It opens with the current statutory picture — including the removal of the Professional Ethics for CPAs examination requirement on 1 July 2024 and its replacement with a Board-approved Regulatory Review Course for a first licence renewal, the 2024 addition of Regulations sections 54.3 and 54.4 governing client notification when a practice is sold, transferred or discontinued, and the 2023 changes to experience certification and continuing education delivery methods.

It then looks at where licensees are actually getting caught. Of the 1,072 citations the California Board of Accountancy issued in fiscal 2023–2024, the three most common causes were failure to meet the 20/12 continuing education requirement, failure to respond to a Board inquiry within thirty days, and practice without a valid permit. The course explains the 20/12 rule in detail, including the calculation error that trips licensees up most often — measuring by calendar year rather than by each year of the two-year renewal period.

The California material is then worked through section by section. From Article 3.5 of the Accountancy Act: the use of individual and firm names, fees and commissions and the written disclosure they require, reports following compilation, review or audit, the twelve-month restriction on accepting employment with a publicly traded audit client, the reportable events a licensee must disclose to the Board within thirty days, the parallel duties on courts and professional liability insurers, and the prohibition on disclosing confidential client information. From Article 9 of the Board Regulations: client notification, firms with nonlicensee owners, the thirty-day duty to respond to a Board inquiry, discrimination, the definition and disclosure of confidential information, sale, transfer and discontinuance of a practice, commission disclosure requirements, incompatible occupations, restatement and investigation reporting, contingent fees, advertising, independence, fictitious names, retention of client records, working papers, and the identification, retention, assembly period and destruction policy for audit documentation.

Alongside the California rules, the course covers the AICPA Code of Professional Conduct across all three of its parts — members in public practice, members in business, and other members — including integrity and objectivity, preparing and reporting information, responding to noncompliance with laws and regulations, independence, the general standards and compliance with standards rules, accounting principles, acts discreditable, contingent fees, commissions and referral fees, advertising, confidential client information, form of organization and name, the obligation of a member to an employer's external accountant, and pressure to breach the rules.

The reasoning behind the rules gets equal weight. The course distinguishes morals from ethics and shows where the two diverge, using Prohibition and the Nike contract manufacturing controversy of the 1990s as cases where prevailing moral views pulled ethical standards above what the law required. It offers two practical tests — the Publicity Standard and the Person Looking Over Your Shoulder Standard — and sets out the conceptual framework of threats and safeguards for situations no rule addresses, together with the motivations that precede most ethical lapses: greed, self-interest, undue influence and familiarity.

Worked case studies run throughout, each analysed against the core foundations of independence, integrity, objectivity, public interest and due care: a controller whose president parks a loaded trailer in the lot on 31 December to make budget; a friend whose cash restaurant reports a loss and who says the figures are the ones he wants reported; a tax practitioner whose married clients are divorcing; year-end adjustments made with loan covenants in view; an audit engagement accepted without relevant experience; a company carrying excess reserves; and a company with contingencies neither disclosed nor recorded.

Learning objectives

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

1. Define ethics from an overall and a professional perspective.
2. Describe the ethical standards contained in the California Accountancy Act.
3. Describe the ethical standards contained in the California Board of Accountancy Regulations.
4. Describe the ethical standards contained in the AICPA Code of Professional Conduct.