Ethics for Maryland CPAs – 4 Hours

Maryland asks for four hours of ethics every two years, and this four-hour course is built to that requirement. It covers the Maryland Board of Public Accountancy Code of Professional Conduct at Code of Maryland Regulations 09.24.01.06 in detail, together with the definitions at 09.24.01.01 that determine how those rules apply, and the AICPA Code of Professional Conduct.

The Maryland rules are covered section by section. Independence comes first, with the circumstances Maryland 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, loans to or from the client or its officers, directors or principal stockholders with the narrow exceptions for ordinary bank lending, connection with the client as promoter, underwriter, voting trustee, director or officer, service as trustee of a pension or profit-sharing trust, and receipt of other compensation from a third party with respect to products or services the client procures.

That last item deserves attention, because Maryland handles it in two places at once. The other compensation rule requires a licensee to disclose in writing, no later than the recommendation or referral, the nature, source and amount of any other compensation where the recipient is a client, or the nature and source alone where they are not — regardless of amount. But complying with that disclosure is expressly stated not to be a defence to a charge of impaired independence, so other compensation connected to an engagement requiring an opinion remains prohibited outright. The separate commissions rule prohibits paying a commission to a third party to obtain a client unless the fact and amount are disclosed to the client in writing before engagement.

The course also covers misrepresentation and subordination of judgment, contingent fees and Maryland's own definition of them, the prohibition on concurrently engaging in an occupation that impairs independence or objectivity, competence and technical standards, and responsibilities to clients — including confidentiality and its four exceptions, and the four categories of document a licensee must furnish on request. Other responsibilities and practices covers acts reflecting adversely on fitness to practise, acting through others, permitted forms of practice, misleading firm names and the restriction on terms such as Group, and Company and and Associates, the thirty-day deadline for responding to a written Board communication, advertising and solicitation with the six categories Maryland treats as false or misleading, and the four items a licensee or firm must display when offering services on a website — including the Maryland license or permit number, labelled as such. The requirement to disclose any felony conviction, misdemeanour conviction or government sanction to the Board in writing within thirty days closes the Maryland material, and applies whether or not an appeal is pending.

Alongside the Maryland rules, the course covers the AICPA Code 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, 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, the conceptual framework of threats and safeguards worked through with illustrations of each threat category, 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 what the public expects of a CPA. Maryland 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 Associates; and an unpaid auditor holding client-provided records.

Learning objectives

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

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