State Board Audit Finds 50% of CPAs Noncompliant with Ethics CPE Requirement

By:
Ruth Singleton
Published Date:
Feb 21, 2017
FAE Conference
A recent New York State Board for Public Accountancy audit of state-licensed CPAs’ continuing professional education (CPE) compliance in 2016 revealed that only 50 percent of New York-licensed CPAs had fulfilled the state’s professional ethics CPE requirement.

“That’s a systemic issue, and I feel that we as a board should have a discussion about it and what do we do about that,” said Jennifer Winters, executive secretary of the New York State Board for Public Accountancy, at the board’s Jan. 18 meeting.

In New York, state regulations require CPAs to take a four-hour professional ethics course within their triennial registration period in order to maintain their licenses.  The four-hour course may be counted toward a CPA’s annual CPE requirement, which must consist of 24 credit hours in a concentrated area of study or 40 credit hours in general study.

CPAs reported different excuses for their lack of compliance, Winters said, all of which board Vice Chair Robert Kawa described as “pretty weak.”

Some believed the time frame in which they had to complete the requirement was based on a registration year and not a calendar year; others took courses not approved by the education department either because the sponsor was not approved to teach ethics, because the courses were from out of state, or—“one of the biggest reasons,” Winters said—“because they took a behavioral ethics course.”

The state board’s Education Committee chair, Priscilla “Penny” Z. Wightman, noted that behavioral ethics courses are “less practice-specific than what we allow now.”  These are classes that focus on how people may react to ethical dilemmas, as opposed to the specifics of professional ethics. “Any thoughts on that?” she asked.

State board member Catherine R. Allen, who said she taught the professional ethics course for the Foundation for Accounting Education in 2009, questioned the efficacy of the ethics course content at the time. 

“I remember time and again people just looking at me like I had two heads,” she said. “It’s just a rote rehashing of what the rules are again and again.”

The state has since revised the course's content and guidelines, however Allen said the state board needs to ask itself, “What are we trying to achieve to ensure that New York CPAs understand the regulations, laws and professional standards of ethics that apply to them?”

Wightman noted that some state accounting boards have addressed their ethics requirement with an online test, and that the State Education Department has allowed that option in other professions, such as engineering.

“I’m coming to the table to really hear comments from state board members on how the Education Committee should proceed,” she said.

State board member Kevin D. Bandoian voiced his support for allowing behavioral ethics to satisfy the requirement, for pragmatic reasons. He said the board should broaden the options for people, not narrow them. He also suggested that the board should allow out-of- state courses to satisfy the requirement. “It’s a national profession. We should allow out-of- state courses. We should allow online courses.”

He referred to the New York State Board of Professional Engineering and Land Surveying, which offers an online self-study course for its licensed professionals. “If our engineers are offering it, than we should. ... We have to broaden options. We’re a very large profession with a lot of resources, and we should have all options available to our people.”

Kawa expressed concern about the board developing its own online course. “If we develop a course, would we become a CPE provider? ... I don’t know if we should be in that business. ... I do agree we should look at other providers who offer ethics courses,” he said.

Wightman reported that the board’s Education Committee is considering alternatives to the lengthy application process for ethics CPE sponsors. That would enable more of them to offer approved ethics courses.

As for the ramifications for the 50 percent of CPAs who are not in compliance, Winters said that her office tells the noncompliant CPAs that they are deficient and that they need to take an approved ethics course.

“If they cooperate with us, then we just close out their case,” she said. “There’s no  fine.”

Only the most egregious cases are referred to the Office of Professional Discipline (OPD), Winters said, giving, as an example, a CPA who didn’t take CPE for six years.

“We try to work with the licensee  first,” she said. “It’s the best course of action for us and for them. In reality, we don’t want to send every case to OPD.”

That’s in contrast to other state boards, which do impose  fines for noncompliance with CPE and make a lot of money off  them, she said.

Winters announced that the board will propose recommendations to address the compliance deficiencies at its April or July meeting.
 

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