Senior Policy Committee to Steer Society’s Peer Review, Ethics Initiatives
Executive Committee Considers Ethics Enhancement

By Jay Dismukes

In anticipation of new legislation and regulations that may come down the pike, the Society is set to appoint a senior policy committee that will closely examine peer review and ethics, with the possibility that peer review eventually might become a membership requirement. At the same time, the Executive Committee has begun considering proposed bylaw changes recommended by the Professional Ethics Committee (PEC) that would amend the Society’s disciplinary proceedings.

The creation of the policy committee stems from the board of directors’ desire to have a structure in place that is ready to respond to any new standards that may get passed into law. Without taking any action before the legislature acts, the committee will “keep the momentum going” and would be equipped to immediately educate members about any changes to the law.

By making the first move, the Society also puts itself in a position to provide feedback to the State Education Department and legislature regarding peer review and ethics transparency.

Should the committee decide to recommend peer review as a mandatory requirement of NYSSCPA membership, the Executive Committee, meeting on May 13, recognized that the content of the reports might be of concern. The policy committee could be crucial to suggesting guidelines for posting peer review reports and enabling the Society to publish such reports voluntarily on its Web site.

Ethics Enhancement

Following discussion of the senior policy committee, PEC Chair Ian J. Benjamin updated the Executive Committee on his committee’s recommendations concerning the handling of ethics violations. The recommendations, he said, are based in part on the findings of a task force that examined how the Society manages its ethics process and how its rules coincide with the AICPA’s.

Among the recommendations, the Society’s bylaws would be changed to authorize discipline of a member without investigation in the event that the NYSS-CPA accepts the findings of a recognized body such as the Public Company Accounting Oversight Board. The member would have the option of appealing to the Joint Trial Board regarding any discipline imposed by the PEC.

“From a practical point of view, automatic discipline is expedient for the members and it means that they don’t have to show their documents all over again,” Benjamin said. Without automatic discipline, he added, the Society could find itself “with a lot of cases to investigate.”

Automatic discipline could even apply to cases where members settle with the government agency, without admitting any guilt. In that event, the PEC would determine the appropriate discipline, but it would be “assumed that the individual committed a violation.” The PEC would not be required to “match” the sanction of the government agency. The AICPA has adopted a similar provision.

Currently, the Society employs automatic discipline in two situations. First, if an issuing authority revokes or suspends a CPA’s license, the Society does the same to that CPA’s membership. Second, the NYSSCPA automatically expels members without a hearing if they are convicted of a felony or a specific income tax crime.

Should the bylaw be passed, Executive Committee members said the term “automatic discipline” would need modification to reflect the PEC’s true mission of providing guidance to members on ethical behavior and standards, and disciplining those who violate or ignore the rules.

The PEC also recommends changing the bylaws to include public admonishment of a member as a tool that the committee could utilize as part of a settlement agreement. The PEC’s admonishment would be published in The CPA Journal, The Trusted Professional and the Society’s Web site, and as a press release. The AICPA Council recently authorized its Professional Ethics Executive Committee to employ a public admonishment penalty.

The third recommendation on transparency allows for notification to a complainant that an investigation has been completed, even if the PEC did not find a violation. The notification would include the same information that the Society publishes concerning the discipline imposed. The AICPA now discloses the results of an investigation to a complainant.

The final recommendation calls for the Society’s encouragement of the AICPA to adopt a bylaw that would reflect the one implemented by the Society last year, which provides for reporting of discipline cases to applicable regulatory authorities, such as state boards of accountancy.

The Executive Committee decided to send the recommendations back to the PEC for further clarification on specific issues.