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| Professional Ethics Resource Center Professional Ethics Introduction Frequency and Conduct of Meetings The Joint Ethics Enforcement Program (JEEP) CPE Requirements for NYS CPAs (Including Ethics CPE) Who to Contact with Independence and Ethics Inquiries
AICPA Exposure Drafts/ Standard Setting
One of the cornerstones of the profession of public accountancy is the high ethical standards of its members. Such standards are set forth in the Society’s Code of Professional Conduct (the “Code”). Code of Professional Conduct. While high standards are essential in achieving public trust and confidence, such trust can be maintained only if the public is confident that the profession can regulate itself and discipline those members who violate or ignore the Code. As the first state society established in the United States, the New York State Society of CPAs continues to play a leading role in the development and promotion of high ethical standards within the profession. The Society’s Bylaws state that the membership shall be bound by the Society’s Code; however, it is advisable for Society members who are also members of the AICPA to apprise themselves of the differences in the respective Codes of Professional Conduct and the applicable laws and related regulations of governmental agencies that regulate certified public accountants. The Code of Professional Conduct was adopted by the membership of the Society to provide guidance and rules to all members—those in public practice, in industry, in government, and in education—in performance of their professional responsibilities. Compliance with the Code of Professional Conduct, as with all standards, depends primarily on members’ understanding and voluntary actions, secondarily on reinforcement by peers and public opinion, and ultimately on disciplinary proceedings, when necessary, against members who fail to comply with the Rules. The best defense against ethics complaints or allegations of misconduct is prevention. Learn and apply the rules of ethical behavior. Be professionally competent, be diligent about CPE, and take advantage of the Society’s technical consultation service. See Who to Contact with Independence and Ethics Inquiries. The Professional Ethics Committee (the “Committee or PEC”) is a standing committee within the Operations Division of the Society created under Article XI of the Bylaws of the NYSSCPA. Its authority is defined in Article XII (Professional Conduct and Disciplinary Proceedings) of the Bylaws. The Bylaws prescribe certain duties, powers, responsibilities, and procedures to the Committee, which are described in this document. Top
of Page The Society, through its PEC, provides guidance to its members on ethical behavior and standards, and ensures members’ adherence thereto by investigating complaints and disciplining those who violate the Code. The Society is a participant in the Joint Ethics Enforcement Program (JEEP) of the American Institute of CPAs, (See Joint Ethics Enforcement Program (JEEP) Manual of Procedures). Under JEEP, discipline could include remedial action, admonishment, censure, suspension or expulsion from membership. See Explanation of Ethics Sanctions. Specifically, the duties and responsibilities of the Committee include, but are not limited to:
Investigations are divided into two categories: technical and behavioral.
The Committee is composed of volunteer members with experience in public accounting, industry and academia and also includes a public member (non-CPA from outside the profession) with full voting rights. [See Committee Roster on NYSSCPA Website, Professional Ethics Committee - Members. The Committee has one chair and two assistant chairs. The Chair generally carries a two year term. The role of the assistant chairs is to oversee the activities of active case investigations. The Committee chair may appoint a task force(s) or working group(s) to address specific issues, such as AICPA exposure drafts. The current five working groups are:
The Committee is also supported by three members of the NYSSCPA staff consisting of an Ethics Counsel, Quality Assurance Manager, and an Ethics Coordinator. See Who to Contact with Independence and Ethics Inquiries. Frequency and Conduct of Meetings The Committee meets during the months of January, March, May, June, September, and November, and conducts conference calls on months where no meetings are scheduled. Additional meetings may be called by the Chair, as may be necessary. All deliberations on active case investigations and other enforcement matters are held in executive sessions, which are closed to the public and non-PEC members due to confidentiality requirements. The purpose of the conference calls is to discuss the current status of particular cases and other matters of interest to the committee. The meeting dates and minutes of the open sessions are posted on the Society’s website. See meeting dates Professional Ethics Committee - Meetings. As a general rule, the Committee does not investigate complaints involving fee disputes. However, if it is determined that a fee dispute includes separate allegations of professional misconduct, the PEC would initiate an investigation of those allegations. The Joint Ethics Enforcement Program (“JEEP”) JEEP is an AICPA/State Society program for ethics enforcement that has existed since the early 1970s. See Joint Ethics Enforcement Program (JEEP) Manual of Procedures on AICPA website. The provisions of the codes of many state societies are identical with, or similar to, the provisions of the AICPA Code. Since it is not uncommon for a CPA to be a member of both the AICPA and one or more state societies, the AICPA established JEEP in order to eliminate duplicate investigations and enforcement of a potential disciplinary matter by both the AICPA Professional Ethics Division and the ethics committees of one or more state societies. The Committee participates in the JEEP program pursuant to an agreement between the Society and the AICPA. Whether or not a Society member is a member of the AICPA, the JEEP agreement provides that investigations of potential disciplinary matters are to be conducted in accordance with JEEP procedures, with limited exceptions. Under JEEP, the Committee will investigate a potential disciplinary matter involving the Society’s members unless: (a) the Committee requests the AICPA Professional Ethics Division to conduct the investigation and the Division agrees to do so; or (b) the complaint or information involves matters that, under JEEP, the AICPA Professional Ethics Division has the right to conduct the investigation. In all investigations, the Committee is bound by the NYSSCPA’s Bylaws and the Professional Ethics Committee Procedures Manual. The Professional Ethics Committee Procedures Manual provides that in the event that a hearing is required to dispose of charges, such hearing shall be conducted by AICPA’s Joint Trial Board under the operative “Rules of Procedure and Practice” of the Joint Trial Board. CPE Requirements for NYS CPAs (includes Ethics CPE) All New York State licensed CPAs who are engaged in the practice of public accountancy in New York are required to complete continuing professional education (CPE) requirements during every triennial registration period (except for the initial triennial registration period). New York State’s CPE requirements, including at least 4 credits of professional ethics course work, are explained as “Frequently Asked Questions” on the New York State Education Department’s website. See NYS Public Accountancy - Continuing Education. Who to Contact with Independence and Ethics Inquiries NYSSCPA staff is available by phone or e-mail to provide guidance. Contact Dolores Rodriguez at 212 719-8361, drodriguez@nysscpa.org, who will forward your inquiry on to the appropriate staff member for a response. The Society's staff can refer members to useful guidance in the professional literature to help members draw the appropriate conclusions. However, neither the Society’s Professional Ethics Committee nor staff will provide formal written opinions on these issues. The AICPA's ethics and independence hotline may also be consulted on ethics issues at 888-777-7077, menu option number 5 followed by menu option number 2, or via email at ethics@aicpa.org. In addition, if your question has New York regulatory implications, you should contact the New York State Board for Public Accountancy (http://www.op.nysed.gov/cpa.htm) at NY
State Education Department 518-474-3817,
ext. 160 (voice) What to Do If You are Being Investigated Members of the PEC are assigned cases to investigate. The case investigator sends an "opening letter" to the member who was identified in the complaint (the “respondent”). The respondent is required to respond in writing to interrogatories in the opening letter within the time period specified, usually 30 days. The respondent should review the rules of conduct that are alleged to have been violated. It is helpful to include any additional information that is relevant to the matter and any evidence to support the response. Failure to cooperate in an investigation is a violation of the Code that can result in a referral to the Joint Trial Board and possible expulsion from membership. The Society's ethics staff and the case investigator can be consulted for guidance. The Professional Ethics Committee Procedures Manual describes the procedures governing an investigation and members' rights. See Professional Ethics Committee Procedures Manual. Many rights are available to respondents under the Professional Ethics Committee Procedures Manual, such as the right:
The PEC will conduct an initial review of a complaint and, if actionable, a member of the PEC will be assigned to investigate the complaint in accordance with the Professional Ethics Committee Procedures Manual and the Joint Ethics Enforcement Program (JEEP) Manual of Procedures. All complaint letters are acknowledged. If an investigation will not be conducted, the complainant will be notified. The reasons for not investigating a complaint may be that the CPA is not a member; the allegations, if true, would not violate the Code; or the matter is already under investigation or has been previously investigated. The respondent is not told the identity of the complainant unless it is necessary in order for the respondent to defend against the allegations, such as in a records retention complaint. If the case investigator finds a violation of the Code, the investigator presents a case summary to a quorum of the PEC, with recommendations on findings and discipline. A majority vote of the Committee is required to find a member in violation of the Code or Bylaws and a separate vote is required on proposed discipline. Possible findings available to the PEC are “no further action” because no evidence of a violation was obtained or “no violation” based upon a finding of no prima facie evidence of a violation of the Code or Bylaws. The discipline imposed for a violation may include a confidential letter of required corrective action (RCA). An RCA is a non-publishable discipline (except for required referral to regulatory agencies under Bylaw Article XII.16 effective July 21, 2003) that usually involves successful completion of CPE, submitting subsequent reports and workpapers for review or submitting a pre-issuance review of reports by an outside party. Failure to comply with mandated corrective action can result in expulsion from the Society with publication. Investigations are conducted in a confidential manner; however, the Committee is required to publish certain disciplinary actions (expulsion, suspension, admonishment or censure) in a Society publication and a Society press release pursuant to Bylaw section XII.12. See Explanation of Ethics Sanctions. The Committee is also required to disclose its investigations to the New York State Education Department and any other regulatory agencies under Bylaw Article XII.16, upon occurrence of any specified events in an investigation.See Bylaws, Article XII.16 effective July 21, 2003, on NYSSCPA website. Complainants are notified of the Committee’s findings of no violation, or a finding of no further action. If disciplinary action is published in a Society publication, the complainant shall be notified of the results of the investigation. The PEC may also offer a publishable Settlement Agreement to expel, suspend, censure or admonish. Settlement Agreements require the approval of the Joint Trial Board of the AICPA, but may be rejected by the member. Upon rejection, the case will be referred to the Joint Trial Board for hearing and final decision. Lastly, if the PEC concludes that a violation is of sufficient gravity to warrant formal disciplinary action, it may refer the matter to the Joint Trial Board, who will summon the respondent to appear at a hearing. The PEC cannot appeal a “not guilty” decision of a hearing panel; however, the respondent has a right to appeal a “guilty” decision of a hearing panel. In August of 2005, the Professional Ethics Committee Procedures Manual was revised to provide members and the PEC with Alternative Procedures in cases where disciplinary action has been taken against a member by NYSSCPA approved agencies, such as the Securities and Exchange Commission, the Internal Revenue Service, the Public Company Accounting Oversight Board and the New York State Office of Professional Discipline.See Professional Ethics Committee Procedures Manual. The first option applies when a member consents to a sanction by an approved agency with no admission or denial of the charges. In such cases, the PEC may, at its discretion, offer the member a Settlement Agreement to consent to a specified sanction without an admission or denial of charges in lieu of an investigation. Second, if a member has been found guilty by an approved regulatory agency, the PEC has the discretion to offer the member the option to waive an investigation by the PEC and enter an admission of guilt to the charges. Members whose conviction of felonies, or conviction of filing false tax returns or failure to file tax returns becomes final, or whose licenses are revoked, are automatically expelled under the Bylaws and are not investigated by PEC. Such automatic actions are published in The Trusted Professional and in a Society press release. Pursuant to Bylaw XII.1-b, the Committee may investigate any member who was “…finally convicted of a criminal offense which tends to discredit the profession.” Explanation of Ethics Sanctions Expelled or Suspended The PEC can expel a member or suspend membership for a period of up to two years through a Settlement Agreement entered into with the member and approved by the Joint Trial Board. During the suspension period, members must not identify themselves as a Society member on any letterhead or other written material, and may not vote, or hold a committee position or an office in the Society. In addition, the PEC or a Trial Board panel may direct a member to complete specified CPE courses or take other actions (e.g. submit subsequent pre or post issuance reports and/or workpapers for continued monitoring) during the suspension period. According to Society Bylaws, a suspended member’s participation in any Society-sponsored insurance program may continue during the period of suspension provided the suspended member continues to pay the Society membership dues and the premiums for such insurance coverage. The member’s existing insurance coverage may not be increased during the suspension period. Subscriptions to the Society publications will continue during suspension provided the suspended member’s dues payments remain current. Pursuant to Society Bylaws, the PEC can automatically expel or suspend a member without a hearing as a result of the member’s conviction of i) a crime defined as a felony under the law of the convicting jurisdiction., ii) the willful failure to file any income tax return which they are required by law to file, iii) the filing of a false or fraudulent income tax return, or iv) the willful aiding in the preparation and presentation of a false and fraudulent income tax return of a client. The Society Bylaws also require that if any member’s CPA license is suspended or revoked by a political authority issuing said license, the suspension or revocation of the license shall automatically effect, respectively, the suspension (for the same length of time) or the expulsion of such member from the Society. Publication of expulsion and suspension is mandatory under Bylaw Article XII.12.The publication appears in The Trusted Professional and in a Society press release that is made available to the media. Admonishment or Censure The PEC can publicly admonish or censure a member who enters into a Settlement Agreement that includes discipline of admonishment or censure and is accepted by the Joint Trial Board. Publication of admonishment or censure is mandatory under Bylaw Article XII.12. The publication appears in The Trusted Professional and in a Society press release that is made available to the media. Required Corrective Action (RCA) The PEC issues letters of required corrective action when it concludes that remedial action is appropriate and the violation is not of sufficient gravity to warrant suspension, expulsion, admonishment or censure. The PEC may issue a letter of required corrective action that directs a member to comply with one or more of the following: up to 80 hours (or more) of specified CPE courses, submit subsequent reports and workpapers for post-issuance review, and/or submit to a pre-issuance review by an outside party of reports, financial statements, and workpapers on selected audit, review and compilation engagements. The PEC will not publish the terms of the letter of required corrective action; however, the member may reject the letter and the PEC would then decide whether to refer the matter to the Joint Trial Board or whether no further action would be taken. Subsequent Monitoring A letter of corrective action or a settlement agreement may include a requirement for a pre-issuance review, when in the judgment of the Committee, the results of an investigation warrant such a requirement. The imposition of a pre-issuance review requires the respondent to hire an outside party, at his or her own expense, acceptable to the Committee to perform a pre-issuance review of the reports, financial statements, and working papers on selected audit, review and compilation engagements, and permit the outside party to report quarterly to the Committee on the respondent’s progress in complying with professional standards. Non-Disciplinary Disposition of an Investigation No Violation Upon completion of an investigation and upon finding no prima facie evidence of a violation of the Code or applicable conditions of the Society Bylaws, the PEC shall issue a finding of no violation and shall send a no violation letter to the respondent closing the investigation. The PEC shall also inform the complainant when an investigation results in a finding of no violation. See Bylaws Article XII.12. No Further Action If the investigation reveals no evidence of a violation was obtained, the Committee shall issue a finding of no violation and send a no further action letter to the respondent. The PEC shall also inform the complainant when an investigation results in a finding of no further action. See Bylaws Article XII.12. Re-opening a Case The Committee may re-open any case that has been closed where it found no violation or no further action, if new information becomes available that warrants such action. In investigations by the PEC where the respondent is both a member of the AICPA and the Society, concurrence with the proposed letter of required corrective action or proposed settlement terms shall be obtained from the AICPA together with appropriate documentation. Similarly, in investigations of a Society member by the AICPA, the AICPA will seek concurrence from the PEC on any proposed letter of required corrective action or proposed settlement agreement. No concurrence is required for a finding of no violation or no further action. Also, no concurrence is required for any findings or sanctions by the Joint Trial Board. In any investigation where concurrence is not obtained from the AICPA on a Settlement Agreement, the PEC may decide to separately issue the Settlement Agreement with reference to the respondent being only a member of the NYSSCPA. |
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