January 2003

Task Force Considers Ethics Reporting Proposal
Society Could Share Information on Complaints with the State

By Simon Eskow

NEW YORK—A proposed amendment to the New York State Society of CPAs bylaws would allow the NYSSCPA Professional Ethics Committee to refer complaints against members to the New York State Education Department.

The Society’s Bylaws Task Force is considering the amendment, in which the PEC would refer a complaint after “corrective action” has been accepted, after it has been referred to the state’s Joint Trial Board, or after it has been settled with the PEC, among other circumstances.

“By giving information on disciplinary action to the education department we are stating that we expect our members to adhere to the highest standards of their profession,” PEC Chair Rona Cherno said. “We take complaints seriously and look to investigate them thoroughly. We feel that it is important to maintain a strong, positive working relationship with the SED…Other state societies currently work with their education departments in a manner which is now being proposed for New York.”

The proposed amendment would become a bylaw only after approval by the Society’s board of directors and by the membership at large.

The idea for the amendment arose last June when a member of the New York State Board for Public Accountancy suggested that the Society modify its bylaws to refer cases to the state for “investigation and possible prosecution.” The proposed amendment would likely increase the number of referrals to the state significantly while relieving the Society of the possible threat of litigation due to breaches of confidentiality. Current bylaws prevent the Society from sharing most information about Society disciplinary actions.

“If the bylaws were amended to require the state Society to refer complaints to the SED, the state Society would not be subject to possible member litigation,” board member Rick Isserman said, according to the minutes of the board’s June 24 meeting. “Mr. Isserman indicated that the board should ask the state Society and ultimately the AICPA (American Institute of CPAs) to revise their bylaws…(and) suggested that the motion be revised to request that the state Society’s bylaws be amended to require notification of the SED whenever a letter of corrective action is issued to a state Society member or a state Society action is deferred due to litigation.”

The PEC in September followed up on the request by passing a proposed bylaw amendment for consideration by the board of directors. Cases would be referred to the state after they have been deferred by the PEC, after a member under investigation fails to cooperate with the PEC, after they are referred to the Society’s Trial Board or the Joint Trial Board, after a settlement has been reached with the PEC, or after certain automatic actions have gone into effect.

Society President Jo Ann Golden subsequently submitted the proposed bylaw amendment to the Society’s Bylaws Task Force for review.

The Society’s current bylaws Article XII, section 12, provides very limited publication of disciplinary actions by the Society against a member. “The names of members who are disciplined by the Joint Trial Board or Society Trial Board and of those who are automatically disciplined by the Society shall be published together with a factual summary of the case in an appropriate publication of the Society which is mailed to all members,” the bylaws state.

The bylaws do not provide for any referral to the state of a disciplinary case against a Society member. The Society’s Professional Ethics Committee Procedure Manual provides in Section XIA that “all investigations and inquiries are handled in a confidential manner. The Society is authorized, through its bylaws, to give the general membership and the public notice of specific disciplinary actions taken against members. Automatic disciplinary actions (see Section V of this Manual) against members are also published.”

The documents considered confidential by the Society in Section XI (B) of the PEC Procedure Manual include: “complaints of professional misconduct” and “materials pertaining to investigations.”

Under the old system, according to Allen Fetterman, a former chairman of the PEC, the extent of the Society’s disciplinary power was to take away membership from CPAs, which generally did not impact a CPA very much.

“One of the things that always concerned (the PEC) is that the worst thing we can do is kick them out of the Society,” Fetterman said. “This (amendment) will put some teeth in what the Society can do to a member in violation of the codeof professional conduct.”

Fetterman said the bylaw would also help restore confidence in a profession whose reputation has been buffeted in a year of accounting and corporate responsibility scandals.

“It’s going to take a few years for our profession to come back to where we were before all this broke a year ago, and this is a good first step,” Fetterman said.