The state's accountancy reform law raised the regulatory and ethical standards New York CPAs must meet by requiring nearly every New York-licensed CPA— regardless of whether they work in industry, government, academia, or a public CPA firm—to be registered and earn CPE.
Since the law went into effect in July 2009, CPAs have been working hard to ensure they are in compliance with it. The NYSSCPA has also been working hard to inform members about the new regulations and to consider changes to the Society's own educational programs, committee activities, and bylaws to better enhance our operations so that they conform with the law. One of these major initiatives has just been com-pleted—the revision of the NYSSCPA Code of Professional Conduct, which includes the guiding principles and ethical rules Society members swear to uphold when they join the Society. The State Board for Public Accountancy is similarly reviewing the state's unprofessional conduct rules as they apply to public accountancy to ensure that they reflect changes in state law.
One of the most significant changes to the code—and there are many—is that maintaining state registration is now an ethical requirement. This aligns with the new law requiring state registration for all New York CPAs using the professional skills and competencies of a CPA.
In order to ensure that the Society's code would fully apply to all CPAs, the Society formed a task force composed of members representing different sectors of the profession—industry, tax, government, education, and auditing. Task force Chair and former Society President Brian Caswell brought to the group his decades of experience drafting ethics standards along with his experience as an auditor. The task force's mission, according to the group's final report, was to “ensure that the code would comply with state law, and be relevant, responsive, and fair to all members of the profession from all sectors.”
Changes to the Code of Professional Conduct were made to the principles, definitions, and rules sections. The code's principles offer broad guidance on member responsibilities, while the rules are specific and enforceable. Several of the code's definitions were changed to align with New York law, and a few additional concepts were introduced to further modernize the code. The task force is not proposing any changes to the introduction, applicability, and interpretations sections of the code.
The revised code elaborates on the integrity, objectivity, due professional care, and competence required of all members. It emphasizes good behavior, not just technical compliance.
Here are just a few of the highlights of the revised NYSSCPA Code of Professional Conduct:
Fraud
The proposed code includes a new rule that would provide guidance for members when they suspect fraud at the workplace. The proposed rule states that a member should report any reasonably suspected illegal activity to the appropriate supervisor. Members are also encouraged to comply with any applicable whistleblowing policies. If the suspected fraud is not remedied, the member should resign from the engagement or position, though there is no requirement to do so.
Independence
Under the current code, independence is required of all members in public practice. Members in industry, academia, and other nonattest areas cannot, however, due to the nature of their positions, be independent from their employers, and the revised code recognizes this fact. Under the code's revised principles, they are exhorted to maintain objectivity, to scrupulously apply generally accepted accounting principles, and to be candid with outside auditors.
Integrity
The task force separated “integrity” and “objectivity”—currently grouped together as a single rule—and expanded upon both concepts. The proposed revision provides seven specific points on how a member providing accounting services within the expanded definition of public accountancy should maintain integrity, which continues to include “not subordinating his or her judgment to others.” The primary addition is a provision encouraging, but not requiring, members to comply with whistleblowing policies, regardless of client or employer confidentiality. The task force said in its report that it made this change to strengthen the CPA's role as financial watchdog.
Objectivity
The code also expands upon the requirement to maintain objectivity by avoiding conflicts of interest. A new clause would exhort all members to perform professional services with impartiality to the greatest extent possible. A conflict of interest occurs under the code when a member has a relationship that impairs objectivity or that a reasonable person with knowledge of the facts would view as impairing objectivity. When it's not possible to avoid a conflict of interest, the proposed rules state that the conflict should be disclosed and resolved though disclosure will not eliminate a conflict of interest with respect to attest services.
Professional Competence
Under the proposed rules, a member is required to possess the knowledge, professional skills, and competencies of a licensed CPA, as well as the technical qualifications—including proper registration and licensing by the appropriate state authority— to provide professional services. The code still stipulates that members should only undertake professional services for which they or their firms are qualified.
Due Professional Care
Proposed language in the rules states that members have an obligation to seek out and implement best practices, defined as generally agreed-upon procedures that may be promulgated by other professional organizations. The rule notes that care and skill are required, though not infallibility.
The revised Code of Professional Conduct was approved by the Society's Board of Directors in July. But before it can be adopted, it must be approved by two-thirds of all votes cast at a special meeting of the CPA membership on October 8 or by proxy/ballot.
Each Society CPA member will receive a special September issue of the Society's newspaper, The Trusted Professional, which will feature the deletions, insertions, and general formatting changes to the Society's code within context. This special issue will be accompanied by a proxy/ballot that will allow members to approve or reject the proposed revisions as a whole or reject them definition by definition and rule by rule. Even those CPA members who do not subscribe to The Trusted Professional will receive this issue so that they may vote on the revised Code of Professional Conduct. Only CPA Society members may vote on matters submitted to Society members. The proxy/ballots must be received via mail by October 1 in order for votes to be counted. Members may also vote in person during a special meeting at 10:00 a.m. on October 8 at the Society's offices, located at 3 Park Avenue, 19th Floor, New York, N.Y.
I encourage all Society members—most importantly, those in industry, academia, and government—to read the revised Code of Professional Conduct and participate in this important voting process. Remember, the NYSSCPA is your society. This is a great opportunity to actively participate in a process that will not only affect every NYSSCPA member for years to come, but also reminds every New York State CPA that a New York license comes with many benefits along with an important obligation— a requirement of high ethical standards on the part of the licensee. It's an obligation CPAs should be proud to meet.□