Ethics: Protectecting the Integrity of the Florida CPA

Report
Ethics for Governmental
CPAs in Florida
2012
1
Today’s Discussion Leader is
William Blend, CPA, CFE
Moore Stephens Lovelace, PA
1201 S. Orlando Av, Suite 400
Orlando, FL 32789
(407) 740-5400
[email protected]
2
For More Information
FICPA Member Service Center:
(800) 342-3197 (in Florida) or (850) 224-2727
www.ficpa.org/ethics
Sponsor Codes
Ethics Sponsor ID (FBOA): 3461
QAS Sponsor ID: 014
DBPR live presentation ID: 4980
3
Schedule
100 Minutes
100 Minutes
Break
Course Begins
Course Ends
4
Housekeeping Details





Course evaluations
Confirmation of attendance
DBPR and BOA course ID numbers
Type of credit – Ethics (ETH)
Participants’ request
• Enter/leave quietly
• Quiet cell phones

Other matters
5
Chapter 1
Objectives, Background and
Overview
Learning Objectives …
p. 1-1
6
Why are we
here?
p. 1-1
7
Overview of the Ethics
Requirement






80 hours over a two-year reporting
period
20 hours of Accounting and Auditing
20 hours of Behavioral – maximum
4 hours of Ethics
No limitation or requirement for
Technical Business
Ethics course content replaces need for
Laws and Rules exam
p. 1-2
8
Yellow Book CPE Requirements




80 hours over a two-year reporting
period, essentially, 80 hours of A&A
CPE to “directly enhance the auditor’s
professional proficiency”
24 hours directly related to
governmental topics
20 out of the 80 hours to be completed
in any one year
p. 1-2
9
Which Ethics Policies to Follow?





Local – organization?
State – rules and regulations?
National – AICPA, Yellow Book?
They may contradict.
Are you responsible to follow more
than one?
p. 1-4
10
Major Course Topics






Relationship of Florida laws and rules to
national standards
Florida Statutes, Chapters 455, 473,
112 and 119
Florida Administrative Code, Chapter
61H1
Governmental Auditing Standards
Independence in Florida
Ethical responsibilities of CPAs
p. 1-4
11
What are Ethics?
The discipline
dealing with
what is good
and bad with
moral duty and
obligation.
p. 1-6
12
Key Definitions - Ethics




A set of moral principles or values
A theory or system of moral values
The principles of conduct governing an
individual or a group
A guiding philosophy
p. 1-6
13
Ethical Behavior Defined
“The term, ethical behavior, refers to how an
organization ensures that all its decisions,
actions, and stakeholder interactions conform to
the organization’s moral and professional
principles. These principles should support all
applicable laws and regulations and are the
foundation for the organization’s culture and
values. They define ‘right’ from ‘wrong’
behavior.”
.
p. 1-6
-- National Malcolm Baldridge
Quality Award
14
Ethics As a System
Key expressions include:
1. What ought a person to do?
2. What ought a person to not do?
3. What attitudes are viewed as good?
4. What behaviors are viewed as
good?
5. Why are they viewed as good?
p. 1-7
15
Ethics As a System



Ethics has traditionally been a subset of
philosophy.
Psychology can only tell us what the
average person does and what may
result if averages hold.
Does psychology lack any authority of
what human behavior ought to be?
p. 1-7
16
Ethics and Psychology

Behavioral sciences include:
• Psychology
• Sociology
• Cultural Anthropology
p. 1-7
17
Ethics and Religion



Religion has a concern with moral
conduct influencing normal behavior
Religions may have different sets of
ethical values depending on the
religion
Ethics is often a common ground for
different religions
p. 1-8
18
Teaching of Ethics

Can one teach someone to be
ethical?
• No, it is either in one’s self or it is not.

Can one teach someone what is
ethical behavior?
• Yes, it is a system of values or
principles for actions.
p. 1-8
19
CPAs in Crisis
(wei-ji)
Crossroads of danger and
opportunity
p. 1-8
20
Past Studies
The bedrock values of the CPA profession:
 Committed to the rules of the accounting
profession
 Being reliable
 Consistently demonstrated integrity and
ethical behavior
 AICPA 2005 study – CPAs ranked higher
than many other professionals
p. 1-9
21
Ethics and the CPA Profession



Ethics begins with the individual
Organizational ethics are guided by
individual ethics
CPA reputation has been based on core
values for over 100 years
• Honesty
• Integrity
• Trustworthiness
p. 1-9
22
Responding to a Crisis


The ethics requirements in the CPA
profession in Florida (and maybe
everywhere) most likely come as a
response to a crisis.
The responses have been at many
levels:
• Regulatory
• Educational
• Personal
p. 1-10
23
Ethics and the CPA Profession



Some mutual fund companies in illegal
trading practices
Prominent pharmaceutical companies
engaging in ethical violations and coverups
Professional and Olympic athletes using
performance enhancers
p. 1-10
24
Ethics and the CPA Profession



Politicians in blatant ethical violations
and shady conduct
Newspaper and news broadcast
companies in fabrication, plagiarism,
and falsification
Sexual misconduct of religious leaders
p. 1-10
25
Ethics and the CPA Profession




Internet spammers, virus creators,
hackers, moral indecency
Illegal downloading of music and files
Shoplifting in the form of copyright
infringement
Accounting wrongdoing
p. 1-10
26
Governmental Ethics
in the News
What ethics news regarding
governmental agencies has
made headlines in your
area?
p. 1-10
27
Changes have Created a
Crossroads of the Profession


Increased emphasis on ethics at state
and national levels
Changes in our profession
• Ownership
• Solicitation
• Commissions
• Sale of financial products
• Competitive bidding
p. 1-10
28
Who Regulates Ethics?







FL BOA
AICPA
SEC
PCAOB
Yellow Book and OMB
State regulatory agencies
IRS
p. 1-11
29
AICPA Code of
Professional Conduct
.02 The Principles of the Code of
Professional Conduct of the American
Institute of Certified Public Accountants
express the profession’s recognition of its
responsibilities to the public, to clients,
and to colleagues. They guide members in
the performance of their professional
responsibilities and express the basic
tenets of ethical and professional conduct.
The Principles call for an unswerving
commitment to honorable behavior, even
at the sacrifice of personal advantage.
p. 1-11
30
General Questions
and Answers
AICPA Code of
Professional Conduct
www.aicpa.org
p. 1-11
31
General Questions
1. Whom does the Code of Professional
Conduct govern?
2. Can the AICPA revoke my license due
to a disciplinary matter?
3. Does the AICPA contact other state
CPA societies and regulatory agencies
having disciplinary responsibilities?
p. 1-11
32
General Questions
4. Do other state CPA societies and
federal and/or state regulatory
agencies refer matters to the AICPA?
5. Am I subject to the same rules of the
Code if I practice public accounting or
work in business and industry?
p. 1-12
33
General Questions
6. What enables the AICPA the power to
enforce the Code of Professional
Conduct?
7. How could I have a conflict of interest
when I am no longer working in public
accounting?
8. What are the ramifications if I am
found in violation of the Code?
p. 1-13
34
Background of Florida’s
Ethics Requirement




Florida became the 37th state to
establish an ethics requirement
All 50 states have this requirement
Outlined by Florida Board of
Accountancy (see 61H1-33.003)
FICPA’s support is in line with national
support
p. 1-13
35
Ethics Decision Tree
For Government
p. 1-14
36
For More Information



Florida Board of Accountancy
http://www.myfloridalicense.com/dbpr/cpa
Florida Institute of CPAs
http://www.ficpa.org/ethics
American Institute of CPAs
http://aicpa.org
Financial Accounting Standards
Board http://www.fasb.org
Appendix B
37
State of Florida
Office of the
Governor
Executive Order
Number
11-03
p. 1-18
38
Chapter 2
Ethical Beliefs and Behavior
in US Businesses &
Government Agencies
Learning Objectives …
p. 2-1
39
The Ethics Resource Center


ERC was founded in 1922
America’s oldest non profit organization
devoted to the advancement of high ethical
standards and practices in public and private
institutions.

ERC has been a resource for public and
private institutions committed to a strong
ethical culture for 90 years.

Visit www.ethics.org
p. 2-1
40
National Business Survey

Survey of businesses conducted by ERC in
2011; government survey in 2007

7th in a series of surveys

Polled over 3,000 employees in the business,
government and non profit sectors

Longitudinal research study; identifies
context for national trends
p. 2-1
41
2011 Survey Results




Fewer employees witnessed misconduct on
the job
•
Fell from 49% in 2009 to 45% in 2011 (new low)
•
65% in 2011, up from 63% in 2009
•
42% in 2011, up from 35% in 2009
•
13% in 2011 from 8% in 2009
More employees reported misconduct when
they observed it
Strength of ethical culture in the workplace
decreased – a negative sign
Perceived pressure to commit an ethics
violation increased
p. 2-2
42
However …
However…retaliation against those who
reported misconduct increased sharply …
a negative development
p. 2-2
43
Survey Results (cont.)



Post-recession employee conduct is similar to
behavior during the recession
This phenomenon is a significant factor in the
historically low rates of misconduct and high
rates of reporting
Also matches historical data that shows
ethical conduct improves when the economy
cools
p. 2-2
44
Survey Results (cont.)



Active social networkers report more negative
experiences in their workplaces
Also more likely to experience pressure to
compromise ethics and to experience
retaliation for reporting misconduct than less
active social networkers
32% of active social networkers are more
likely to feel pressure than less active
networkers and non-networkers
p. 2-2
45
2011 Was Unique Year for Ethics


The NBES findings indicate something is
changing in the American workplace
American employees are doing the right
thing more than ever before, but in other
ways employees’ experiences are worse
than in the past
p. 2-2
46
2011 Was Unique Year
for Ethics (cont.)

ERC’s explanation of the unique results from
the 2011 survey could be one of two views:
• The 2011 survey marks the beginning of a
major change in the way the American office
conducts itself
• The 2011 survey is a snapshot of a workforce
knocked off its historic trend, and now in the
process of returning to the patterns seen in
past studies
p. 2-2
47
2011 Was Unique Year
for Ethics (cont.)
The ERC believes it is more likely the latter – a
snapshot that captures a downturn on the
horizon in ethical behavior
p. 2-2
48
Specific Forms of Retaliation
Experienced












64% Excluded from decisions and work activity
62% Received a cold shoulder
62% Verbally abused by management
56% Almost lost their job
55% Not given promotions or raises
51% Verbally abused by other employees
46% Cut in pay or hours
44% Relocated or reassigned
32% Demoted
31% Experienced physical harm to person or
property
31% Experienced online harassment
29% Harassed at home
p. 2-2
49
Observed Misconduct


Nearly half (49%) of employees observed
some type of misconduct taking place in the
workplace
Percentage is based on employees’ observing
at least 1 of 15 specific behaviors in the past
12 months
p. 2-2
50
Governmental Study - Results



30% of federal and 14% of state/ local govt.
workers believe their organizations have wellimplemented ethics and compliance programs
Most frequently observed misconduct by federal
employees were: abusive behavior, safety
violations, lying to employees, and putting one's
own interests ahead of the organization's
58% of all government workers who saw
misconduct did not report it
• Did not believe managers would take action
• Feared they would face retaliation if they
reported what they
• 1% used anonymous hotlines
p. 2-3
51
Organizational Ethics
Links for Government – Examples





City Ethics - www.cityethics.org
FirstGov.gov - www.firstgov.gov/
Dodd-Frank Wall Street Reform &
Consumer Protection Act http://sec.gov/spotlight/dodd-frank.shtml
House Committee on Standards of Official
Conduct - www.house.gov/ethics
US Office of Government Ethics www.usoge.gov
p. 2-4
52
Too Big to Regulate?



The ERC Fellows Program meets twice a
year to study issues.
For past two years they have looked into
questions of government regulation and
enforcement.
“Too Big to Regulate?” refers not to size
but to whether the U.S. government can
keep pace with changes and challenges.
p. 2-6
53
Chapter 3
Assurance Provided by
Regulation
(Chapter 455)
Learning Objectives …
p. 3-1
54
Florida Board of
Accountancy

Defined in FS 455.01(1)

Powers and duties include:
• Authority to issue citations
• Conduct disciplinary proceedings
• Designate violations
• Recover costs
p. 3-1
55
The Division of Certified Public
Accountants


The Division of Certified Public Accounting
is a division within Florida’s Department of
Business and Professional Regulation
(DBPR)
The division is responsible for the licensing
and regulation of over 30,500 Certified
Public Accountants (CPAs) and over 5,200
CPA firms
p. 3-1
56
Division
Offices
Mission:
To ensure that the licensees
meet the statutory
requirements for licensure
and practice of certified
public accounting in Florida,
as well as to protect the
public from unscrupulous
and unlicensed
practitioners.
p. 3-2
Tallahassee, Florida
Department of Business and
Professional Regulation
Headquarters
www.MyFloridaLicense.com
Gainesville, Florida
Section 20.165(2)(c)(2), Florida
Statutes, states that the Division of
Certified Public Accounting shall be
located in Gainesville.
Number of
Licenses
28,285
2,163
5,263
Active CPAs
Inactive CPAs
Accounting Firms
Source: DBPR Div. of CPA, November 2011
p. 3-2
Division
Responsibilities
 Administers to the Florida Board of
Accountancy
 Application Processing
 Biennial License Renewal
 Protect the public from unscrupulous and
unlicensed practitioners
p. 3-2
www.MyFloridaLicense.com
Administers to the Florida
Board of Accountancy
 Coordinates meetings for Board, Probable Cause
Panel, and other committees.
 Prepares agendas
 Copies agenda items and bind board books
 Prepares and sends notices
 Makes recommendations regarding licensure and
denial of applications.
 Communicates to licensees and/or potential
licensees board policies and rulings.
Board and Probable Cause Panel meet every 6 to 8 weeks
p. 3-2
www.MyFloridaLicense.com
Complaints Received By
Board of Accountancy
10-11
09-10
08-09
07-08
Total received
328
301
304
334
Legally sufficient
161
235
350
34
Probable cause found
183
55
69
10
No probable cause
150
172
206
111
Administrative
22
24
36
10
Disciplinary action
27
48
5
10
p. 3-2
www.MyFloridaLicense.com
Complaint Process
The Division is responsible
for reviewing complaints for
legal sufficiency
Cases found to have probable
cause are presented to the full
board for final action.
p. 3-3
Complaints found to have legal
sufficiency are forwarded to the
Office of General Counsel
(OGC)
OGC Prosecuting
Attorney presents case
to the Probable Cause
Panel to determine if
probable cause exists,
and/or to determine if the
complaint should be
forwarded to a consultant
for further investigation.
Final Order
www.MyFloridaLicense.com
Protecting the Public
Disciplinary Proceedings
Florida Statute 455.225
• The Department shall investigate any complaint that is in writing,
signed by the complainant, and is legally sufficient.
• The Department may investigate any anonymous complaint or a
complaint made by a confidential informant if:
– The complaint is in writing and legally sufficient,
– The alleged violation of law or rule is substantial, and
– The department has reason to believe that the allegations are
true.
• The Department may initiate an investigation if it has reasonable
cause to believe that a licensee has violated a Florida Statute or
Rule.
p. 3-3
www.MyFloridaLicense.com
Authority to Issue Citations
(Florida Statutes 455.225)




FL BOA has authority to issue citations
FL BOA may designate violations
FL BOA can recover costs
Must issue citations within 6 months
p. 3-5
64
Grounds for
Disciplinary Action


Being convicted or found guilty, or
entering a plea of nolo contendere to a
crime in any jurisdiction directly relating
to practice of public accounting or
ability to practice
Making or filing a false report or record
that licensee knows to be false
p. 3-9
65
Introduction to the Case Study

The case study begins with this chapter
and continues throughout the manual.
p. 3-13
66
Chapter 4
Public Accountancy in
Florida
(Chapter 473)
Learning Objectives …
p. 4-1
67
Statutory References
The public is assured by the State
Legislature in the Florida Statutes,
Chapter 473 that the Legislature,
“…deems it necessary in the interest
of public welfare to regulate the
practice of public accountancy in this
state.”
p. 4-1
68
Key Definitions




Certified Public Accountant – person holding a
license to practice – 473.302(4)
Firm – Any entity engaged in practice of public
accounting – 473.302(5)
Licensed Audit Firm – licensed under FS
473.3101
“Practice of” or “practicing public
accountancy”, or “public accounting”
473.302(8)(a)(b)(c)
• Opinion on financial statements
• Accounting services
• Preparation of financial statements
p. 4-1
69
New Definition –
Members in Business


ET Section 92, Definitions
The new definition is intended to capture
members that are not in the practice of
public accounting
p. 4-3
70
Powers and Duties of the Board

Chapter 473, FS, gives the FL BOA
certain powers and duties:
• Fees
• Examinations
• Licensure
• Practice Requirements
• Continuing education
• Other matters
p. 4-3
71
Biennial License Renewal
Individual Renewal
 Approximately 16,000 renew each fiscal year
 Continuing Professional Education
 Payment of renewal fee of $105.00
– $97.00 deposited into the Professional
Regulation Trust Fund
– $5.00 deposited into the Unlicensed Activity
Trust Fund
– $3.00 deposited into the Minority Scholarship
Trust Fund
p. 4-4
www Payment can be made online at
www.MyFloridaLicense.com
Biennial License Renewal
Firm Renewal
 Approximately 5,200 firms renew every
two years
 All firm licenses expire in odd years
 Submit the appropriate renewal fee:
– $150 for Partnerships, Corporations, and
Limited Liability Companies
– $50 for a Sole Proprietor and One Owner
Corporations
p. 4-4
www Payment can be made online at
www.MyFloridaLicense.com
CPA Examination – 473.306
Requirements for taking CPA Exam:

Good moral character

Meets academic requirements
• 120 hours with a concentration in
accounting and business
• Must have an additional 30 semester
hours (150 total) to be issued a
license
p. 4-4
74
473.308 Licensure



Baccalaureate degree with a major in
accounting or its equivalent plus at
least 30 semester/45 quarter hours
Must have one year of work experience
Good moral character
p. 4-5
75
Licensure by Endorsement
473.308 (7)


Section 473.308(7) waiver
Five year experience as CPA
• Under CPA in any state or equivalent
as determined by the BOA
• May waive the additional education
requirements
p. 4-7
76
Renewal of License
(473.311, FS)
The department shall renew a license upon
receipt of:
• Renewal application
• Fee
• Certification of CPE by BOA
• Exception for spouses of members of
Armed Forces (61H1-33.0065)
p. 4-10
77
Informaing DBPR of Address
Changes
(61H1-26.005, FAC)

All Florida CPAs must have their correct street
address on file with the BOA as their ‘address of
record’

A post office box may be added only as a
mailing address

All Florida CPAs must notify the BOA within 30
days of any changes to the ‘address of record’
p. 4-11
78
Changes by Firms
(61H1-26.004, FAC)

Firm must file written notification with
Department within 30 days of:
• Addition of any non-CPA
• Any non-CPA co-partner, shareholder or
member in any Florida office
• Any CPA, non-CPA co-partners, shareholders
or members have convictions or findings of
guilt, regardless of adjudication
p. 4-11
79
www.MyFloridaLicense.com
p. 4-11
www.MyFloridaLicense.com
Communicating
with DBPR


Changing your address online will satisfy
the “in writing” requirement
Do check your license periodically
• www.myfloridalicense.com
• Choose Renew a License and follow
the prompts
• To log in initially, use your license
number and last four digits of SSN
p. 4-11
81
The Florida BOA
is not responsible
for finding you!
Submit written notice of your
changes to DBPR within 30 days
All addresses on file with DBPR are
required to include a street address
p. 4-11
82
Communicating with DBPR
Contact the BOA with your questions
E-mail: [email protected]
Customer Contact Center: (850) 487-1395
Monday-Friday, 8 am to 5 pm EST
Florida Board of Accountancy
240 NW 76th Drive, Suite A
Gainesville, FL 32607
p. 4-11
83
Continuing Education
(473.312 FS)


Florida CPAs must submit proof of completing
at least 48 of 80 CPE hours every 2 years
Penalty to complete CPE requirement on time
may be up to 25% additional CPE hours
p. 4-12
84
Continuing Education (cont.)
(473.312 FS)


Not less than 25 percent of the total hours
required by the board shall be in accountingrelated and auditing-related subjects
Not less than 5 percent of the total hours
required by the board shall be in ethics
applicable to the practice of public accounting
p. 4-12
85
Continuing Education (cont.)

Approved programs by the board shall be
formal programs of learning which contribute
directly to the professional competency of an
individual following licensure to practice public
accounting and may be any of the following:
• Professional development programs of the
AICPA
• State societies of certified public
accountants or other organizations
p. 4-12
86
Continuing Education (cont.)

• Technical sessions at meetings of the
AICPA, state societies, chapters, or other
organizations
• University and college courses
• Formal organized in-firm education
programs
The board shall adopt rules establishing the
CPE requirements for Florida CPAs who are
engaged in the audit of a governmental entity
(61H1-33.0035)
p. 4-12
87
Continuing Education (cont.)

CPAs need to keep track of Yellow Book
hours, primarily for peer review purposes
(61H1-33.0035)

The board may appoint a CPE Advisory
Committee, which shall be composed of 1
member of the board, 1 academician on the
faculty of a Florida university, and 6 CPAs
p. 4-12
88
Continuing Education –
Governmental Auditing



Any CPA involved in governmental audits
including planning, directing, field work, or
reporting should comply with the “Yellow Book”
CPE requirements
Required to take 24 hours of CPE that directly
relates to government auditing, the government
environment, or the specific environment of
the audited entity
See details at http://www.gao.gov/yellowbook
p. 4-13
89
Major Changes to CPE Reporting




As of January 1, 2011, DBPR no longer requires
CPAs to report their CPE to DBPR
All licensees, regardless of whether you have
an established account with DBPR’s Online
Services are required to register as a new user
DBPR will rely on the honor system, selfreporting of hours earned
Retain documentation in case of CPE audit
p. 4-13
90
Inactive Status
(473.313 FS)


A Florida certified public accountant may
request that her or his license be placed in an
inactive status by making application to the
department
The board may prescribe by rule fees for
placing a license on inactive status, renewal of
inactive status, and reactivation of an inactive
license
p. 4-14
91
Reactivation
(61H1-33.006)

Complete forms
• DBPR 0010-2, Master Individual Application
• DBPR CPA 5011-1, Request for Change of
Status

Required CPE hours
• one reporting period (120 hours)
• two reporting periods (200 hours)
• three-plus reporting periods (280 hours)
p. 4-14
92
Mobility
(473.3141 FS)
Mobility (or also know as “practice mobility”)
is the ability of a licensed CPA to gain a
practice privilege outside of their home state
without getting an additional license in
another state where they will be serving a
client.
Visit www.CPAMobility.org for practice
requirements of other states.
p. 4-15
93
Temporary License
(473.314 FS)




Not valid for more than 90 days
Fee of $400
Will not cover more than one engagement
Not required for person entering this state
solely for the purpose of preparing federal tax
returns or advising on federal tax matters
p. 4-16
94
“Accountancy Bill” 2012
Legislation – 5 Key Changes


Amends 473.308(4), F.S., to allow CPAs to
obtain the one-year work experience
licensure requirement through verification by
another CPA, versus direct supervision of a
CPA (current law)
Streamlines the licensure-by-endorsement
requirements in 473.308(7), F.S. for CPAs
who have held a license in another state for
at least 10 years prior to application
p. 4-16
95
“Accountancy Bill” 2012
Legislation – 5 Key Changes

Creates a one-time amnesty to reactivate a
license by allowing CPAs to notify the BOA of
their intention by Dec. 31, 2012, and
complete 120 hours of continuing
professional education (CPE) by June 30,
2014
p. 4-16
96
“Accountancy Bill” 2012
Legislation – 5 Key Changes


Amends 473.313(3), F.S., by creating a 75day window to submit a renewal application,
without having to apply for reactivation, for
licensees who had completed the required
CPE by Dec. 31, but failed to report
Provides for a BOA report to the Legislature
on the potential cost savings of privatizing or
outsourcing some Board functions
p. 4-16
97
Chapter 5
Ethics of Integrity,
Objectivity, Commissions,
Contingencies, and
Communications
(FAC 61H1)
Learning Objectives …
p. 5-1
98
Comparison of Florida Rules
to National Standards
FAC 61H1-21.002
In the Florida Administrative Code (FAC),
a CPA shall not:
• Knowingly misrepresent facts
• Subordinate their judgment to:



p. 5-1
Clients
Employers
Other third parties
99
Comparison of Florida Rules
to National Standards
FAC 61H1-21.002
• Florida standards have their basis
in the AICPA’s standards
• True for Section 102, Integrity and
Objectivity of the AICPA Code of
Professional Conduct
p. 5-1
100
Definition of Objectivity
“A member should maintain
objectivity and be free of conflicts
of interest in discharging
professional responsibilities.”
p. 5-2
101
Definition of Integrity
“Integrity can accommodate the
inadvertent error and the honest
difference of opinion; it cannot
accommodate deceit or
subordination of principle.”
p. 5-2
102
What is Integrity?



Being candid
Being honest
Placing service
and public trust
above personal
advantage and
personal gain
p. 5-2



Doing the right
thing
Acting in good
faith
Observing both
form and spirit of
professional
standards
103
Conflicts of Interest –
AICPA Examples



A member provides tax or PFP services for
several members of a family who may have
opposing interests
A member has a significant financial interest, is a
member of management, or is in a position of
influence in a company that is a major competitor
of a client for which the member performs
management consulting services
A member serves on a city's board of tax
appeals, which considers matters involving
several of the member's tax clients
p. 5-3
104
Direct Violations


AICPA ET 102.01 Rule 102
Actions deemed violations:
• Make, permit, or direct materially
false or misleading entries…
• Fail to correct materially …
• Signing, permitting to sign or
directing to sign materially …
p. 5-4
105
Materiality A Key Concept
What is it?
p. 5-4
106
Definition of Materiality
“Magnitude of an omission or
misstatement of accounting information
that, in the light of surrounding
circumstances, makes it probable that
the judgment of a reasonable person
relying on the information would change
or be influenced.”
Defined by FASB Statement of Financial
Accounting Concepts No. 2, Qualitative
Characteristics of Accounting Information
p. 5-4
107
Materiality
Has been defined in FASB, AICPA, SEC,
and PCAOB documents…
So, if the definitions are
everywhere, what’s the problem?
p. 5-4
108
Materiality (cont.)
The problem is…
• No authoritative formulation of
materiality in the law or accounting
literature.
• May be quite small numerically
• Must be considered quantitatively and
qualitatively
p. 5-4
109
GAS Materiality
The 2007 GAS (sections 4.05 & 6.06)
includes:
• An increased emphasis on audit quality
and ethics
• An extensive update of the performance
audit standards to include a specified
level of assurance within the context of
risk and materiality
• May need to set lower materiality levels
than in private sector–public
accountability
p. 5-4
110
Impairment of Objectivity
or Integrity


Rule 102, Ethics Ruling No. 113 –
“Acceptance or Offering of Gifts and
Entertainment”
What about gifts???
•
•
•
•
p. 5-5
Nature of gift
Occasion
Cost
Other matters
111
Ethical Responsibilities under
GAS 2007
2007 GAS has guidance on:
 Public interest
 Professional behavior
 Integrity
 Objectivity
 Proper use of government information,
resources, and position
p. 5-5
112
Gifts at the
Federal Level
5 C.F.R. § 2635.202-204







Use common sense
Pay your own way for meals and entertainment
valued over $20
Pay your own transportation and
accommodations
Pay fair market price for products and services
Keep records of your expenses
If in doubt, don’t accept!
See Appendix D for ethics principles
p. 5-7
113
Gifts at the
State Level
Florida Statutes 112.3148




Follow guidance from your own agency
and FS 112.3148
Don’t accept gifts from a political
committee or lobbying organization
Determine fair value of gifts – actual
cost less taxes & gratuities
Honorariums treated similarly to gifts
p. 5-8
114
Commissions and/or Referral Fees
(FAC Section 61H1-21.003)

Prohibits commissions or referral fees
with:
• Audits
• Reviews
• Compilations
• Prospective financial data
• Services resulting in an expression of
opinion
p. 5-10
115
Contingent Fees
(FAC 61H1 – 21.005)



Allowed only on findings of the
government - not that of the licensee
Some exceptions
Government employees are not allowed
to accept a contingent fee
p. 5-12
116
Communication with Client of
Another Licensee
(Florida Administrative Code 61H1 – 21.006)
“When a client of one licensee requests
a second licensee to provide
professional advice in connection with
an expression of opinion, the second
licensee must consult with the first,
after obtaining the client's consent, to
make certain that the second CPA is
aware of all the relevant facts.”
p. 5-14
117
Chapter 6
Competency and Related
Issues
Learning Objectives …
p. 6-1
118
Florida Standards - Compliance

The Florida standards require
compliance in four general areas:
1. Professional Competence
2. Due Professional Care
3. Planning and Supervision
4. Sufficient Relevant Data
p. 6-1
119
Competence – Professional




Agreement to perform implies that the
member has necessary competence to
complete the engagement
Member does not assume a
responsibility for infallibility of
knowledge or judgment
Competence involves both the member
and his/her staff
A CPA must be in charge of all public
accounting services performed by the
firm
p. 6-2
120
Competence –
Due Professional Care


Assumes the person offering services
possess the “degree of skill commonly
possessed” by other persons
Assumes the person exercises that skill
with “reasonable care and diligence”
p. 6-2
121
Competence
Planning and Supervision
 “A licensee shall adequately plan and
supervise an engagement.”
Sufficient Relevant Data
 Data of a reasonable basis for a
conclusion or recommendations
p. 6-2
122
AICPA ET Section 201
– General Standards


The AICPA standards are closely
aligned with the Florida standards
Various interpretations also are
closely aligned with the Florida
standards
p. 6-2
123
Interpretations Under
Rule 201, (cont.)

Competence to perform professional
services involves:
• The technical qualifications of the
member and the member's staff
• Ability to supervise and evaluate the
quality of the work performed
p. 6-2
124
Interpretations Under
Rule 201, (cont.)

Competence relates to:
• Knowledge of the profession's
standards, techniques and the technical
subject matter involved
• The capability to exercise sound
judgment in applying such knowledge in
the performance of professional services
p. 6-2
125
Hindsight
How we may be judged
p. 6-3
126
Hindsight Judgment





Hindsight is how we will be judged
We will be judged for compliance with the
ethical standards (professional competence,
due professional care, planning and
supervision, and sufficient relevant data)
Often these standards may be judged after
the situation has occurred
Those judging us may ask, “Did you…”
We must protect ourselves from perfect
hindsight vision
p. 6-3
127
Hindsight Protection
Documentation
Documentation
Documentation
Documentation
Documentation
p. 6-3
128
Documentation Requirements
Documentation requirements are found in
many professional standards:
 Auditing Standards
 Review Standards
 Compilation Standards
 Quality Control Standards
 Attestation Standards
 Other Standards
p. 6-4
129
Audit Documentation



For our protection, we must understand
the general body of standards to which we
will be held accountable
Includes AICPA standards as well as
Florida requirements
Documenting is your best means of
defense. Be sure to document:
• in writing
• industry-specific
• timely
p. 6-4
130
Audit Documentation
(cont.)
Documentation implies that each work
paper will include the following six points:
1. Who prepared it?
2. When?
3. Who reviewed it?
4. When?
5. Where did it come from?
6. Where is it going?
p. 6-5
131
Risk Assessment Standards



Many documentation requirements are
in the “Risk Assessment” standards
SASs 104-111 have been reissued as
part of the Clarity Project
The new standards are in SAS 122,
effective for periods ending after
December 15, 2012
p. 6-6
132
Specific Standards





A&A Standards are generally the same
as those of the AICPA
Other Standards are generally those of
the AICPA
Some standards are not authoritative
Florida’s assembled financial statements
are NOT recognized by the AICPA
New standards for local Government
audits – Auditor General Rules
p. 6-6
133
Government Auditing Standards
– General Standards



Independence
• free from personal, external, &
organizational impairments
Professional Competence
• Professional skepticism, diligence
Judgment
• Engagement staff must collectively
possess adequate professional
competence
p. 6-6
134
Summary of New Ethics
Guidance from the AICPA

Framework for independence standards [ET
Section 100-1.20]
• Definitions of Public Interest and changes to
threats

Applicability [ET Section 91]
• No separate AICPA disciplinary process if
AESBA standards used

Members in business [ET Section 92.22]
• Members must follow Code if type of services
requires it
p. 6-6
135
Summary of New Ethics
Guidance from the AICPA (cont.)

Disclose client info to third parties [ET
Sections 92.05 and 391.2]
• Disclosing info without permission is more
limited

Disclose prior employer confidential
information [ET Sections 92.05, 391.2, 501.9]
• Limits member’s disclosure about prior
employers
p. 6-6
136
Summary of New Ethics
Guidance from the AICPA (cont.)

Concept of “financial interest threats” is
expanded to business members [ET Section
100-1.20]
• Now requires members in business to recognize
financial interest threats and safeguards

Expands what is false or misleading acts to all
CPAs [Interpretation 501.10, .11]
• Now applies to members in business
p. 6-6
137
Summary of New Ethics
Guidance from the AICPA (cont.)

Interpretation on application of independence
reqs. to attest clients [Int.101-18, 20]
• Independence requirement applications
revisited

CPAs may now teach for firm’s educational
institution clients [101-.19, .21]
• Auditors may now be part-time faculty

Changes 101-3 for Attestation Engagements
[101-.11, .13]
• May now provide attest services not relating to
specific matters of attestation engagement
p. 6-6
138
Summary of New Ethics
Guidance from the AICPA (cont.)

Modifies GAAP for Rule 203 [Interp. 203-5]
• May now use but denote the framework used

Explains when members may withhold records
prepared for clients [Interp. 501-1]
• Members must give client prepared records on
request; may retain if unpaid fees or pending
litigation exists

Members may not use misleading firm names
[Interpretations 505-4 and 505-5]
• CPAs should not use misleading firm names
p. 6-6
139
Chapter 7
Ethics and Independence
(Florida and AICPA)
Learning Objectives …
p. 7-1
140
Which Rules are for You?
• The Florida Legislature
• The FL BOA
• The AICPA
• The PCAOB
• The SEC
• Yellow Book and/or OMB Requirements
• Others
p. 7-1
141
Key Independence Terms




Covered member
• Single Office
• Multi Office
Services performed
• Attest services
• Nonattest services
Client
Relationships
p. 7-2
142
Who is a Covered Member?



Individual on attest
engagement team
Individual in a
position to
influence
Partner or Manager
providing nonattest
services if…
p. 7-3



Partner in office of
engagement
partner
The firm
Firm or commonly
controlled entities
143
What is an attest engagement?




An engagement that requires
independence (ET 92.01)
In Florida, FS 473.315 sets the stage.
Florida has “Standards for
Independence” (Appendix H)
“A certified public accountant shall not
express an opinion of the financial
statements of an enterprise unless she
or he and her or his firm are
independent with respect to such
enterprise.”
p. 7-3
144
Gifts and Entertainment




Rule 101, Ethics Ruling No. 114,
“Acceptance or Offering of Gifts or
Entertainment to or from an Attest
Client.”
Position to influence
Significance
Reasonable
p. 7-5
145
Code of Professional Conduct
“The Code of Professional Conduct was
adopted by the membership to provide
guidance and rules to all members - those
in public practice, in industry, in
government, and in education - in the
performance of their professional
responsibilities."
Introduction to Code of
Professional Conduct, AICPA
p. 7-6
146
61H1-21.001 Independence




The Florida Statutes are very clear on
independence and expressing an opinion.
The technical standards for independence
are set out in FAC 61H1-21-001.
61H1-21.001 (2) sets out the standards
known as “Standards for Independence”
for Florida CPAs
Requires compliance with this rule
p. 7-6
147
Code of Professional Conduct



Florida’s “Standards for Independence”
has a direct reference to the AICPA’s Code
of Professional Conduct
From the pronouncements, one can
assume that if you are either a member of
the AICPA or a licensed Florida CPA, the
provisions for independence will apply
The major question is…apply to which
engagements?
p. 7-6
148
Basic Engagements
Five basic engagements require
independence:
1. Audit
2. Review
3. Compilation
4. Attestation
5. Prospective Financial Statements
p. 7-6
149
Attest Engagements




The AICPA’s Ethics Interpretation No. 101-3,
states that an attest engagement is any
engagement which requires the CPA to be
independent
Interpretation does not apply to a compilation
engagement which the accountant has modified
the report to indicate a lack of independence
No question that a review engagement or an
audit engagement is an “attest” engagement
In SSARS 19 there is a clear indication that
a compilation is an attest engagement
p. 7-6
150
Covered Members and
Independence


Single Office
Multi Offices
p. 7-6
151
Who is the Client?
“Client” shall be deemed and construed
to mean the person(s) or entity which
retains a licensee for the performance
of public accounting services.”
FAC 61H1-20.003
p. 7-8
152
Independence of Internal
Auditors
Internal auditors reporting internally to
management are free from impairment of
independence if they are:




p. 7-8
Accountable to the governmental
head
Report results of work to the
governmental head
Located organizationally outside of
staff or line management functions
Has access to those charged with
governance
153
Independence Changes in Comp
& Review Engagements

SSARS 19, Compilation and Review
Engagements
• In a compilation when the accountant is not
independent, the accountant should indicate
the lack of independence
• SSARS 19 states that the accountant is not
precluded from disclosing a description about
the reason(s) independence is impaired
• Disclosing the reason(s) is not required but is
optional
p. 7-10
154
Chapter 8
Independence: Non-attest,
Non-audit Services
Learning Objectives …
p. 8-1
155
AICPA and GAO Standards




Both AICPA and GAS provide guidance
for nonattest services by an auditor
Nonattest audits must comply with both
sets of standards
GAO rules are typically more restrictive
The standards are different, see
comparison in Appendix F
p. 8-1
156
Performing Nonattest Services
Independence Rules of AICPA

Under Interpretation 101-3 the
independence rules may come from
several authoritative bodies.
• FL BOA
• AICPA
• SEC
• GAO
• Department of Labor
p. 8-2
157
Nonattest Services
for a Client

When nonattest services are performed
for clients for which attest services are
performed:
• Documentation of understanding
with client is necessary
• The requirements of 101-3 are still
being revised
p. 8-2
158
Nonattest Services
for a Client

Clients must agree to do certain things:
• Make all management decisions
• Designate an employee
• Evaluate adequacy and results
• Accept responsibilities
• Establish and maintain controls
p. 8-2
159
Nonattest Services
for a Client

Member must establish and document in
writing his/her understanding with the
client:
• Engagement objectives
• Services
• Client’s acceptance
• Member’s responsibilities
• Any limitations
p. 8-3
160
AICPA Interpretation 101-3



Revisions issued by the Professional Ethics
Executive Committee (PEEC)
Revisions are in bookkeeping, internal
audit services, valuation, appraisal,
actuarial services, and information
systems design and implementation
Revisions tighten the requirements for
documentation of the member’s
understanding with the client regarding
the services to be performed
p. 8-3
161
Professional Ethics Quiz
…do you know
the answer?
p. 8-4
162
Independence Changes in
Attestation Engagements


SSAE No. 17, Reporting on Compiled
Prospective Financial Statements When
the Practitioner’s Independence is
Impaired, has permitted (but not
required) the accountant to disclose the
reason(s) for an independence
impairment in the report
SSAE 17 is effective for compilations of
prospective financial statements for
periods ending on or after December 15,
2010
p. 8-11
163
Performing Nonattest Services
Independence Rules of GAS
Overarching Principles
1. The auditor should not provide
nonaudit services that involve
performing management functions or
making management decisions.
2. The auditor should not audit his/her
own work or provide nonaudit services
in situations where the nonaudit
services are significant/material to the
subject matter of the audit.
p. 8-12
164
Yellow Book
Independence Scenarios
…do you know
the answer?
By the Comptroller General of the United States
Government Auditing Standards
July 2007
p. 8-13
165
Chapter 9
Ethical Responsibilities to
Clients and Other
Considerations
Learning Objectives …
p. 9-1
166
Confidential Client Information



CPAs may not disclose any confidential
information obtained in the course of a
professional engagement without the
consent of the client.
Implies active and stored information
Peer Review is excluded
p. 9-2
167
Client Confidentiality

Confidentiality includes:
• Office situations
• Storage in and away of client data
• Other situations
p. 9-3
168
Records Disposition
Responsibility


CPA must return client records,
documents, or other papers belonging
to the client within a reasonable time
May charge for reasonable costs
incurred
p. 9-4
169
Revisions to Rule 501-1


The revised interpretation defines key
terms
Makes interpretations of how to respond
to client requests
p. 9-5
170
Florida’s Public Record Law
Chapter 119, F.S.
“any public record made or received in
connection with the official business of
any public body, officer, or employee of
the state, or person acting on their
behalf unless there is a specific
exemption.” Article I, Section 24 (a),
Florida Constitution (1968)
p. 9-9
171
Advertising
Advertising may not be:
• Fraudulent
• False
• Deceptive
• Misleading
p. 9-10
172
Advertising/ Advertisements







Misrepresentation of facts
Partial disclosure
False or unjustified expectations
Appeal to fears, ignorance or anxieties
False claims or misleading claims
Designations
False information
p. 9-10
173
AICPA Rules on Advertising


Found in ET Section 502 –
“Advertising and Other Forms of
Solicitation”
Florida rules generally follow the
AICPA rules
p. 9-12
174
Solicitation
(61H1-24.002)


Licensee may reply to requests for
proposals
Must adhere to rules for advertising,
both oral and written
p. 9-13
175
Responsibilities to
Other Persons


Licensees may not allow others to do
things the CPA themselves may not do
This includes situations for
compensation and not for compensation
p. 9-14
176
Practical Responsibilities





Advertising/Advertisements
Solicitation
Other Persons
Names, Terms, Branch Offices
Form of Practice
p. 9-14
177
Administrative and
Office Considerations




Names, terms, and branch offices
(61H1-26)
Forms of practice and name shared
office space (61H1-26.001)
Minimum capitalization /adequate public
liability insurance (61H1-26.002)
Financial statements of the firm
p. 9-14
178
AICPA Rulings and
Interpretations on Ethics
p. 9-15
179
Chapter 10
Code of Ethics for Public
Officers and Employees
Learning Objectives …
p. 10-1
180
Key Definitions







Agency
Breach of public trust
Conflicts of interest
Gift
Purchasing agent
Relative
See s. 112, Part III, Definitions
p. 10-2
181
Standards of Conduct







Solicitation or acceptance of gifts
Doing business with one's agency
Conflicts of employment or contractual
relationship
Unauthorized compensation
Misuse of public position
Exemptions and other issues
Disclosures or use of certain
information
p. 10-3
182
Chapter 11
Future Implications
Learning Objectives …
p. 11-1
183
To prophesy is extremely difficult
… especially with regard
to the future.
Chinese Proverb
p. 11-1
184
Our Future
Where is the CPA profession going?
p. 11-1
185
Our Future (cont.)


Most VERY large audits are performed
by the “Quadropoly”/“Final Four”
XBRL – bar coding of financial
statements

Accounting Standards Codification

GAAP Restructuring/Codification


Student enrollment in accounting across
the US continues to rise
Mobility
p. 11-1
186
Mobility
473.3141 FS
2007 - only 4 states had passed mobility
provisions
By Nov. 2011, 48 states had enacted mobility
statutes. California, Guam, Hawaii, Puerto Rico,
and US Virgin Islands are in-process.
Washington, DC has mobility pending.
p. 11-2
187
Mobility (cont.)
473.3141 FS
 Mobility (practice mobility) is the ability of a
licensed CPA to gain a practice privilege
outside of their home state without getting an
additional license in a client’s state.
 In the end, State Boards of Accountancy will
gain automatic jurisdiction over all CPAs
practicing in their states whether they are
licensed or registered in their state.
.
p. 11-2
188
Mobility (cont.)
473.3141 FS

Substantial Equivalency – 3 Issues
• Education
• Experience
• Enforcement
p. 11-2
189
CPA Mobility Legislation 2012
p. 11-2
190
“Big GAAP” vs “Little GAAP”



Jan. 2011 - Blue-Ribbon Panel addressing
Standards for Private Companies submits
report of recommendations to Financial
Accounting Foundation
Report calls for fundamental changes to the
system of standard setting, including the
creation of a new board, to be overseen by the
FAF, that would focus on making modifications
to US GAAP for private companies
Report does not recommend a separate GAAP
for private companies or a comprehensive
reorganization of GAAP
p. 11-2
191
Private Company GAAP


Mar. 2011 - Financial Accounting Foundation
outlines plans to address Standard Setting for
Nonpublic Entities
Formed a Trustee Working Group to address
accounting standard setting for nonpublic
entities
p. 11-2
192
International Implications



2008 - AICPA Council approved
International Financial Reporting Standards
as recognized GAAP in the US
Another step towards IFRS becoming the
official GAAP of the US
An ongoing convergence project between
the FASB and the International Accounting
Standards Board (IASB) will eliminate most
of the differences between US GAAP and
International GAAP over the next five years
p. 11-2
193
International Implications (cont.)



The SEC Roadmap reflects that the SEC
will make a major decision for the issuing
entities in the United States
The SEC Roadmap should not be
interpreted as a roadmap for non issuers
Ultimately, the convergence for non
issuers will be determined by the FASB,
the AICPA, and possibly others
p. 11-2
194
p. 11-3
195
International Implications (cont.)

The major question facing the United
States is • If the United States mandates IFRS for
publicly traded companies, will private
companies and not-for-profit organizations be
required to adopt IFRS?
p. 11-3
196
International Implications (cont.)

The simple answer is NO
• The discussion of the SEC designating a
future date for voluntary (or mandatory)
adoption of IFRS has been for U.S. public
companies only

Many privately held companies adopted
provisions of the Sarbanes-Oxley Act, such as
the formation of independent audit committees
• Many might take similar action regarding IFRS
p. 11-3
197
International Implications (cont.)

In December 2009, the AICPA, the
Financial Accounting Foundation (FAF)
and the National Association of State
Boards of Accountancy (NASBA)
established of a blue-ribbon panel to
address how U.S. accounting standards
can best meet the needs of users of
private company financial statements
p. 11-3
198
International Implications (cont.)


The panel will provide recommendations
on the future of standard setting for
private companies, including
development of separate, standalone
accounting standards
A report is expected in the early part of
2011
p. 11-4
199
International Implications (cont.)
Why might some private companies in the
United States adopt IFRS?
 Adoption of IFRS by small businesses
and non-profits is likely to be market
driven
 IASB developed a version of IFRS for
small and medium-size entities to
minimize complexity and reduce the
cost of financial statement preparation,
yet allow users to assess financial
position, cash flows, and performance
p. 11-4
200
International Implications (cont.)

IFRS for Small and Medium Entities (SME)
released on July 9, 2009
• See FAQs regarding IFRS for SMEs at the
AICPA site

Will IFRS be incorporated into the Uniform
CPA Exam?
• Yes, starting in January 2011
p. 11-4
201
International Audit Convergence


Parallel effort is the AICPA’s Auditing
Standards Board convergence project
with the International Auditing and
Attestation Standards Board (IAASB)
Missing is what might happen to the
Public Companies Accounting Oversight
Board and its role in the global
accounting profession
p. 11-4
202
International Compilation and
Review Convergence


International Standard on Related
Services (ISRS) 4410, Engagements to
Compile Financial Statements
International Standard on Review
Engagements (ISRE) 2400, Engagements
to Review Financial Statements
• Issued by the International Auditing and
Assurance Standards Board (IAASB) of the
International Federation of Accountants
(IFAC)
p. 11-4
203
International Compilation
and Review Convergence (cont.)
The purpose of the ISRS and ISRE is to:
• Establish international standards and
provide guidance on the accountant’s
professional responsibilities when
engaged to compile or review financial
statements
• Provide guidance on the form and content
of the report the accountant issues for
that compilation or review.
p. 11-4
204
International Compilation
and Review Convergence (cont.)


ISRS 4410 and ISRE 2400 can be found
in IFAC’s Handbook of International
Auditing, Assurance, and Ethics
Pronouncements at www.ifac.org
ISRS 4410 and ISRE 2400 do not
override SSARS
p. 11-5
205
International Compilation
and Review Convergence (cont.)

Interpretation No. 30 (AR 9100.130.135),
Considerations Related to Financial
Statements Prepared in Accordance with
International Standards
• Allows an accountant who performs a
compilation or review of historical financial
statements of a U.S. entity to follow the
standards of another set of compilation and
review standards in addition to the required AR
100 Standards

Additionally, as US GAAP and US GAAS
converge with the international standards,
the ethics will also change
p. 11-5
206
International Ethics



The AICPA and IFAC have begun to
converge the IFAC’s Code of Ethics for
Professional Accountants and the AICPA’s
Code of Professional Conduct
In 1917, the AICPA’s predecessor adopted
eight rules of conduct (one sheet of paper)
The rules evolved and were codified in
1973 into the current AICPA’s Code of
Professional Conduct
p. 11-5
207
International Ethics (cont.)



Almost 100 years – and many sheets of
paper – later, the AICPA Code and
related guidance is ripe for
reorganization
The standard setting organizations in
more than 100 countries have adopted
the IFAC’s Code of Ethics and many
others are in the process of converging
with the code
The code will impact those in public
practice, business, academia, and
government
p. 11-5
208
International Ethics (cont.)


The IFAC code uses a conceptual
framework approach to evaluate
relationships or circumstances that raise
ethical issues
The AICPA’s and the IFAC’s codes
address similar issues:
•
•
•
•
Independence
Objectivity
Due care
Confidentiality
p. 11-6
209
Who’s in Charge?


An ongoing issue for the future will be just who is in charge?
As organizations, people, and nations
jockey for position in the future
accounting world, our profession will see
many changes occur
•
•
•
•
•
What will become of the FASB?
What about the PCAOB?
What will happen to the AICPA?
How about the SEC?
Will the IRS be impacted?
p. 11-7
210
Where in the heck are we going?
211
CPA Horizons 2025
The AICPA Project, CPA Horizons 2025,
sought the insights on current and future
trends that will impact the profession and
the world of CPAs by:
•
•
•
•
online survey
16 in-person forums
online discussions and focus groups
More than 5,600 CPAs responded spending a
cumulative 6,000 hours and generating
75,000-plus comments relating to the current
state and future of the CPA profession
p. 11-7
212
CPA Horizons 2025 (cont.)

Ten key themes emerged that give
insight into how the profession is:
• Conducting and will conduct business
• Serve clients and employers
• Attract and retain employees and new
business
• Remain competitive in the marketplace
throughout the next 15 years
p. 11-7
213
1. Technology

Understand and leverage relevant
technology in conjunction with core
CPA competencies to deliver superior
services
214
1. Technology (cont.)
IMPACT ON THE PROFESSION
 CPAs must stay current with, embrace and exploit
technology for increased efficiency and expansion of
services
 The profession must find solutions to offer investors
and stakeholders up-to-date, real-time financial
information and to increase transparency
 CPAs must embrace mobile technologies and social
media to modernize and enhance interaction and
collaboration with clients and colleagues
 Fraud may be easier to commit and more difficult to
prevent and detect
215
2. Pre-certification and
Lifelong Learning

Evolve the educational framework to
keep pace with the changing
dynamics of business, government
and our profession
216
2. Pre-certification and Lifelong
Learning (cont.)
IMPACT ON THE PROFESSION
 CPAs must devote time to staying current with
regulations and standards, and social, economic,
technological and political trends domestically and
abroad
 CPAs must further develop interpersonal skills to
enhance relationships with colleagues, clients,
businesses and employers
 Real-time learning in the workplace will change the
way CPAs learn and help them adapt quickly and
knowledgeably
 Requirements for new CPAs must remain rigorous and
demanding and be practical and relevant
 New CPAs must have a broad knowledge of business
and soft skills and not simply focus on technical
accounting
217
3. Worldwide Profession

Position the CPA as a premier
designation of the accounting and
finance profession throughout the
world
218
3. Worldwide Profession (cont.)
IMPACT ON THE PROFESSION
 CPAs must be increasingly aware of
international business issues and trends
 CPAs must assess the trend toward
outsourcing overseas and create
opportunities to expand services to
serve these markets
 CPAs must continue to market the
quality and value of their services in
order to expand and thrive globally
219
4. Pride in the Profession

Encourage pride among CPAs in the
CPA profession and in the value CPAs
create throughout society
220
4. Pride in the Profession (cont.)
IMPACT ON THE PROFESSION


The profession must continue to advocate
on behalf of itself to ensure continued
recognition as a trusted advisor
CPAs must uphold the integrity of the
profession and maintain high standards in
an ever-changing environment and in
cultures where business practices differ
from U.S. practices
221
5. Trusted Attester

Preserve the role of the CPA as the
trusted attester of financial and other
information
222
5. Trusted Attester (cont.)
IMPACT ON THE PROFESSION



The profession must stay vigilant in
defending its unique role as providers of
audit and attest services
All CPAs benefit from the public trust
rooted in the provision of audit and
assurances services
Audit and attest functions must evolve to
meet changing regulatory demands and
client and business needs
223
6. Trusted Advisor

Promote the CPA as the trusted
advisor who, in addition to providing
core CPA services, develops solutions
to complex problems by integrating
knowledge, expertise and resources
from multiple disciplines
224
6. Trusted Advisor (cont.)
IMPACT ON THE PROFESSION

CPAs must continue to evolve as strategic
partners of clients, business and
employers, applying multidisciplinary and
integrated problem solving to expand
traditional services and enhance
nontraditional offerings and the perception
of trusted advisor
225
7. Market Permissions

Leverage the strengths of the
profession to expand market
permissions
226
7. Market Permissions (cont.)
IMPACT ON THE PROFESSION


Emerging opportunities for specialization
will allow CPAs to strengthen their
expertise and provide additional value to
clients, employers and business
The profession must continue to evaluate
which services it offers locally and globally
and how it will deliver these services to
adapt to the needs of clients, employers
and business
227
8. Marketplace

Address continual changes in the
marketplace, economy, businesses
and regulations
228
8. Marketplace (cont.)
IMPACT ON THE PROFESSION
 The nature of the work that CPAs perform
must evolve to respond to shifts in
business, society and technology
 Changes will offer opportunities to enhance
the value of CPA services, positioning CPAs
to be leaders in helping clients and
employers
 Lifelong learning will take on greater
importance as a way for CPAs to stay up-todate
229
9. Value Proposition


Increase the visibility of the
profession’s value
proposition by demonstrating the
profession’s Core Values in multiple
areas of business and society
230
9. Value Proposition (cont.)
IMPACT ON THE PROFESSION


By listening to and understanding the
needs and challenges of employers and
clients, opportunities for CPAs to develop
services that align with Core Values will
emerge
The profession must spend more time
demonstrating their value to clients,
businesses and the public about the role
and value of the CPA in order thrive amid
increased competition and economic
pressures
231
10. Demographic Shifts

Continue to offer opportunities that
enhance the appeal of the profession
and be proactive in addressing both
U.S. and global demographic shifts
232
10. Demographic Shifts (cont.)
IMPACT ON THE PROFESSION
 The profession must strive to reflect the
demographic shifts of incoming accounting
students, clients, business and society
 Programs offered to support minorities,
women and young CPAs in the workplace
must be more widely implemented
throughout the profession
 Experienced and older CPAs must continue to
mentor young CPAs and identify leadership
and advancement opportunities that will
foster stronger relationships and loyalty
233
10. Demographic Shifts (cont.)


In order to attract and retain younger
generations, employers must increase
flexible work arrangements and work-athome options
The profession must continue to support
and enhance programs that build
awareness of the CPA profession to young
audiences
234
WHAT HAVE WE LEARNED?




It is a small world after all — every
business is becoming a global business
The future is here — embracing the
future now will ensure viability in the
long run
Change is inevitable — technology
already is changing the way we work …
and the change will continue
Generations are working side by side
— Baby Boomers are not retiring and
Millennials are bringing a new set of skills
and ideals to the workplace
235
HOW DO WE DO IT?
• Technology: Address security and
privacy concerns; adapt traditional
services; utilize state-of-the-art tools to
reach out to new markets
• Education: Balance judgment with
technical skills; teach soft skills; stay ahead
of the curve on regulations and standards
236
HOW DO WE DO IT? (cont.)
• Globalization: Understand international
issues, trends, standards and regulations;
identify new markets; explore new job
opportunities
• Promotion: Market the profession’s
virtues of integrity, objectivity and trust to
local, national and international audiences
237
HOW DO WE DO IT? (cont.)
• Collaboration: Understand the different
perceptions and realities of the generations
and find ways to bridge the gap and take
advantage of the best each can offer
• Integration: Review our competencies
and align them with new realities; enhance
our role as a business advisor
238
HOW DO WE DO IT? (cont.)
• Adaptation: Address changes in the
marketplace, economy, business and
regulations; immerse ourselves in domestic
and international trends
• Competition: Understand the numerous
choices available to clients and employers;
market the CPA value
239
Welcome to the future!
240
Even if you are
on the right track,
you’ll get run
over if you just sit
there.
Will Rogers
p. 11-7
241
Take Away…

Remember that for over 100 years the
profession of certified public accountants
have been kept at the top of the ethical
list for the professions with:
•
•
•
•
Honesty
Trustworthiness
Integrity
Objectivity
p. 11-7
242
The Reason for This is Simple…
Our Professional
ETHICS
p. 11-7
243
Yellow Book Interim Revision




Effective for engagements and financial
audits beginning December 15, 2011
Expect final issuance by end of 2011
Biggest changes are to independence
standards; will more closely align with
AICPA
Other changes include requirements:
• Requirements for internal specialists
• Requirements to follow AICPA’s general
standards
Appendix I, YB
244
Key Changes to
Independence Standards




Conceptual framework of “threats and
safeguards” and how to document them
Identification of seven threat categories
Discussion of nonaudit service prohibitions
and how to evaluate such services
How to document management’s ability to
oversee nonaudit services
Appendix I, YB
245
Thank you…
for attending today!
246

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