Even if you haven’t taken an ethics course you already know that it would be unethical to lie about having taken an ethics course. The New Jersey Board of Accountancy collected $4.2 million in penalties from CPAs last year who apparently did just that. That’s right $4,200,000.00! The New Jersey Star Ledger reports that this amount exceeded the “total amount of penalties leveled by all the state boards in each of the last five years.” The largest fine assessed was $8,000, so there were a lot of CPAs who failed to obtain the required CPE.
In New Jersey, CPAs are required to take a state specific ethics course every three years. Like many states New Jersey usually selected about 10% of renewal applications to conduct an audit of all CPE courses. Instead, last year they elected to compare the list of attendees at the required ethics course from 2006 through 2008 to the list of CPAs who renewed as of January 1, 2009. Everyone who filed a renewal but had not attended the state specific course was audited for all courses. While I’m certain some of these CPAs attended a non-state specific ethics course and believed that was acceptable there was a disturbingly large number of CPAs who didn’t take any courses. That means these CPAs lied on their applications not only about taking the ethics course but also about taking the required 120 hours.
Not surprisingly the New Jersey Board has indicated that it will conduct another audit for the January 1, 2012 renewals and it should come as no surprise that other states and other professional boards are considering conducting audits of their own. $4.2 million is certainly an incentive for any state. New Jersey has already indicated that they may more vigorously review doctors, nurses, pharmacists and psychologists.
CPAs are generally considered to be the most honest and trustworthy profession, so, if they have trouble meeting their ethics requirements the other professionals are as well. Hopefully, the lesson learned here is that every professional should take their CPE requirements seriously. If anyone has any questions about their requirements or has a licensing issue please contact me. And remember to contact me before meeting with an investigator.
For CPAs, please remember that in Pennsylvania, your next renewal will be on January 1, 2014. You are required to obtain at least 20 CPE credits each year during the two year cycle and 80 hours total during that period. Although the regulations still have yet to be passed, the Board has indicated that it will be requiring 4 credits of ethics for the upcoming renewal. Remember, it is also your responsibility to make certain that the CPE credits you have taken are approved for credit in Pennsylvania. Your provider should be able to give you this information.
All other professionals have renewal deadlines and CPE requirements which must be followed.
While it remains to be seen if Pennsylvania will increase its CPE audits and prosecutions, you can avoid any concern about an audit or prosecution if you simply follow the regulations of your profession.
Mike Colgan, the new Executive Director and CEO of the Pennsylvania Institute of Certified Public Accountants, has recently brought an issue to my attention. The issue is that when CPA’s provide documents to the State Board of
Accountancy during a license investigation some of those documents are being made available to the public. This
is despite the fact that some of these documents may be protected by the accountant client privilege. Without going through all the prosecutions by the Board, there is no way to know how often client documents are being made available to the public. However, I looked at nine of the most recent licensing violations. Of those nine, three of the consent orders had what appeared to be confidential client documents attached and therefore available to the public.
Of these three, only one of the CPAs (or their attorney) thought to have the documents redacted with their client’s identifying information removed.
In Pennsylvania the CPA Law provides an accountant client privilege. However providing documents to the Board in a licensing investigation is an exception to the privilege. Therefore, ethically a CPA can provide any documents requested by the Board. There is no guidance in the statute as to what the Accountancy Board can do with them.
It turns out in some cases they attach them as exhibits to the consent orders and make them available to anyone who asks to see the disciplinary history! While there is no ethical problem with this for the CPA it certainly has the potential for a client problem if the client discovers that their tax returns or audit paperwork are available to the general public. Certainly if the client is harmed in some way by this information leaking out they would have a cause of action to sue the CPA. The client could claim that this was a foreseeable result of the CPA releasing this information without any protection to the client. Without addressing the merits of such a claim, which I believe should be vigorously defended, no CPA wants to be sued in the first place or have to deal with a lawsuit, the costs or the aggravation.
There is a simple fix. When asked by the investigator or any representative of the Board to provide any client documents, redact all client identifying information. Name, address, social security or tax identification numbers and phone numbers all should be removed. They can be whited out or blacked out with a permanent marker. It will be obvious that information was removed and that’s ok. Don’t remove anything other than the client identifying information. I even recommend that when you provide the documents to the Board your cover letter indicates that you have removed all client identifying information, and if there is anything you missed, that information should also be removed before any of the documents are made available to the public.
The Accountancy Board should have no problem with this. If they do you should contact an attorney before turning over any documents and your attorney should be able to convince them that the redacted documents will serve their
purposes. (Frankly, your license is too important not to have the advice of counsel in a license investigation or
While I don’t know if this may be an issue for any other profession with a recognized privilege but I can’t imagine that any of the medical boards are publishing patient’s medical records so it is unlikely. However, keep in mind that if your profession has a privilege you can (and probably should) always redact the client identification information unless it somehow relates to the prosecution’s case.
At this point the PICPA will attempt to address this issue with the Accountancy Board, its counsel and the prosecutors in an effort to make certain that they all understand that this is a serious issue for CPAs. We will try to stop this practice of making unredacted documents available even in the circumstances where the CPA
fails to redact the information. Hopefully, a little education will go a long way to alleviate this problem.