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The professional ethics committee: protecting the public interest.

Each state CPA society as a professional ethics committee to protect the public and the profession. Michael A. Pearson, CPA, professor of accounting at Kent State University, Kent, Ohio, and a member of the Ohio Society of CPAs (OSCPA) professional ethics committee, describes the procedures his committee follows when it becomes aware of a possible unethical act.

Every CPA has a responsibility to the public. To ensure the public interest is protected, the OSCPA professional ethics committee advises CPAs on ethical matters, comments on proposed changes in the OSCPA Code of Professional Conduct and addresses allegations of unethical conduct by members.

Members should be aware of the committee's work and function for at least four reasons. They should

1. Recognize the committee can provide advice on ethical issues.

2. Know they can contact the committee with comments on proposed changes in the OSCPA Code of Professional Conduct.

3. Realize they have an obligation to be complainants, if necessary, by reporting fellow OSCPA members'unethical conduct.

4. Understand the committee's due process procedures in case they are respondents - the subjects of complaints.

In all of its deliberations, the professional ethics committee is guided by the OSCPA's Code of Professional Conduct and Joint Ethics Enforcement Program (JEEP) Manual of Procedures. The latter describes the due process procedures the committee must follow when considering potential disciplinary matters. "Joint enforcement" refers to an OSCPA-American Institute of CPAs agreement to jointly enforce their professional conduct codes. The close working relationship between the OSCPA and the Institute ensures needed exchanges of information take place and guards against unnecessary duplication of efforts.

Allegations of conduct possibly in violation of the OSCPA Code of Professional Conduct come to the committee's attention through member and nonmember correspondence, AICPA referrals, court decisions, news stories, anonymous tips and other sources. The committee potentially faces five decision points each time it considers a possible conduct code violation.

ARE AUTOMATIC DISCIPLINARY PROCEEDINGS APPLICABLE?

Membership automatically is terminated for causes described in detail in the OSCPA bylaws. Willfully failing to file tax returns, filing fraudulent returns and assisting others in filing fraudulent returns are examples of acts resulting in automatic membership termination.

SHOULD THE AICPA CONDUCT THE INVESTIGATION?

Some cases must be referred to the AICPA professional ethics division. Complaints having national or international significance, for example, most appropriately are ddressed by the AICPA, as are cases affecting more than one state society. The OSCPA ethics committee may ask the AICPA professional ethics division to consider or investigate a case for any reason.

IS FURTHER INVESTIGATION WARRANTED?

If automatic disciplinary proceedings are not applicable and the OSCPA ethics committee is determined to be the appropriate body to consider an allegation, it conducts an initial review to determine if further investigation is warranted.

Before doing so, the committee acknowledges by letter the allegation's receipt. The letter indicates a confidential investigation will take place if deemed necessary by the committee. If the allegation is submitted by a complainant who is neither an OSCPA nor an AICPA member, generally the only contact OSCPA has with him or her is this initial acknowledgment. No additional information is provided to nonmember complainants regarding the outcome of their complaints.

OSCPA and AICPA member complainants are notified if the committee decides not to undertake an investigation, in which case the complainant has the right to forward the complaint to the AICPA Joint Trial Board for its consideration.

The complainant's identity is confidential and is disclosed to the respondent only if necessary.

The content of an initial review ranges from the ethics committee's basic reading and consideration of the complaint to gathering additional information from the complainant, the respondent and any other source.

The JEEP manual specifies four circumstances in which an initial review should result in no further investigation and dismissal of the complaint: (1) when no OSCPA Code of Professional Conduct provision applies, (2) when the alleged act is not a code violation even if the act occurred, (3) when all of the allegation's aspects are exactly the same as those of a current or closed JEEP investigation and (4) when the respondent is neither an OSCPA nor an AICPA member.

HAS PRIMA FACIE EVIDENCE

OF A CODE VIOLATION BEEN

FOUND?

If the committee determines the matter warrants further investigation, it sends an opening letter to the respondent that describes the issues under investigation and cites the rule or rules of conduct that may have been violated. The respondent is informed the investigation's results will not be published unless the matter is submitted by the committee to the Joint Trial Board and the board finds him or her guilty of violating a rule of conduct. Respondents also are told the committee will defer the investigation on request if the issues are the subject of legal proceedings or of an investigation by a regulatory agency. The letter concludes with specific questions the committee wishes to have answered and a request for needed documents.

An investigation's purpose is to determine whether there is prima facie evidence of a violation of the OSCPA Code of Professional Conduct. Evidence is obtained through many sources, including the allegation prompting the investigation, facts acquired during the initial review, written and oral responses to questions posed to the respondent, and other sources and professional pronouncements.

One committee member typically is assigned responsibility for overseeing a case. The overseeing member and perhaps other committee members gather and examine the evidence needed to complete an investigation and report the findings to the full committee.

Gathering and examining evidence can include reviewing work-papers, financial statements a reports; examining relevant file and conducting telephone or on-site interviews with the respondent. A respondent always is offered the opportunity of a person interview with at least two committee representatives, unless on the basis of other evidence the committee concludes no violation has occurred.

The committee sometimes re quests the assistance of the OSCP quality review committee's reporting standards review program (RSRP) with matters involving financial statements and reports Masked copies of pertinent documents are sent to the RSRP for it assessment of their conformity with professional standards. The RSRP'S evaluations of the responent's work products then are used by the ethics committee as aids in determining whether a rule of conduct has been violated.

At the conclusion of an investigation, each ethics committee member is furnished with an investigation summary. The full committee is responsible for arriving at a finding of "violation" or "no violation." (Another possible conclusion, "failure to cooperate," is viewed seriously by the OSCPA and the AICPA, which are likely to bring the respondent before the Joint Trial Board and charge him or her with violating their bylaws, as well as Rule 102 - Integrity and Objectivity and Rule 501 - Acts Discreditable of the AICPA and OSCPA conduct codes.)

When no prima facie evidence of a violation is found, the committee informs the respondent by letter that the case is being closed with a finding of no violation and that it will reopen the investigation if new information warrants such a step.

When prima facie evidence of a violation is found, the committee must decide, on the basis of the gravity of the violation, whether to bring the case before the Joint Trial Board or to issue a letter of required corrective action.

IS THE VIOLATION OF

SUFFICIENT GRAVITY TO

WARRANT FORMAL

DISCIPLINARY ACTION?

When the ethics committee finds a violation, it can either refer the case to the Joint Trial Board for formal disciplinary action or issue a letter of required corrective action. If the case is referred to the Joint Trial Board and the respondent is found guilty of the committee's charges, the board can suspend or expel the respondent from the OSCPA, the AICPA or both or admonish him or her. Additional possible Joint Trial Board actions include requiring peer review, the completion of designated continuing professional education courses or both. Guilty findings of the Joint Trial Board are published in the CPA Letter and the OSCPA Newsletter.

If the committee decides the code violation is not of sufficient gravity to warrant referral to the Joint Trial Board, it instead issues the respondent a letter of required corrective action stating its findings and indicating the actions it wants the respondent to take. Such letters are viewed as strictly confidential and are not published.

A letter of required corrective action is likely to call for the completion of committee-determined CPE courses and the later submission of reports, workpapers and financial statements for committee review. (The committee is responsible for monitoring compliance with the letter's directives.) Such a letter always advises the respondent of his or her right to reject it and its directives and of the possible result of a rejection. If a letter is rejected, the committee can decide either not to pursue the matter further or to forward the case to the Joint Trial Board.
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Title Annotation:Ohio Society of CPAs
Author:Pearson, Michael A.
Publication:Journal of Accountancy
Date:Oct 1, 1993
Words:1477
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