Examining the Pennsylvania Accounting Code of Ethics

In the commonwealth of Pennsylvania, the State Board of Accountancy regulates the practice of public accountants and certified public accountants who provide service within the state. This includes providing information on the CPA exam, verifying if someone is certified and/or licensed in Pennsylvania, and providing information to out-of-state firms seeking temporary permits. Also, the State Board of Accountancy revises, circulates, and enforces standards of professional conduct. These standards of professional conduct help make up Pennsylvania's accounting code of ethics. Comprised of 49 sections, the standards fall under one of ten headings: General Provisions, Supervision, Examinations, Relations with Clients and Public, Liability, Public Accountant Examinations, Experience, Continuing Professional Education, Interpretation, and Peer Review.

Overview of the Code of Ethics

It is the heading titled Relations with Clients and Public that specifically covers the code of ethics (The Pennsylvania Code Chapter 11). Relations with Clients and Public covers the following topics:

· Independence

· Integrity and Objectivity

· Competence

· Commissions and Referral Fees

· Contingent Fees

· Incompatible Occupations

· Auditing Standards and Other Technical Standards

· Accounting Principles

· Forecasts

· Confidential Client Information

· Records

· Acting Through Others

· Advertising

· Solicitation

· Form of Practice

Although the heading Relations with Clients and Public appears to cover a thorough listing of topics, some of these topics lack essential details. For example, the topic Incompatible Occupations states that "a licensee may not concurrently engage in the practice of public accounting and in another business or occupation which impairs his independence or objectivity in rendering professional services" (Chapter 11 State Board of Accountancy). Although this statement makes sense, it is not specific enough. What type of business or occupation would impair an individual's independence or objectivity in providing professional services? What criteria are used to determine this? Who makes the final decision and what is it based on?

Other topics do provide sufficient information. The topic Confidential Client Information provides for accountant client privilege. It states that "a licensee may not without the consent of his client disclose a confidential information pertaining to his client obtained in the course of performing professional services except to the extent provided by section 11.1 of the act (63 P. S. § 9.11a)" (Chapter 11 State Board of Accountancy). This statement makes sense and it is specific. A licensee may not disclose confidential information with two exceptions: client consent and/or provisions listed in section 11.1 of the act.

The State Board of Accountancy does not share a position on accounting work product. That being the case, one would have to assume that the state's position is the same as the federal government, and that accounting work product is not protected under accountant-client privilege.

Criminal and/or Civil Penalties for Code Violations

There are several code violations that may result in criminal and/or civil accountant liabilities. One of these violations is practicing public accounting without a license. George Edward Rock, of Pittsburgh, "was assessed a $500 civil penalty for practicing public accounting without a current license" (Disciplinary Actions).

Another violation that may result in civil penalties is unprofessional conduct. David Brian Moul, of York, "was assessed a $2,000 civil penalty for engaging in unprofessional conduct by failing to exercise due professional care in the performance of professional services and engaging in conduct that lowers public esteem for the public accounting profession" Disciplinary Actions).

A third violation that may result in civil penalties is failure to complete a required CPE. Bruce E. Haney, of Allison Park, "was assessed a $1,000 civil penalty and directed to complete make-up CPE for failing to complete required CPE during the 2000-2001 reporting period" (Disciplinary Actions).

In addition to civil penalties, accountants may have their certified public accountant certificates suspended or revoked. "John Allen Dill, of Philadelphia, had his certificate of certified public accountant suspended for a minimum of three years for failing to timely return client records, engaging in unprofessional conduct by failing to exercise due professional care in the performance of professional service, and failing to comply with a prior Board disciplinary order" (Disciplinary Actions).

Conclusion

The commonwealth of Pennsylvania and the Pennsylvania State Board of Accountancy have created a respectable accounting code of ethics, while providing civil penalties, criminal penalties, and license suspension or revocation in an effort to enforce the code of ethics. However, the standards of professional conduct need to be updated to include more details and better definitions, in order to prevent any misunderstanding of the code.

References

"Chapter 11 State Board of Accountancy." State Board of Accountancy. URL: http://www.pacode.com/secure/data/049/chapter11/049_0011.pdf

"Disciplinary Actions." Pennsylvania State Board of Accountancy Newsletter. URL: http://www.dos.state.pa.us/bpoa/lib/bpoa/20/acct_board/cpa_2005.pdf

"The Pennsylvania Code Chapter 11 - State Board of Accountancy." Commonwealth of Pennsylvania. URL: http://www.pacode.com/secure/data/049/chapter11/chap11toc.html