1 ethics for governmental cpas in florida 2012. 2 today’s discussion leader is william blend, cpa,...
TRANSCRIPT
1
Ethics for Governmental CPAs in Florida
2012
2
Today’s Discussion Leader is
William Blend, CPA, CFEMoore Stephens Lovelace, PA
1201 S. Orlando Av, Suite 400Orlando, FL 32789
(407) [email protected]
3
For More Information
FICPA Member Service Center:(800) 342-3197 (in Florida) or (850) 224-2727
www.ficpa.org/ethics
Sponsor CodesEthics Sponsor ID (FBOA): 3461
QAS Sponsor ID: 014DBPR live presentation ID: 4980
4
Schedule
Course Begins
Break
Course Ends
100 Minutes 100 Minutes
5
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
6
Chapter 1Objectives, Background and
Overview
p. 1-1
Learning Objectives …
7
Why are we here?
p. 1-1
8
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
9
Yellow Book CPE Requirements
p. 1-2
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
10
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
11
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
12
What are Ethics?
p. 1-6
The discipline dealing with what is good and bad with
moral duty and obligation.
13
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
14
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.”
.-- National Malcolm Baldridge
Quality Awardp. 1-6
15
Ethics As a SystemKey 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
16
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
17
Behavioral sciences include:• Psychology• Sociology• Cultural Anthropology
Ethics and Psychology
p. 1-7
18
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
19p. 1-8
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.
20
Crossroads of danger and opportunity
p. 1-8
CPAs in Crisis
(wei-ji)
21
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
22
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
23
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
Responding to a Crisis
p. 1-10
24
Ethics and the CPA Profession
Some mutual fund companies in illegal trading practices
Prominent pharmaceutical companies engaging in ethical violations and cover-ups
Professional and Olympic athletes using performance enhancers
p. 1-10
25
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
26
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
27
Governmental Ethics in the News
What ethics news regarding governmental agencies has
made headlines in your area?
p. 1-10
28
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
29
Who Regulates Ethics?
FL BOA AICPA SEC PCAOB Yellow Book and OMB State regulatory agencies IRS
p. 1-11
30
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
31
General Questionsand Answers
AICPA Code of Professional Conduct
www.aicpa.org
p. 1-11
32
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
33
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
34
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
35
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
36
Ethics Decision Tree
For Government
p. 1-14
37
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
38
State of FloridaOffice of the
Governor
p. 1-18
Executive OrderNumber
11-03
39
Chapter 2Ethical Beliefs and Behavior
in US Businesses & Government Agencies
p. 2-1
Learning Objectives …
40
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
41
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
42
2011 Survey Results
Fewer employees witnessed misconduct on the job• Fell from 49% in 2009 to 45% in 2011 (new low)
More employees reported misconduct when they observed it• 65% in 2011, up from 63% in 2009
Strength of ethical culture in the workplace decreased – a negative sign • 42% in 2011, up from 35% in 2009
Perceived pressure to commit an ethics violation increased• 13% in 2011 from 8% in 2009
p. 2-2
43
However…retaliation against those who reported misconduct increased sharply … a negative development
However …
p. 2-2
44
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
45
Survey Results (cont.)
Active social networkers report more negative experiences in their workplaces
Also more likely to experience pressure to compromise ethics and to experi ence retaliation for reporting misconduct than less active social networkers
32% of active social networkers are more likely to feel pres sure than less active networkers and non-networkers
p. 2-2
46
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 em ployees’ experiences are worse than in the past
p. 2-2
47
2011 Was Unique Yearfor 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
48
2011 Was Unique Yearfor 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
49
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
50
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
51
30% of federal and 14% of state/ local govt. workers believe their organizations have well-implemented 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
Governmental Study - Results
p. 2-3
52
Organizational EthicsLinks 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
53
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.
Too Big to Regulate?
p. 2-6
54
Chapter 3
Assurance Provided by Regulation
(Chapter 455)
p. 3-1
Learning Objectives …
55
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
56
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
The Division of Certified Public Accountants
p. 3-1
Division Offices
Tallahassee, FloridaDepartment of Business and
Professional Regulation Headquarters
Gainesville, FloridaSection 20.165(2)(c)(2), Florida
Statutes, states that the Division of Certified Public Accounting shall be
located in Gainesville.
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.
www.MyFloridaLicense.comp. 3-2
Number of Licenses
28,285 Active CPAs 2,163 Inactive CPAs 5,263 Accounting Firms
Source: DBPR Div. of CPA, November 2011
p. 3-2
www.MyFloridaLicense.com
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 agendasCopies agenda items and bind board booksPrepares 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 ByBoard of Accountancy
p. 3-2
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
www.MyFloridaLicense.com
Complaint Process
Cases found to have probable cause are presented to the full board for final action.
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.
Complaints found to have legal sufficiency are forwarded to the Office of General Counsel (OGC)
The Division is responsible for reviewing complaints for legal sufficiency
Final Orderp. 3-3
www.MyFloridaLicense.com
Protecting the PublicDisciplinary 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
64
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
65
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
66
Introduction to the Case Study
The case study begins with this chapter and continues throughout the manual.
p. 3-13
67
Chapter 4
Public Accountancy in Florida
(Chapter 473)
p. 4-1
Learning Objectives …
68
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
69
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
70
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
71
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
p. 4-4
Biennial License RenewalIndividual 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
www Payment can be made online at www.MyFloridaLicense.com
www Payment can be made online at www.MyFloridaLicense.com
Biennial License RenewalFirm 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
74
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
75
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
76
Licensure by Endorsement
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
473.308 (7)
77
Renewal of License
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)
(473.311, FS)
p. 4-10
78
Informaing DBPR of Address Changes
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’
(61H1-26.005, FAC)
p. 4-11
79
Changes by Firms
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
(61H1-26.004, FAC)
p. 4-11
www.MyFloridaLicense.com
www.MyFloridaLicense.com
p. 4-11
81
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
82
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
83
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
84
Continuing Education
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
(473.312 FS)
p. 4-12
85
Continuing Education (cont.)
Not less than 25 percent of the total hours required by the board shall be in accounting-related 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
(473.312 FS)
p. 4-12
86
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
87
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
88
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
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
89p. 4-13
90
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, self-reporting of hours earned
Retain documentation in case of CPE audit
p. 4-13
91
Inactive Status
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
(473.313 FS)
p. 4-14
92
Reactivation
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)
(61H1-33.006)
p. 4-14
93
Mobility
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.
(473.3141 FS)
p. 4-15
94
Temporary License
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
(473.314 FS)
p. 4-16
95
“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
96
“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
97
“Accountancy Bill” 2012 Legislation – 5 Key Changes
Amends 473.313(3), F.S., by creating a 75-day 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
98
Chapter 5Ethics of Integrity,
Objectivity, Commissions, Contingencies, and
Communications(FAC 61H1)
p. 5-1
Learning Objectives …
99
Comparison of Florida Rulesto National Standards
FAC 61H1-21.002
In the Florida Administrative Code (FAC), a CPA shall not:
• Knowingly misrepresent facts• Subordinate their judgment to:
Clients Employers Other third parties
p. 5-1
100
Comparison of Florida Rulesto 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
101
“A member should maintain objectivity and be free of conflicts
of interest in discharging professional responsibilities.”
Definition of Objectivity
p. 5-2
102
“Integrity can accommodate the inadvertent error and the honest difference of opinion; it cannot
accommodate deceit or subordination of principle.”
Definition of Integrity
p. 5-2
103
What is Integrity?
Being candid Being honest Placing service and public trust above
personal advantage and personal gain
Doing the right thing Acting in good faith Observing both form and spirit of
professional standards
p. 5-2
104
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
105
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
106
Materiality -A Key Concept
What is it?
p. 5-4
107
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
108
Materiality
Has been defined in FASB, AICPA, SEC, and PCAOB documents…
So, if the definitions are everywhere, what’s the problem?
p. 5-4
109
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
110
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
111
Impairment of Objectivity or Integrity
Rule 102, Ethics Ruling No. 113 – “Acceptance or Offering of Gifts and Entertainment”
What about gifts???• Nature of gift• Occasion• Cost• Other matters
p. 5-5
112
2007 GAS has guidance on: Public interest Professional behavior Integrity Objectivity Proper use of government information,
resources, and position
Ethical Responsibilities under GAS 2007
p. 5-5
113
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
Gifts at the Federal Level
5 C.F.R. § 2635.202-204
p. 5-7
114
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
Gifts at theState Level
Florida Statutes 112.3148
p. 5-8
115
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
116
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
117
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
118
Chapter 6
Competency and Related Issues
p. 6-1
Learning Objectives …
119
Florida Standards - Compliance
The Florida standards require compliance in four general areas:1. Professional Competence2. Due Professional Care3. Planning and Supervision4. Sufficient Relevant Data
p. 6-1
120
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
121
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
122
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
123
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
124
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
125
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
126
HindsightHow we may be judged
p. 6-3
127
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
128
Hindsight Protection
p. 6-3
Documentation
Documentation
Documentation
Documentation
Documentation
129
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
130
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
131
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
132
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
133
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
134
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
135
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
136
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
137
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
138
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
139
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
140
Chapter 7Ethics and Independence
(Florida and AICPA)
p. 7-1
Learning Objectives …
141
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
142
Key Independence Terms Covered member
• Single Office• Multi Office
Services performed• Attest services• Nonattest services
Client Relationships
p. 7-2
143
Who is a Covered Member?
Individual on attest engagement team
Individual in a position to influence Partner or Manager providing
nonattest services if…
Partner in office of engagement partner
The firm Firm or commonly controlled entities
p. 7-3
144
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
145
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
146
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
147
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
148
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
149
Basic Engagements
Five basic engagements require independence:
1. Audit2. Review3. Compilation4. Attestation5. Prospective Financial Statements
p. 7-6
150
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
151
Covered Members and Independence
Single Office Multi Offices
p. 7-6
152
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
153
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
154
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
155
Chapter 8
Independence: Non-attest, Non-audit Services
p. 8-1
Learning Objectives …
156
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
157
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
158
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
159
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
160
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
161
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
162
Professional Ethics Quiz
…do you know the answer?
p. 8-4
163
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
164
Performing Nonattest Services Independence Rules of GAS
Overarching Principles1. 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
165
Yellow Book Independence Scenarios
…do you know the answer?
p. 8-13
By the Comptroller General of the United StatesGovernment Auditing Standards
July 2007
166
Chapter 9Ethical Responsibilities to
Clients and Other Considerations
p. 9-1
Learning Objectives …
167
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
168
Client Confidentiality
Confidentiality includes:• Office situations• Storage in and away of client data• Other situations
p. 9-3
169
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
170
Revisions to Rule 501-1
The revised interpretation defines key terms
Makes interpretations of how to respond to client requests
p. 9-5
171
Florida’s Public Record LawChapter 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
172
Advertising
Advertising may not be:• Fraudulent• False• Deceptive• Misleading
p. 9-10
173
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
174
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
175
Solicitation (61H1-24.002)
Licensee may reply to requests for proposals
Must adhere to rules for advertising, both oral and written
p. 9-13
176
Responsibilities toOther 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
177
Practical Responsibilities
Advertising/Advertisements Solicitation Other Persons Names, Terms, Branch Offices Form of Practice
p. 9-14
178
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
179
AICPA Rulings and Interpretations on Ethics
p. 9-15
180
Chapter 10
Code of Ethics for Public Officers and Employees
p. 10-1
Learning Objectives …
181
Key Definitions
Agency Breach of public trust Conflicts of interest Gift Purchasing agent Relative See s. 112, Part III, Definitions
p. 10-2
182
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
183
Chapter 11
Future Implications
p. 11-1
Learning Objectives …
184
To prophesy is extremely difficult … especially with regard
to the future.
p. 11-1
Chinese Proverb
185
Our FutureWhere is the CPA profession going?
p. 11-1
186
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
187
Mobility
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.
473.3141 FS
p. 11-2
188
Mobility (cont.)
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.
.
473.3141 FS
p. 11-2
189
Mobility (cont.)
Substantial Equivalency – 3 Issues• Education• Experience• Enforcement
473.3141 FS
p. 11-2
190
CPA Mobility Legislation 2012
p. 11-2
191
“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
192
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
193
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
194
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
195
p. 11-3
196
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
197
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
198
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
199
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
200
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
201
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
202
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
203
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
204
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
205
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
206
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
207
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
208
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
209
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
210
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
Where in the heck are we going?
211
212
CPA Horizons 2025The 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
213
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
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 andLifelong 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-to-date
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-at-home 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
241
Even if you are on the right track, you’ll get run over if you just sit there.
Will Rogers
p. 11-7
242
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
243
The Reason for This is Simple…
Our Professional
ETHICS
p. 11-7
244
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
standardsAppendix I, YB
245
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
246
Thank you…
for attending today!