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1 Ethics for Governmental CPAs in Florida 2012. 2 Today’s Discussion Leader is William Blend, CPA, CFE Moore Stephens Lovelace, PA 1201 S. Orlando Av,

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Presentation on theme: "1 Ethics for Governmental CPAs in Florida 2012. 2 Today’s Discussion Leader is William Blend, CPA, CFE Moore Stephens Lovelace, PA 1201 S. Orlando Av,"— Presentation transcript:

1 1 Ethics for Governmental CPAs in Florida 2012

2 2 Today’s Discussion Leader is William Blend, CPA, CFE Moore Stephens Lovelace, PA 1201 S. Orlando Av, Suite 400 Orlando, FL (407)

3 3 For More Information FICPA Member Service Center: (800) (in Florida) or (850) Sponsor Codes Ethics Sponsor ID (FBOA): 3461 QAS Sponsor ID: 014 DBPR live presentation ID: 4980

4 4 Schedule Course Begins Break Course Ends 100 Minutes

5 5 Housekeeping Details Course evaluations Course evaluations Confirmation of attendance Confirmation of attendance DBPR and BOA course ID numbers DBPR and BOA course ID numbers Type of credit – Ethics (ETH) Type of credit – Ethics (ETH) Participants’ request Participants’ request Enter/leave quietlyEnter/leave quietly Quiet cell phonesQuiet cell phones Other matters Other matters

6 6 Chapter 1 Objectives, Background and Overview p. 1-1 Learning Objectives …

7 7 Why are we here? p. 1-1

8 8 Overview of the Ethics Requirement 80 hours over a two-year reporting period 80 hours over a two-year reporting period 20 hours of Accounting and Auditing 20 hours of Accounting and Auditing 20 hours of Behavioral – maximum 20 hours of Behavioral – maximum 4 hours of Ethics 4 hours of Ethics No limitation or requirement for Technical Business No limitation or requirement for Technical Business Ethics course content replaces need for Laws and Rules exam Ethics course content replaces need for Laws and Rules exam p. 1-2

9 9 Yellow Book CPE Requirements p hours over a two-year reporting period, essentially, 80 hours of A&A 80 hours over a two-year reporting period, essentially, 80 hours of A&A CPE to “directly enhance the auditor’s professional proficiency” CPE to “directly enhance the auditor’s professional proficiency” 24 hours directly related to governmental topics 24 hours directly related to governmental topics 20 out of the 80 hours to be completed in any one year 20 out of the 80 hours to be completed in any one year

10 10 Which Ethics Policies to Follow? Local – organization? Local – organization? State – rules and regulations? State – rules and regulations? National – AICPA, Yellow Book? National – AICPA, Yellow Book? They may contradict. They may contradict. Are you responsible to follow more than one? Are you responsible to follow more than one? p. 1-4

11 11 Major Course Topics Relationship of Florida laws and rules to national standards Relationship of Florida laws and rules to national standards Florida Statutes, Chapters 455, 473, 112 and 119 Florida Statutes, Chapters 455, 473, 112 and 119 Florida Administrative Code, Chapter 61H1 Florida Administrative Code, Chapter 61H1 Governmental Auditing Standards Governmental Auditing Standards Independence in Florida Independence in Florida Ethical responsibilities of CPAs Ethical responsibilities of CPAs p. 1-4

12 12 What are Ethics? p. 1-6 The discipline dealing with what is good and bad with moral duty and obligation.

13 13 Key Definitions - Ethics A set of moral principles or values A set of moral principles or values A theory or system of moral values A theory or system of moral values The principles of conduct governing an individual or a group The principles of conduct governing an individual or a group A guiding philosophy A guiding philosophy p. 1-6

14 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 Award p. 1-6

15 15 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

16 16 Ethics As a System Ethics has traditionally been a subset of philosophy. 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. 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? Does psychology lack any authority of what human behavior ought to be? p. 1-7

17 17 Behavioral sciences include: Behavioral sciences include: PsychologyPsychology SociologySociology Cultural AnthropologyCultural Anthropology Ethics and Psychology p. 1-7

18 18 Ethics and Religion Religion has a concern with moral conduct influencing normal behavior Religion has a concern with moral conduct influencing normal behavior Religions may have different sets of ethical values depending on the religion Religions may have different sets of ethical values depending on the religion Ethics is often a common ground for different religions Ethics is often a common ground for different religions p. 1-8

19 19 p. 1-8 Teaching of Ethics Can one teach someone to be ethical? Can one teach someone to be ethical? No, it is either in one’s self or it is not.No, it is either in one’s self or it is not. Can one teach someone what is ethical behavior? Can one teach someone what is ethical behavior? Yes, it is a system of values or principles for actions.Yes, it is a system of values or principles for actions.

20 20 Crossroads of danger and opportunity p. 1-8 CPAs in Crisis (wei-ji)

21 21 Past Studies The bedrock values of the CPA profession: Committed to the rules of the accounting profession Committed to the rules of the accounting profession Being reliable Being reliable Consistently demonstrated integrity and ethical behavior Consistently demonstrated integrity and ethical behavior AICPA 2005 study – CPAs ranked higher than many other professionals AICPA 2005 study – CPAs ranked higher than many other professionals p. 1-9

22 22 Ethics and the CPA Profession Ethics begins with the individual Ethics begins with the individual Organizational ethics are guided by individual ethics Organizational ethics are guided by individual ethics CPA reputation has been based on core values for over 100 years CPA reputation has been based on core values for over 100 years HonestyHonesty IntegrityIntegrity TrustworthinessTrustworthiness p. 1-9

23 23 The ethics requirements in the CPA profession in Florida (and maybe everywhere) most likely come as a response 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: The responses have been at many levels: RegulatoryRegulatory EducationalEducational PersonalPersonal Responding to a Crisis p. 1-10

24 24 Ethics and the CPA Profession Some mutual fund companies in illegal trading practices Some mutual fund companies in illegal trading practices Prominent pharmaceutical companies engaging in ethical violations and cover- ups Prominent pharmaceutical companies engaging in ethical violations and cover- ups Professional and Olympic athletes using performance enhancers Professional and Olympic athletes using performance enhancers p. 1-10

25 25 Ethics and the CPA Profession Politicians in blatant ethical violations and shady conduct Politicians in blatant ethical violations and shady conduct Newspaper and news broadcast companies in fabrication, plagiarism, and falsification Newspaper and news broadcast companies in fabrication, plagiarism, and falsification Sexual misconduct of religious leaders Sexual misconduct of religious leaders p. 1-10

26 26 Ethics and the CPA Profession Internet spammers, virus creators, hackers, moral indecency Internet spammers, virus creators, hackers, moral indecency Illegal downloading of music and files Illegal downloading of music and files Shoplifting in the form of copyright infringement Shoplifting in the form of copyright infringement Accounting wrongdoing Accounting wrongdoing p. 1-10

27 27 Governmental Ethics in the News What ethics news regarding governmental agencies has made headlines in your area? What ethics news regarding governmental agencies has made headlines in your area? p. 1-10

28 28 Changes have Created a Crossroads of the Profession Increased emphasis on ethics at state and national levels Increased emphasis on ethics at state and national levels Changes in our profession Changes in our profession OwnershipOwnership SolicitationSolicitation CommissionsCommissions Sale of financial productsSale of financial products Competitive biddingCompetitive bidding p. 1-10

29 29 Who Regulates Ethics? FL BOA FL BOA AICPA AICPA SEC SEC PCAOB PCAOB Yellow Book and OMB Yellow Book and OMB State regulatory agencies State regulatory agencies IRS IRS p. 1-11

30 30 AICPA Code of Professional Conduct.02The 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 31 General Questions and Answers AICPA Code of Professional Conduct p. 1-11

32 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 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 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 35 Background of Florida’s Ethics Requirement Florida became the 37 th state to establish an ethics requirement Florida became the 37 th state to establish an ethics requirement All 50 states have this requirement All 50 states have this requirement Outlined by Florida Board of Accountancy (see 61H ) Outlined by Florida Board of Accountancy (see 61H ) FICPA’s support is in line with national support FICPA’s support is in line with national support p. 1-13

36 36 Ethics Decision Tree For Government p. 1-14

37 37 For More Information Florida Board of Accountancy Florida Board of Accountancy Florida Institute of CPAs American Institute of CPAs Florida Institute of CPAs American Institute of CPAs Financial Accounting Standards Board Financial Accounting Standards Board Appendix B

38 38 State of Florida Office of the Governor p Executive Order Number 11-03

39 39 Chapter 2 Ethical Beliefs and Behavior in US Businesses & Government Agencies p. 2-1 Learning Objectives …

40 40 The Ethics Resource Center ERC was founded in 1922 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. 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. ERC has been a resource for public and private institutions committed to a strong ethical culture for 90 years. Visit Visit p. 2-1

41 41 National Business Survey Survey of businesses conducted by ERC in 2011; government survey in 2007 Survey of businesses conducted by ERC in 2011; government survey in th in a series of surveys 7 th in a series of surveys Polled over 3,000 employees in the business, government and non profit sectors Polled over 3,000 employees in the business, government and non profit sectors Longitudinal research study; identifies context for national trends Longitudinal research study; identifies context for national trends p. 2-1

42 Survey Results Fewer employees witnessed misconduct on the job Fewer employees witnessed misconduct on the job Fell from 49% in 2009 to 45% in 2011 (new low)Fell from 49% in 2009 to 45% in 2011 (new low) More employees reported misconduct when they observed it More employees reported misconduct when they observed it 65% in 2011, up from 63% in % in 2011, up from 63% in 2009 Strength of ethical culture in the workplace decreased – a negative sign Strength of ethical culture in the workplace decreased – a negative sign 42% in 2011, up from 35% in % in 2011, up from 35% in 2009 Perceived pressure to commit an ethics violation increased Perceived pressure to commit an ethics violation increased 13% in 2011 from 8% in % in 2011 from 8% in 2009 p. 2-2

43 43 However…retaliation against those who reported misconduct increased sharply … a negative development However … p. 2-2

44 44 Survey Results (cont.) Post-recession employee conduct is similar to behavior during the recession 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 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 Also matches historical data that shows ethical conduct improves when the economy cools p. 2-2

45 45 Survey Results (cont.) Active social networkers report more negative experiences in their workplaces 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 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 32% of active social networkers are more likely to feel pres­sure than less active networkers and non-networkers p. 2-2

46 Was Unique Year for Ethics The NBES findings indicate something is changing in the American workplace 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 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

47 Was Unique Year for Ethics (cont.) ERC’s explanation of the unique results from the 2011 survey could be one of two views: 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 itselfThe 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 studiesThe 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 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

49 49 Specific Forms of Retaliation Experienced 64% Excluded from decisions and work activity 64% Excluded from decisions and work activity 62% Received a cold shoulder 62% Received a cold shoulder 62% Verbally abused by management 62% Verbally abused by management 56% Almost lost their job 56% Almost lost their job 55% Not given promotions or raises 55% Not given promotions or raises 51% Verbally abused by other employees 51% Verbally abused by other employees 46% Cut in pay or hours 46% Cut in pay or hours 44% Relocated or reassigned 44% Relocated or reassigned 32% Demoted 32% Demoted 31% Experienced physical harm to person or property 31% Experienced physical harm to person or property 31% Experienced online harassment 31% Experienced online harassment 29% Harassed at home 29% Harassed at home p. 2-2

50 50 Observed Misconduct Nearly half (49%) of employees observed some type of misconduct taking place in the workplace 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 Percentage is based on employees’ observing at least 1 of 15 specific behaviors in the past 12 months p. 2-2

51 51 30% of federal and 14% of state/ local govt. workers believe their organizations have well- implemented ethics and compliance programs 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 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 58% of all government workers who saw misconduct did not report it Did not believe managers would take actionDid not believe managers would take action Feared they would face retaliation if they reported what theyFeared they would face retaliation if they reported what they 1% used anonymous hotlines1% used anonymous hotlines Governmental Study - Results p. 2-3

52 52 Organizational Ethics Links for Government – Examples City Ethics - FirstGov.gov - Dodd-Frank Wall Street Reform & Consumer Protection Act - House Committee on Standards of Official Conduct - US Office of Government Ethics - p. 2-4

53 53 The ERC Fellows Program meets twice a year to study issues. 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. 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?” 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 54 Chapter 3 Assurance Provided by Regulation (Chapter 455) p. 3-1 Learning Objectives …

55 55 Florida Board of Accountancy Defined in FS (1) Defined in FS (1) Powers and duties include: Powers and duties include: Authority to issue citationsAuthority to issue citations Conduct disciplinary proceedingsConduct disciplinary proceedings Designate violationsDesignate violations Recover costsRecover costs p. 3-1

56 56 The Division of Certified Public Accounting is a division within Florida’s Department of Business and Professional Regulation (DBPR) 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 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

57 Division Offices Tallahassee, Florida Department of Business and Professional Regulation Headquarters Gainesville, Florida Section (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. p. 3-2

58 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

59 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

60 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

61 Complaints Received By Board of Accountancy p Total received Legally sufficient Probable cause found No probable cause Administrative Disciplinary action

62 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 Order p. 3-3

63 Protecting the Public Disciplinary Proceedings Florida Statute 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 64 Authority to Issue Citations (Florida Statutes ) FL BOA has authority to issue citations FL BOA has authority to issue citations FL BOA may designate violations FL BOA may designate violations FL BOA can recover costs FL BOA can recover costs Must issue citations within 6 months Must issue citations within 6 months p. 3-5

65 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 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 Making or filing a false report or record that licensee knows to be false p. 3-9

66 66 Introduction to the Case Study The case study begins with this chapter and continues throughout the manual. The case study begins with this chapter and continues throughout the manual. p. 3-13

67 67 Chapter 4 Public Accountancy in Florida (Chapter 473) p. 4-1 Learning Objectives …

68 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 69 Key Definitions Certified Public Accountant – person holding a license to practice – (4) Certified Public Accountant – person holding a license to practice – (4) Firm – Any entity engaged in practice of public accounting – (5) Firm – Any entity engaged in practice of public accounting – (5) Licensed Audit Firm – licensed under FS Licensed Audit Firm – licensed under FS “Practice of” or “practicing public accountancy”, or “public accounting” (8)(a)(b)(c) “Practice of” or “practicing public accountancy”, or “public accounting” (8)(a)(b)(c) Opinion on financial statementsOpinion on financial statements Accounting servicesAccounting services Preparation of financial statementsPreparation of financial statements p. 4-1

70 70 New Definition – Members in Business ET Section 92, Definitions ET Section 92, Definitions The new definition is intended to capture members that are not in the practice of public accounting The new definition is intended to capture members that are not in the practice of public accounting p. 4-3

71 71 Powers and Duties of the Board Chapter 473, FS, gives the FL BOA certain powers and duties: Chapter 473, FS, gives the FL BOA certain powers and duties: FeesFees ExaminationsExaminations LicensureLicensure Practice RequirementsPractice Requirements Continuing educationContinuing education Other mattersOther matters p. 4-3

72 p. 4-4 Biennial License Renewal Individual Renewal  Approximately 16,000 renew each fiscal year  Continuing Professional Education  Payment of renewal fee of $ –$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

73 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

74 74 CPA Examination – Requirements for taking CPA Exam: Good moral character Good moral character Meets academic requirements Meets academic requirements 120 hours with a concentration in accounting and business120 hours with a concentration in accounting and business Must have an additional 30 semester hours (150 total) to be issued a licenseMust have an additional 30 semester hours (150 total) to be issued a license p. 4-4

75 Licensure Baccalaureate degree with a major in accounting or its equivalent plus at least 30 semester/45 quarter hours 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 Must have one year of work experience Good moral character Good moral character p. 4-5

76 76 Licensure by Endorsement Section (7) waiver Section (7) waiver Five year experience as CPA Five year experience as CPA Under CPA in any state or equivalent as determined by the BOAUnder CPA in any state or equivalent as determined by the BOA May waive the additional education requirementsMay waive the additional education requirements p (7)

77 77 Renewal of License The department shall renew a license upon receipt of: Renewal applicationRenewal application FeeFee Certification of CPE by BOACertification of CPE by BOA Exception for spouses of members of Armed Forces (61H )Exception for spouses of members of Armed Forces (61H ) ( , FS) p. 4-10

78 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’ 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 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’ All Florida CPAs must notify the BOA within 30 days of any changes to the ‘address of record’ (61H , FAC) p. 4-11

79 79 Changes by Firms Firm must file written notification with Department within 30 days of: Firm must file written notification with Department within 30 days of: Addition of any non-CPAAddition of any non-CPA Any non-CPA co-partner, shareholder or member in any Florida officeAny 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 adjudicationAny CPA, non-CPA co-partners, shareholders or members have convictions or findings of guilt, regardless of adjudication (61H , FAC) p. 4-11

80 p. 4-11

81 81 Communicating with DBPR Changing your address online will satisfy the “in writing” requirement Changing your address online will satisfy the “in writing” requirement Do check your license periodically Do check your license periodically Choose Renew a License and follow the promptsChoose Renew a License and follow the prompts To log in initially, use your license number and last four digits of SSNTo log in initially, use your license number and last four digits of SSN p. 4-11

82 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 83 Communicating with DBPR Contact the BOA with your questions Customer Contact Center: (850) Monday-Friday, 8 am to 5 pm EST Florida Board of Accountancy 240 NW 76 th Drive, Suite A Gainesville, FL p. 4-11

84 84 Continuing Education Florida CPAs must submit proof of completing at least 48 of 80 CPE hours every 2 years 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 Penalty to complete CPE requirement on time may be up to 25% additional CPE hours ( FS) p. 4-12

85 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 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 Not less than 5 percent of the total hours required by the board shall be in ethics applicable to the practice of public accounting ( FS) p. 4-12

86 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: 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 AICPAProfessional development programs of the AICPA State societies of certified public accountants or other organizationsState societies of certified public accountants or other organizations p. 4-12

87 87 Continuing Education (cont.) Technical sessions at meetings of the AICPA, state societies, chapters, or other organizationsTechnical sessions at meetings of the AICPA, state societies, chapters, or other organizations University and college coursesUniversity and college courses Formal organized in-firm education programsFormal 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 (61H ) The board shall adopt rules establishing the CPE requirements for Florida CPAs who are engaged in the audit of a governmental entity (61H ) p. 4-12

88 88 Continuing Education (cont.) CPAs need to keep track of Yellow Book hours, primarily for peer review purposes (61H ) CPAs need to keep track of Yellow Book hours, primarily for peer review purposes (61H ) 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 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

89 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 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 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 See details at 89 p. 4-13

90 90 Major Changes to CPE Reporting As of January 1, 2011, DBPR no longer requires CPAs to report their CPE to DBPR 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 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 DBPR will rely on the honor system, self- reporting of hours earned Retain documentation in case of CPE audit Retain documentation in case of CPE audit p. 4-13

91 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 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 The board may prescribe by rule fees for placing a license on inactive status, renewal of inactive status, and reactivation of an inactive license ( FS) p. 4-14

92 92 Reactivation Complete forms Complete forms DBPR , Master Individual ApplicationDBPR , Master Individual Application DBPR CPA , Request for Change of StatusDBPR CPA , Request for Change of Status Required CPE hours Required CPE hours one reporting period (120 hours)one reporting period (120 hours) two reporting periods (200 hours)two reporting periods (200 hours) three-plus reporting periods (280 hours)three-plus reporting periods (280 hours) (61H ) p. 4-14

93 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 for practice requirements of other states. ( FS) p. 4-15

94 94 Temporary License Not valid for more than 90 days Not valid for more than 90 days Fee of $400 Fee of $400 Will not cover more than one engagement 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 Not required for person entering this state solely for the purpose of preparing federal tax returns or advising on federal tax matters ( FS) p. 4-16

95 95 “Accountancy Bill” 2012 Legislation – 5 Key Changes Amends (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) Amends (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 (7), F.S. for CPAs who have held a license in another state for at least 10 years prior to application Streamlines the licensure-by-endorsement requirements in (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 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 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 97 “Accountancy Bill” 2012 Legislation – 5 Key Changes Amends (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 Amends (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 Provides for a BOA report to the Legislature on the potential cost savings of privatizing or outsourcing some Board functions p. 4-16

98 98 Chapter 5 Ethics of Integrity, Objectivity, Commissions, Contingencies, and Communications (FAC 61H1) p. 5-1 Learning Objectives …

99 99 Comparison of Florida Rules to National Standards FAC 61H In the Florida Administrative Code (FAC), a CPA shall not: Knowingly misrepresent factsKnowingly misrepresent facts Subordinate their judgment to:Subordinate their judgment to: Clients Clients Employers Employers Other third parties Other third parties p. 5-1

100 100 Comparison of Florida Rules to National Standards FAC 61H Florida standards have their basis in the AICPA’s standardsFlorida standards have their basis in the AICPA’s standards True for Section 102, Integrity and Objectivity of the AICPA Code of Professional ConductTrue for Section 102, Integrity and Objectivity of the AICPA Code of Professional Conduct p. 5-1

101 101 “A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities.” Definition of Objectivity p. 5-2

102 102 “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

103 103 What is Integrity? Being candid Being candid Being honest Being honest Placing service and public trust above personal advantage and personal gain Placing service and public trust above personal advantage and personal gain Doing the right thing Doing the right thing Acting in good faith Acting in good faith Observing both form and spirit of professional standards Observing both form and spirit of professional standards p. 5-2

104 104 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 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 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 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

105 105 Direct Violations AICPA ET Rule 102 AICPA ET Rule 102 Actions deemed violations: Actions deemed violations: Make, permit, or direct materially false or misleading entries…Make, permit, or direct materially false or misleading entries… Fail to correct materially …Fail to correct materially … Signing, permitting to sign or directing to sign materially …Signing, permitting to sign or directing to sign materially … p. 5-4

106 106 Materiality - A Key Concept What is it? p. 5-4

107 107 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

108 108 Materiality Has been defined in FASB, AICPA, SEC, and PCAOB documents… So, if the definitions are everywhere, what’s the problem? p. 5-4

109 109 Materiality (cont.) The problem is… No authoritative formulation of materiality in the law or accounting literature.No authoritative formulation of materiality in the law or accounting literature. May be quite small numericallyMay be quite small numerically Must be considered quantitatively and qualitativelyMust be considered quantitatively and qualitatively p. 5-4

110 110 GAS Materiality The 2007 GAS (sections 4.05 & 6.06) includes: An increased emphasis on audit quality and ethicsAn 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 materialityAn 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 accountabilityMay need to set lower materiality levels than in private sector–public accountability p. 5-4

111 111 Impairment of Objectivity or Integrity Rule 102, Ethics Ruling No. 113 – “Acceptance or Offering of Gifts and Entertainment” Rule 102, Ethics Ruling No. 113 – “Acceptance or Offering of Gifts and Entertainment” What about gifts??? What about gifts??? Nature of giftNature of gift OccasionOccasion CostCost Other mattersOther matters p. 5-5

112 GAS has guidance on: Public interest Public interest Professional behavior Professional behavior Integrity Integrity Objectivity Objectivity Proper use of government information, resources, and position Proper use of government information, resources, and position Ethical Responsibilities under GAS 2007 p. 5-5

113 113 Use common sense Use common sense Pay your own way for meals and entertainment valued over $20 Pay your own way for meals and entertainment valued over $20 Pay your own transportation and accommodations Pay your own transportation and accommodations Pay fair market price for products and services Pay fair market price for products and services Keep records of your expenses Keep records of your expenses If in doubt, don’t accept! If in doubt, don’t accept! See Appendix D for ethics principles See Appendix D for ethics principles Gifts at the Federal Level 5 C.F.R. § p. 5-7

114 114 Follow guidance from your own agency and FS Follow guidance from your own agency and FS Don’t accept gifts from a political committee or lobbying organization Don’t accept gifts from a political committee or lobbying organization Determine fair value of gifts – actual cost less taxes & gratuities Determine fair value of gifts – actual cost less taxes & gratuities Honorariums treated similarly to gifts Honorariums treated similarly to gifts Gifts at the State Level Florida Statutes p. 5-8

115 115 Commissions and/or Referral Fees ( FAC Section 61H ) Prohibits commissions or referral fees with: Prohibits commissions or referral fees with: AuditsAudits ReviewsReviews CompilationsCompilations Prospective financial dataProspective financial data Services resulting in an expression of opinionServices resulting in an expression of opinion p. 5-10

116 116 Contingent Fees (FAC 61H1 – ) Allowed only on findings of the government - not that of the licensee Allowed only on findings of the government - not that of the licensee Some exceptions Some exceptions Government employees are not allowed to accept a contingent fee Government employees are not allowed to accept a contingent fee p. 5-12

117 117 Communication with Client of Another Licensee (Florida Administrative Code 61H1 – ) “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.” “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

118 118 Chapter 6 Competency and Related Issues p. 6-1 Learning Objectives …

119 119 Florida Standards - Compliance The Florida standards require compliance in four general areas: 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

120 120 Competence – Professional Agreement to perform implies that the member has necessary competence to complete the engagement 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 Member does not assume a responsibility for infallibility of knowledge or judgment Competence involves both the member and his/her staff Competence involves both the member and his/her staff A CPA must be in charge of all public accounting services performed by the firm A CPA must be in charge of all public accounting services performed by the firm p. 6-2

121 121 Competence – Due Professional Care Assumes the person offering services possess the “degree of skill commonly possessed” by other persons 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” Assumes the person exercises that skill with “reasonable care and diligence” p. 6-2

122 122 Competence Planning and Supervision “A licensee shall adequately plan and supervise an engagement.” “A licensee shall adequately plan and supervise an engagement.” Sufficient Relevant Data Data of a reasonable basis for a conclusion or recommendations Data of a reasonable basis for a conclusion or recommendations p. 6-2

123 123 AICPA ET Section 201 – General Standards The AICPA standards are closely aligned with the Florida standards The AICPA standards are closely aligned with the Florida standards Various interpretations also are closely aligned with the Florida standards Various interpretations also are closely aligned with the Florida standards p. 6-2

124 124 Interpretations Under Rule 201, (cont.) Competence to perform professional services involves: Competence to perform professional services involves: The technical qualifications of the member and the member's staffThe technical qualifications of the member and the member's staff Ability to supervise and evaluate the quality of the work performedAbility to supervise and evaluate the quality of the work performed p. 6-2

125 125 Interpretations Under Rule 201, (cont.) Competence relates to: Competence relates to: Knowledge of the profession's standards, techniques and the technical subject matter involvedKnowledge 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 servicesThe capability to exercise sound judgment in applying such knowledge in the performance of professional services p. 6-2

126 126 Hindsight How we may be judged p. 6-3

127 127 Hindsight Judgment Hindsight is how we will be judged 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) 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 Often these standards may be judged after the situation has occurred Those judging us may ask, “Did you…” Those judging us may ask, “Did you…” We must protect ourselves from perfect hindsight vision We must protect ourselves from perfect hindsight vision p. 6-3

128 128 Hindsight Protection p. 6-3 DocumentationDocumentationDocumentationDocumentationDocumentation

129 129 Documentation Requirements Documentation requirements are found in many professional standards: Auditing Standards Auditing Standards Review Standards Review Standards Compilation Standards Compilation Standards Quality Control Standards Quality Control Standards Attestation Standards Attestation Standards Other Standards Other Standards p. 6-4

130 130 Audit Documentation For our protection, we must understand the general body of standards to which we will be held accountable 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 Includes AICPA standards as well as Florida requirements Documenting is your best means of defense. Be sure to document: Documenting is your best means of defense. Be sure to document: in writingin writing industry-specificindustry-specific timelytimely p. 6-4

131 131 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

132 132 Risk Assessment Standards Many documentation requirements are in the “Risk Assessment” standards Many documentation requirements are in the “Risk Assessment” standards SASs have been reissued as part of the Clarity Project SASs have been reissued as part of the Clarity Project The new standards are in SAS 122, effective for periods ending after December 15, 2012 The new standards are in SAS 122, effective for periods ending after December 15, 2012 p. 6-6

133 133 Specific Standards A&A Standards are generally the same as those of the AICPA A&A Standards are generally the same as those of the AICPA Other Standards are generally those of the AICPA Other Standards are generally those of the AICPA Some standards are not authoritative Some standards are not authoritative Florida’s assembled financial statements are NOT recognized by the AICPA Florida’s assembled financial statements are NOT recognized by the AICPA New standards for local Government audits – Auditor General Rules New standards for local Government audits – Auditor General Rules p. 6-6

134 134 Government Auditing Standards – General Standards Independence Independence free from personal, external, & organizational impairmentsfree from personal, external, & organizational impairments Professional Competence Professional Competence Professional skepticism, diligenceProfessional skepticism, diligence Judgment Judgment Engagement staff must collectively possess adequate professional competenceEngagement staff must collectively possess adequate professional competence p. 6-6

135 135 Summary of New Ethics Guidance from the AICPA Framework for independence standards [ET Section ] Framework for independence standards [ET Section ] Definitions of Public Interest and changes to threatsDefinitions of Public Interest and changes to threats Applicability [ET Section 91] Applicability [ET Section 91] No separate AICPA disciplinary process if AESBA standards usedNo separate AICPA disciplinary process if AESBA standards used Members in business [ET Section 92.22] Members in business [ET Section 92.22] Members must follow Code if type of services requires itMembers must follow Code if type of services requires it p. 6-6

136 136 Summary of New Ethics Guidance from the AICPA (cont.) Disclose client info to third parties [ET Sections and 391.2] Disclose client info to third parties [ET Sections and 391.2] Disclosing info without permission is more limitedDisclosing info without permission is more limited Disclose prior employer confidential information [ET Sections 92.05, 391.2, 501.9] Disclose prior employer confidential information [ET Sections 92.05, 391.2, 501.9] Limits member’s disclosure about prior employersLimits member’s disclosure about prior employers p. 6-6

137 137 Summary of New Ethics Guidance from the AICPA (cont.) Concept of “financial interest threats” is expanded to business members [ET Section ] Concept of “financial interest threats” is expanded to business members [ET Section ] Now requires members in business to recognize financial interest threats and safeguardsNow requires members in business to recognize financial interest threats and safeguards Expands what is false or misleading acts to all CPAs [Interpretation ,.11] Expands what is false or misleading acts to all CPAs [Interpretation ,.11] Now applies to members in businessNow applies to members in business p. 6-6

138 138 Summary of New Ethics Guidance from the AICPA (cont.) Interpretation on application of independence reqs. to attest clients [Int , 20] Interpretation on application of independence reqs. to attest clients [Int , 20] Independence requirement applications revisitedIndependence requirement applications revisited CPAs may now teach for firm’s educational institution clients [ ,.21] CPAs may now teach for firm’s educational institution clients [ ,.21] Auditors may now be part-time facultyAuditors may now be part-time faculty Changes for Attestation Engagements [ ,.13] Changes for Attestation Engagements [ ,.13] May now provide attest services not relating to specific matters of attestation engagementMay now provide attest services not relating to specific matters of attestation engagement p. 6-6

139 139 Summary of New Ethics Guidance from the AICPA (cont.) Modifies GAAP for Rule 203 [Interp ] Modifies GAAP for Rule 203 [Interp ] May now use but denote the framework usedMay now use but denote the framework used Explains when members may withhold records prepared for clients [Interp ] Explains when members may withhold records prepared for clients [Interp ] Members must give client prepared records on request; may retain if unpaid fees or pending litigation existsMembers must give client prepared records on request; may retain if unpaid fees or pending litigation exists Members may not use misleading firm names [Interpretations and 505-5] Members may not use misleading firm names [Interpretations and 505-5] CPAs should not use misleading firm namesCPAs should not use misleading firm names p. 6-6

140 140 Chapter 7 Ethics and Independence (Florida and AICPA) p. 7-1 Learning Objectives …

141 141 Which Rules are for You? The Florida LegislatureThe Florida Legislature The FL BOAThe FL BOA The AICPAThe AICPA The PCAOBThe PCAOB The SECThe SEC Yellow Book and/or OMB RequirementsYellow Book and/or OMB Requirements OthersOthers p. 7-1

142 142 Key Independence Terms Covered member Covered member Single OfficeSingle Office Multi OfficeMulti Office Services performed Services performed Attest servicesAttest services Nonattest servicesNonattest services Client Client Relationships Relationships p. 7-2

143 143 Who is a Covered Member? Individual on attest engagement team Individual on attest engagement team Individual in a position to influence Individual in a position to influence Partner or Manager providing nonattest services if… Partner or Manager providing nonattest services if… Partner in office of engagement partner Partner in office of engagement partner The firm The firm Firm or commonly controlled entities Firm or commonly controlled entities p. 7-3

144 144 What is an attest engagement? An engagement that requires independence (ET 92.01) An engagement that requires independence (ET 92.01) In Florida, FS sets the stage. In Florida, FS sets the stage. Florida has “Standards for Independence” (Appendix H) 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.” “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

145 145 Gifts and Entertainment Rule 101, Ethics Ruling No. 114, “Acceptance or Offering of Gifts or Entertainment to or from an Attest Client.” Rule 101, Ethics Ruling No. 114, “Acceptance or Offering of Gifts or Entertainment to or from an Attest Client.” Position to influence Position to influence Significance Significance Reasonable Reasonable p. 7-5

146 146 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

147 147 61H Independence The Florida Statutes are very clear on independence and expressing an opinion. The Florida Statutes are very clear on independence and expressing an opinion. The technical standards for independence are set out in FAC 61H The technical standards for independence are set out in FAC 61H H (2) sets out the standards known as “Standards for Independence” for Florida CPAs 61H (2) sets out the standards known as “Standards for Independence” for Florida CPAs Requires compliance with this rule Requires compliance with this rule p. 7-6

148 148 Code of Professional Conduct Florida’s “Standards for Independence” has a direct reference to the AICPA’s 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 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? The major question is…apply to which engagements? p. 7-6

149 149 Basic Engagements Five basic engagements require independence: 1.Audit 2.Review 3.Compilation 4.Attestation 5.Prospective Financial Statements p. 7-6

150 150 Attest Engagements The AICPA’s Ethics Interpretation No , states that an attest engagement is any engagement which requires the CPA to be independent The AICPA’s Ethics Interpretation No , 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 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 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 In SSARS 19 there is a clear indication that a compilation is an attest engagement p. 7-6

151 151 Covered Members and Independence Single Office Single Office Multi Offices Multi Offices p. 7-6

152 152 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 61H p. 7-8

153 153 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 Accountable to the governmental head Report results of work to the governmental head Report results of work to the governmental head Located organizationally outside of staff or line management functions Located organizationally outside of staff or line management functions Has access to those charged with governance Has access to those charged with governance

154 154 Independence Changes in Comp & Review Engagements SSARS 19, Compilation and Review Engagements SSARS 19, Compilation and Review Engagements In a compilation when the accountant is not independent, the accountant should indicate the lack of independenceIn 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 impairedSSARS 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 optionalDisclosing the reason(s) is not required but is optional p. 7-10

155 155 Chapter 8 Independence: Non-attest, Non-audit Services p. 8-1 Learning Objectives …

156 156 AICPA and GAO Standards Both AICPA and GAS provide guidance for nonattest services by an auditor Both AICPA and GAS provide guidance for nonattest services by an auditor Nonattest audits must comply with both sets of standards Nonattest audits must comply with both sets of standards GAO rules are typically more restrictive GAO rules are typically more restrictive The standards are different, see comparison in Appendix F The standards are different, see comparison in Appendix F p. 8-1

157 157 Performing Nonattest Services Independence Rules of AICPA Under Interpretation the independence rules may come from several authoritative bodies. Under Interpretation the independence rules may come from several authoritative bodies. FL BOAFL BOA AICPAAICPA SECSEC GAOGAO Department of LaborDepartment of Labor p. 8-2

158 158 Nonattest Services for a Client When nonattest services are performed for clients for which attest services are performed: When nonattest services are performed for clients for which attest services are performed: Documentation of understanding with client is necessaryDocumentation of understanding with client is necessary The requirements of are still being revisedThe requirements of are still being revised p. 8-2

159 159 Nonattest Services for a Client Clients must agree to do certain things: Clients must agree to do certain things: Make all management decisionsMake all management decisions Designate an employeeDesignate an employee Evaluate adequacy and resultsEvaluate adequacy and results Accept responsibilitiesAccept responsibilities Establish and maintain controlsEstablish and maintain controls p. 8-2

160 160 Nonattest Services for a Client Member must establish and document in writing his/her understanding with the client: Member must establish and document in writing his/her understanding with the client: Engagement objectivesEngagement objectives ServicesServices Client’s acceptanceClient’s acceptance Member’s responsibilitiesMember’s responsibilities Any limitationsAny limitations p. 8-3

161 161 AICPA Interpretation Revisions issued by the Professional Ethics Executive Committee (PEEC) 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 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 Revisions tighten the requirements for documentation of the member’s understanding with the client regarding the services to be performed p. 8-3

162 162 Professional Ethics Quiz …do you know the answer? p. 8-4

163 163 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 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 SSAE 17 is effective for compilations of prospective financial statements for periods ending on or after December 15, 2010 p. 8-11

164 164 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

165 165 Yellow Book Independence Scenarios …do you know the answer? p By the Comptroller General of the United States Government Auditing Standards July 2007

166 166 Chapter 9 Ethical Responsibilities to Clients and Other Considerations p. 9-1 Learning Objectives …

167 167 Confidential Client Information CPAs may not disclose any confidential information obtained in the course of a professional engagement without the consent of the client. 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 Implies active and stored information Peer Review is excluded Peer Review is excluded p. 9-2

168 168 Client Confidentiality Confidentiality includes: Confidentiality includes: Office situationsOffice situations Storage in and away of client dataStorage in and away of client data Other situationsOther situations p. 9-3

169 169 Records Disposition Responsibility CPA must return client records, documents, or other papers belonging to the client within a reasonable time CPA must return client records, documents, or other papers belonging to the client within a reasonable time May charge for reasonable costs incurred May charge for reasonable costs incurred p. 9-4

170 170 Revisions to Rule The revised interpretation defines key terms The revised interpretation defines key terms Makes interpretations of how to respond to client requests Makes interpretations of how to respond to client requests p. 9-5

171 171 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

172 172 Advertising Advertising may not be: FraudulentFraudulent FalseFalse DeceptiveDeceptive MisleadingMisleading p. 9-10

173 173 Advertising/ Advertisements Misrepresentation of facts Misrepresentation of facts Partial disclosure Partial disclosure False or unjustified expectations False or unjustified expectations Appeal to fears, ignorance or anxieties Appeal to fears, ignorance or anxieties False claims or misleading claims False claims or misleading claims Designations Designations False information False information p. 9-10

174 174 AICPA Rules on Advertising Found in ET Section 502 – “Advertising and Other Forms of Solicitation” Found in ET Section 502 – “Advertising and Other Forms of Solicitation” Florida rules generally follow the AICPA rules Florida rules generally follow the AICPA rules p. 9-12

175 175 Solicitation Solicitation (61H ) Licensee may reply to requests for proposals Licensee may reply to requests for proposals Must adhere to rules for advertising, both oral and written Must adhere to rules for advertising, both oral and written p. 9-13

176 176 Responsibilities to Other Persons Licensees may not allow others to do things the CPA themselves may not do Licensees may not allow others to do things the CPA themselves may not do This includes situations for compensation and not for compensation This includes situations for compensation and not for compensation p. 9-14

177 177 Practical Responsibilities Advertising/Advertisements Advertising/Advertisements Solicitation Solicitation Other Persons Other Persons Names, Terms, Branch Offices Names, Terms, Branch Offices Form of Practice Form of Practice p. 9-14

178 178 Administrative and Office Considerations Names, terms, and branch offices (61H1-26) Names, terms, and branch offices (61H1-26) Forms of practice and name shared office space (61H ) Forms of practice and name shared office space (61H ) Minimum capitalization /adequate public liability insurance (61H ) Minimum capitalization /adequate public liability insurance (61H ) Financial statements of the firm Financial statements of the firm p. 9-14

179 179 AICPA Rulings and Interpretations on Ethics p. 9-15

180 180 Chapter 10 Code of Ethics for Public Officers and Employees p Learning Objectives …

181 181 Key Definitions Agency Agency Breach of public trust Breach of public trust Conflicts of interest Conflicts of interest Gift Gift Purchasing agent Purchasing agent Relative Relative See s. 112, Part III, Definitions See s. 112, Part III, Definitions p. 10-2

182 182 Standards of Conduct Solicitation or acceptance of gifts Solicitation or acceptance of gifts Doing business with one's agency Doing business with one's agency Conflicts of employment or contractual relationship Conflicts of employment or contractual relationship Unauthorized compensation Unauthorized compensation Misuse of public position Misuse of public position Exemptions and other issues Exemptions and other issues Disclosures or use of certain information Disclosures or use of certain information p. 10-3

183 183 Chapter 11 Future Implications p Learning Objectives …

184 184 To prophesy is extremely difficult … especially with regard to the future. p Chinese Proverb

185 185 Our Future Where is the CPA profession going? p. 11-1

186 186 Our Future (cont.) Most VERY large audits are performed by the “Quadropoly”/“Final Four” Most VERY large audits are performed by the “Quadropoly”/“Final Four” XBRL – bar coding of financial statements XBRL – bar coding of financial statements Accounting Standards Codification Accounting Standards Codification GAAP Restructuring/Codification GAAP Restructuring/Codification Student enrollment in accounting across the US continues to rise Student enrollment in accounting across the US continues to rise Mobility Mobility p. 11-1

187 187 Mobility 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. 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. Washington, DC has mobility pending FS p. 11-2

188 188 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 FS p. 11-2

189 189 Mobility (cont.) Substantial Equivalency – 3 Issues Substantial Equivalency – 3 Issues EducationEducation ExperienceExperience EnforcementEnforcement FS p. 11-2

190 190 CPA Mobility Legislation 2012 p. 11-2

191 191 “Big GAAP” vs “Little GAAP” Jan Blue-Ribbon Panel addressing Standards for Private Companies submits report of recommendations to Financial Accounting Foundation Jan 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 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 Report does not recommend a separate GAAP for private companies or a comprehensive reorganization of GAAP p. 11-2

192 192 Private Company GAAP Mar Financial Accounting Foundation outlines plans to address Standard Setting for Nonpublic Entities Mar 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 Formed a Trustee Working Group to address accounting standard setting for nonpublic entities p. 11-2

193 193 International Implications AICPA Council approved International Financial Reporting Standards as recognized GAAP in the US AICPA Council approved International Financial Reporting Standards as recognized GAAP in the US Another step towards IFRS becoming the official GAAP of 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 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

194 194 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 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 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 Ultimately, the convergence for non issuers will be determined by the FASB, the AICPA, and possibly others p. 11-2

195 195 p. 11-3

196 196 International Implications (cont.) The major question facing the United States is - 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?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

197 197 International Implications (cont.) The simple answer is NO 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 onlyThe 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 privately held companies adopted provisions of the Sarbanes-Oxley Act, such as the formation of independent audit committees Many might take similar action regarding IFRSMany might take similar action regarding IFRS p. 11-3

198 198 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 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

199 199 International Implications (cont.) The panel will provide recommendations on the future of standard setting for private companies, including development of separate, standalone accounting standards 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 A report is expected in the early part of 2011 p. 11-4

200 200 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 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 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

201 201 International Implications (cont.) IFRS for Small and Medium Entities (SME) released on July 9, 2009 IFRS for Small and Medium Entities (SME) released on July 9, 2009 See FAQs regarding IFRS for SMEs at the AICPA siteSee FAQs regarding IFRS for SMEs at the AICPA site Will IFRS be incorporated into the Uniform CPA Exam? Will IFRS be incorporated into the Uniform CPA Exam? Yes, starting in January 2011Yes, starting in January 2011 p. 11-4

202 202 International Audit Convergence Parallel effort is the AICPA’s Auditing Standards Board convergence project with the International Auditing and Attestation Standards Board (IAASB) 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 Missing is what might happen to the Public Companies Accounting Oversight Board and its role in the global accounting profession p. 11-4

203 203 International Compilation and Review Convergence International Standard on Related Services (ISRS) 4410, Engagements to Compile Financial Statements International Standard on Related Services (ISRS) 4410, Engagements to Compile Financial Statements International Standard on Review Engagements (ISRE) 2400, Engagements to Review 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)Issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC) p. 11-4

204 204 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 statementsEstablish 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.Provide guidance on the form and content of the report the accountant issues for that compilation or review. p. 11-4

205 205 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 ISRS 4410 and ISRE 2400 can be found in IFAC’s Handbook of International Auditing, Assurance, and Ethics Pronouncements at ISRS 4410 and ISRE 2400 do not override SSARS ISRS 4410 and ISRE 2400 do not override SSARS p. 11-5

206 206 International Compilation and Review Convergence (cont.) Interpretation No. 30 (AR ), Considerations Related to Financial Statements Prepared in Accordance with International Standards Interpretation No. 30 (AR ), 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 StandardsAllows 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 Additionally, as US GAAP and US GAAS converge with the international standards, the ethics will also change p. 11-5

207 207 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 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) 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 The rules evolved and were codified in 1973 into the current AICPA’s Code of Professional Conduct p. 11-5

208 208 International Ethics (cont.) Almost 100 years – and many sheets of paper – later, the AICPA Code and related guidance is ripe for reorganization 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 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 The code will impact those in public practice, business, academia, and government p. 11-5

209 209 International Ethics (cont.) The IFAC code uses a conceptual framework approach to evaluate relationships or circumstances that raise ethical issues 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: The AICPA’s and the IFAC’s codes address similar issues: IndependenceIndependence ObjectivityObjectivity Due careDue care ConfidentialityConfidentiality p. 11-6

210 210 Who’s in Charge? An ongoing issue for the future will be - just who is 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 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 will become of the FASB? What about the PCAOB?What about the PCAOB? What will happen to the AICPA?What will happen to the AICPA? How about the SEC?How about the SEC? Will the IRS be impacted?Will the IRS be impacted? p. 11-7

211 Where in the heck are we going? 211

212 212 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 surveyonline survey 16 in-person forums16 in-person forums online discussions and focus groupsonline 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 professionMore 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

213 213 CPA Horizons 2025 (cont.) Ten key themes emerged that give insight into how the profession is: Ten key themes emerged that give insight into how the profession is: Conducting and will conduct businessConducting and will conduct business Serve clients and employersServe clients and employers Attract and retain employees and new businessAttract and retain employees and new business Remain competitive in the marketplace throughout the next 15 yearsRemain competitive in the marketplace throughout the next 15 years p. 11-7

214 1. Technology Understand and leverage relevant technology in conjunction with core CPA competencies to deliver superior services Understand and leverage relevant technology in conjunction with core CPA competencies to deliver superior services 214

215 1. Technology (cont.) IMPACT ON THE PROFESSION CPAs must stay current with, embrace and exploit technology for increased efficiency and expansion of services 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 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 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 Fraud may be easier to commit and more difficult to prevent and detect 215

216 2. Pre-certification and Lifelong Learning Evolve the educational framework to keep pace with the changing dynamics of business, government and our profession Evolve the educational framework to keep pace with the changing dynamics of business, government and our profession 216

217 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 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 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 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 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 New CPAs must have a broad knowledge of business and soft skills and not simply focus on technical accounting 217

218 3. Worldwide Profession Position the CPA as a premier designation of the accounting and finance profession throughout the world Position the CPA as a premier designation of the accounting and finance profession throughout the world 218

219 3. Worldwide Profession (cont.) IMPACT ON THE PROFESSION CPAs must be increasingly aware of international business issues and trends 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 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 CPAs must continue to market the quality and value of their services in order to expand and thrive globally 219

220 4. Pride in the Profession Encourage pride among CPAs in the CPA profession and in the value CPAs create throughout society Encourage pride among CPAs in the CPA profession and in the value CPAs create throughout society 220

221 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 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 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

222 5. Trusted Attester Preserve the role of the CPA as the trusted attester of financial and other information Preserve the role of the CPA as the trusted attester of financial and other information 222

223 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 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 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 Audit and attest functions must evolve to meet changing regulatory demands and client and business needs 223

224 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 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

225 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 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

226 7. Market Permissions Leverage the strengths of the profession to expand market permissions Leverage the strengths of the profession to expand market permissions 226

227 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 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 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

228 8. Marketplace Address continual changes in the marketplace, economy, businesses and regulations Address continual changes in the marketplace, economy, businesses and regulations 228

229 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 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 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 Lifelong learning will take on greater importance as a way for CPAs to stay up-to- date 229

230 9. Value Proposition Increase the visibility of the profession’s value Increase the visibility of the profession’s value proposition by demonstrating the profession’s Core Values in multiple areas of business and society proposition by demonstrating the profession’s Core Values in multiple areas of business and society 230

231 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 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 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

232 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 Continue to offer opportunities that enhance the appeal of the profession and be proactive in addressing both U.S. and global demographic shifts 232

233 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 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 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 Experienced and older CPAs must continue to mentor young CPAs and identify leadership and advancement opportunities that will foster stronger relationships and loyalty 233

234 10. Demographic Shifts (cont.) In order to attract and retain younger generations, employers must increase flexible work arrangements and work-at- home options 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 The profession must continue to support and enhance programs that build awareness of the CPA profession to young audiences 234

235 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

236 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 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 Education: Balance judgment with technical skills; teach soft skills; stay ahead of the curve on regulations and standards 236

237 HOW DO WE DO IT? (cont.) Globalization: Understand international issues, trends, standards and regulations; identify new markets; explore new job opportunities 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 Promotion: Market the profession’s virtues of integrity, objectivity and trust to local, national and international audiences 237

238 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 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 Integration: Review our competencies and align them with new realities; enhance our role as a business advisor 238

239 HOW DO WE DO IT? (cont.) Adaptation: Address changes in the marketplace, economy, business and regulations; immerse ourselves in domestic and international trends 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 Competition: Understand the numerous choices available to clients and employers; market the CPA value 239

240 Welcome to the future! 240

241 241 Even if you are on the right track, you’ll get run over if you just sit there. Will Rogers p. 11-7

242 242 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: 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: HonestyHonesty TrustworthinessTrustworthiness IntegrityIntegrity ObjectivityObjectivity p. 11-7

243 243 The Reason for This is Simple … Our Professional ETHICS p. 11-7

244 244 Yellow Book Interim Revision Effective for engagements and financial audits beginning December 15, 2011 Effective for engagements and financial audits beginning December 15, 2011 Expect final issuance by end of 2011 Expect final issuance by end of 2011 Biggest changes are to independence standards; will more closely align with AICPA Biggest changes are to independence standards; will more closely align with AICPA Other changes include requirements: Other changes include requirements: Requirements for internal specialistsRequirements for internal specialists Requirements to follow AICPA’s general standardsRequirements to follow AICPA’s general standards Appendix I, YB

245 245 Key Changes to Independence Standards Conceptual framework of “threats and safeguards” and how to document them Conceptual framework of “threats and safeguards” and how to document them Identification of seven threat categories Identification of seven threat categories Discussion of nonaudit service prohibitions and how to evaluate such services Discussion of nonaudit service prohibitions and how to evaluate such services How to document management’s ability to oversee nonaudit services How to document management’s ability to oversee nonaudit services Appendix I, YB

246 246 Thank you… for attending today!


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