1.4 - Licensing and Disciplinary Systems

Question 1

Who governs the licensing process of CPAs & what is the requirement?

Answer 1

• State boards of accountancy govern this process
• requirements vary by state

Question 2

What authority do state boards have

Answer 2

authority to suspend / revoke license

Question 3

What are state CPA societies?

Answer 3

• Voluntary organizations and private

Question 4

What is the AICPA?

Answer 4

• National level CPA society
• Private organization and voluntary

Question 5

What authority does the AICPA have?

Answer 5

• Has no authority over non-members directly, state codes of conduct usually require adherence to AICPA rules

Question 6

Identify the divisions or boards that are established to enforce discipline on a CPA

Answer 6

• Professional ethics division
• Joint trial board or full trial board

Question 7

Identify a remedial measure implemented by the Professional Ethics Division of the AICPA as a form of discipline for CPAs

Answer 7

May have to take additional CPA courses

Question 8

Automatic expulsion from the AICPA results without a hearing due to what types of misconduct

Answer 8

• Committing a felony
• Willfully failing to file a return
• Filing a fraudulent tax return
• Aiding in preparing a fraudulent tax return
• If state issued license is revolked

Question 9

Does automatice expulsion from the AICPA bar an individual from the practice of public accounting?

Answer 9

No

Question 10

How might the SEC discipline a CPA?

Answer 10

• May seek injunction to prohibit future violations
  
  • Injunction - order to refrain CPA from perfoming a certain act
• May also conduct quasi-judicial hearings
  
  • Quasi-judicial - exercising powers or functions that resemble those of a court or judge

Question 11

What conditions does the SEC sanction?

Answer 11

• Do not have the qualifications to represent others
• Lacks character or integrity
• Has engaged in unethical or unprofessional conduct
• Has willfully violated, or aided and abetted the violation of federal securities laws

Question 12

Identify convictions for SEC suspension

Answer 12

• Conviction of a felony
• Revocation of license to practice
• Being permanently enjoined from violation of federal securities acts
  
  • Enjoin – to prohibit or restrain by an injunction

Question 13

What powers do SEC proceedings have?

Answer 13

• Have prohibited individuals and accounting firms from accepting SEC clients
• Can initiate administrative proceedings against accounting firms
• May impose civil penalties
• Prohibit firm from appearing before SEC if engage in unethical or improper professional conduct

Question 14

What (5) powers does the PCAOB (Public Company Accounting Oversight Board) have?

Answer 14

• Established to oversee auditors of companies
• Has rule-making authority regarding quality control, ethics and auditing standards
• Has substantially the same investigatory scope with respect to accountants as SEC
• May request that SEC issue subpoenas to 3^rd parties
• Has no injunctive power but may institute administrative proceedings

Question 15

Are accounting firms required to register with the PCAOB?

Answer 15

Yes

Question 16

What authoritative body is required to handle an ethics complaint filed against a CPA?

Answer 16

• either the AICPA or a state CPA society

Question 17

What is the annual inspection guideline for accounting firms per the PCAOB standards?

Answer 17

• On firms that provide audits for 100+ issuers
• Other firms inspected every 3 years
• Must include firm’s response

Question 18

How long does a firm have to correct reported weaknesses per the PCAOB guidelines?

Answer 18

12 months