A Look at the CPA Ethics Rule Changes Effective May 1, 2017

Some noteworthy changes to the professional ethics and conduct rules for Certified Public Accountants (CPAs) in North Carolina went into effect on May 1, 2017. The amended rules include the following:

1. 21 NCAC 08N .0203 Discreditable Conduct Prohibited

Rule .0203 prohibits CPAs from engaging in conduct that is “discreditable to the accounting profession.” Under the revised rule, listed examples of “discreditable conduct” now include:

  • acts that reflect adversely on the CPA’s honesty, integrity, trustworthiness, good moral character, or fitness as a CPA;
  • stating or implying an ability to improperly influence a governmental agency or official;
  • failing to comply with any order issued by the Board;
  • failing to fulfill the terms of a peer review engagement contract;
  • misrepresentation in reporting CPE credits;
  • entering into any settlement or other resolution of a dispute that purports to keep its contents confidential from the Board; or
  • failing to participate in a peer review program pursuant to 21 NCAC 08M .0105.

Failure to participate in a peer review program is an addition from the previous version of the rules.

2. 21 NCAC 08N .0208 Reporting Convictions, Judgments, and Disciplinary Actions

Section (c) of Rule .0208 has been revised to clarify the conditions under which a CPA must notify the State Board of certified Public Accountant Examiners (the “Board”) of a settlement with a client or firmer client. The revised language states:

“A CPA shall notify the Board within 30 days of any written settlement in which a client or former client releases the CPA from liability that is grounded upon an allegation of professional negligence; gross negligence; dishonesty; fraud; misrepresentation; incompetence; or violation of any federal, state, or local law, regardless of whether the client or former client has filed a civil suit or criminal charge.”

3. 21 NCAC 08N .0305 Retention of Client Records

The revisions effective May 1 include substantial changes to Rule .0305, which governs the retention of include. The changes affect CPAs’ obligations with respect to the delivery or return of work product, and also acknowledge that state and federal regulations may impose obligations to deliver work papers to clients even when such obligations are not imposed by the Board. The revisions also clarify that CPAs may charge fees for their time spent in retrieving copies of work papers at a client’s request (in addition to charging any copying costs incurred). CPAs are not required to convert records into electronic format; however, “[i]f the client requests records in a specific format and the records are available in such format within the CPA’s custody and control, the client’s request should be honored.”

Contact the Raleigh CPA License Defense Attorneys at Cheshire Parker

The professional license defense attorneys at Cheshire Parker Schneider & Bryan, PLLC provide experienced representation for CPAs facing disciplinary action in North Carolina. To speak with an attorney at our offices in Raleigh, please call (919) 833-3114 or request a consultation online today.

Categories: Professional License Defense