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The Question of Ethics - Complaint and Enforcement Procedures for CPAs in Texas Revised August 2002 The Texas Society of CPAs (TSCPA) and the American Institute of CPAs (AICPA) are voluntary professional organizations. They represent the accounting profession’s dedication to serving the public interest while contributing to the professional image and commitments of CPAs throughout Texas and the nation. Texas Certified Public Accountants (CPAs) are licensed to practice accounting by the Texas State Board of Public Accountancy (State Board). The State Board grants CPA certificates after candidates pass a rigorous, four-part examination and obtain practical, on-the-job experience. Additionally, licensees must complete a minimum requirement of continuing education as a condition for maintaining a license, which includes a Board-approved four-hour course in ethics. Once the initial four-hour course has been completed, licensees are required to update their ethics training every three years with a subsequent two-hour course. The Texas Public Accountancy Act — the statute governing the practice of accounting in Texas — provides for annual licensing. In addition to a valid certificate, a CPA in good standing is one who has a current license to practice issued by the State Board. TSCPA, AICPA and the State Board take their obligations to the public and to the accounting profession seriously and pledge to uphold a high level of moral and ethical standards for members and licensees. Similarly, CPAs take an oath to maintain a high level of ethics throughout their careers. As a result, all three bodies have established rules to govern and guide the conduct of CPAs. CPAs are engaged in all aspects of business and commerce — including practice in public accounting, government, industry, education and not-for-profit organizations. A CPA who fails to uphold the required standards of conduct is subject to disciplinary action by the State Board, as are members of TSCPA and AICPA who violate the standards of those organizations. Professional misconduct that reflects adversely on the individual CPA, and consequently, on the accounting profession, is not tolerated.
CPAs licensed by the State Board take an oath to abide by the Public Accountancy Act and the Board’s Rules of Professional Conduct. Additionally, every CPA who voluntarily joins TSCPA and/or AICPA agrees to observe the respective organization’s Codes of Professional Conduct. Every allegation of a CPA’s misconduct is thoroughly investigated to determine whether disciplinary action is warranted. Violations of ethical standards subject the CPA to disciplinary sanctions that may include suspension or revocation of the CPA certificate and license to practice by the State Board, and suspension or expulsion from membership in TSCPA and AICPA. A CPA is obligated to:
Complaints against a CPA can arise from various sources, including, but not limited to, dissatisfied clients, present and former employers, other CPAs, governmental agencies, the media, and private citizens or businesses that rely on the CPA’s expertise. A CPA’s clients also may become displeased as a result of unexpected fees or a misunderstanding about the nature of a CPA’s services. Although unfortunate, such incidents usually do not involve violations of specific rules of conduct. Indeed, a candid discussion of the issue between the CPA and client may offer a solution to a disagreement. When specific rules of conduct do not apply to the situation, the State Board, TSCPA and AICPA close the case. However, if such a situation involves misleading advertising or improper solicitation, the State Board, TSCPA and AICPA may open an investigation. State Board files are confidential by statute, so complaint information cannot be shared with anyone other than the CPA under investigation until the hearing process is complete. A complaint must be filed with both the State Board and TSCPA to initiate action by both. However, the State Board and TSCPA act independently of one another. (See Investigations). An investigation by one does not necessarily mean an investigation by the other organization. Similarly, dismissal of a complaint by one does not mean that the complaint will be dismissed by the other organization. (After the State Board investigates a complaint, finds a violation, and publishes the CPA’s name, TSCPA will learn of the violation and may open an investigation of its own.) If the CPA is a member of both TSCPA and AICPA, the two organizations do share complaint information on a confidential basis and conduct one investigation under the Joint Ethics Enforcement Program (JEEP). Fee Disputes (Client Practice of Public Accounting) A fee dispute may result from a client’s lack of understanding of the basis for the fee and the factors that make up the charges. However, a CPA may be at fault for failing to inform the client of the time and cost involved with the client’s work. A CPA should not be reluctant to discuss fees. Every client has a right to know the extent of his or her monetary obligations. A request for a written fee estimate from the CPA is an acceptable practice. Complaints involving fee misunderstandings are investigated by the State Board, TSCPA, or AICPA only when possible violations of the ethics rules are also involved. In cases involving fee disputes, clients might consider contacting a nonprofit arbitration, mediation organization or retaining legal counsel to seek civil recourse. CPAs and all other persons are welcome to inquire and discuss matters of accountants’ rules of conduct. Members of the TSCPA Professional Ethics Committee may be reached by (1) calling a committee member directly, (2) calling the local TSCPA chapter office for a referral to a committee member, or (3) calling the TSCPA headquarters for a referral to the Society’s ethics hotline. Such inquiries and discussions are informal and confidential. Inquiries also may be directed to the State Board’s Enforcement Division. The State Board will help people interpret the rules. The public may request an opinion from the Board, which offers binding conclusions about specific conduct. A disciplinary action based on that opinion may be imposed only through a formal investigative process. Ethics investigations are conducted independently by the State Board and by TSCPA/AICPA. The State Board may act with regard to any CPA licensed in Texas or any individual using the identification of “CPA” or “public accountant.” TSCPA and AICPA have authority only over their members. Complaints against Texas CPAs should be sent to the State Board’s Enforcement Division, the TSCPA and/or AICPA. The Board asks that complaints be made in writing. Complaints to the TSCPA/AICPA must be made in writing and include all relevant facts and support documentation to provide a complaint-processing committee with enough information to determine whether the allegations constitute violations of rules of professional conduct (or the Public Accountancy Act in a Board investigations). A CPA under investigation by the State Board must respond to the allegation. In State Board proceedings, the respondent (CPA being investigated) has access to the complaint and support documentation, and the complainant (the party filing the complaint) is informed of the case’s progress and disposition. Persons who file complaints with either TSCPA or AICPA receive an acknowledgment and a notification regarding the CPA’s membership status in both organizations. A complainant’s identity is generally withheld from the CPA, although the nature of the complaint and the questions posed often enable the CPA to determine the source. Through correspondence from TSCPA or AICPA, the CPA is asked to answer specific questions related to the complaint so TSCPA can determine how to proceed. If the State Board’s enforcement committee determines that no violation occurred, the case is closed, following the Board’s ratification of the committee’s finding, with no further action. Otherwise, the respondent may be scheduled for an informal hearing or informal conference before a State Board committee. In State Board proceedings, the file is available to the CPA for preparation of a defense. In AICPA and TSCPA proceedings, the file is confidential unless the case is referred to the AICPA Joint Trial Board for a formal hearing or a settlement agreement is reached. CPAs can reach a settlement agreement with the TSCPA/AICPA Ethics Division and agree to the imposition of penalties, usually suspension or expulsion, without a full Trial Board hearing. The Trial Board reviews the agreement and publishes the result in the appropriate periodical just as if a full Trial Board proceeding had occurred. Purpose and Form of Discipline at the TSCPA/AICPA The primary purpose of disciplinary proceedings is to protect the public from CPAs whose actions fall below the required standards of conduct. Depending on the seriousness of the violations, TSCPA and/or AICPA may elect to issue sanctions to their members in two different forms.
In State Board proceedings, the following forms of sanctions can be imposed on a CPA: reprimand, censure, non-renewal of license, revocation or suspension of the CPA certificate, monitoring of work product for a specific period of time, limitation on the scope of public practice, probation, and assessment of administrative costs and monetary penalties. The most severe penalties are limitation of a public practice and suspension or revocation of the CPA certificate and license to practice. These severe penalties effectively remove all or part of the accountant’s privilege to be known in practice as a “CPA” or “accountant.” Hearings, Informal Conference and Interviews State Board investigations are reviewed by the Major Case Enforcement Committee, the Behavioral Enforcement Committee, or the Technical Standards Review Committee. After the review, a Board committee may decide to conduct an informal conference, which is a meeting of the committee, the complainant, and the CPA. The committee can question both parties and recommend a resolution. If a violation has occurred, the committee recommends a resolution to the CPA. If the CPA does not accept the proposed resolution, a public hearing is held before an administrative law judge. This hearing is similar to a civil lawsuit; the parties follow rules of evidence, the State Board enforcement attorneys present the case, the CPA can have an attorney, and a court reporter records the proceedings. However, under recent changes by the State Board, any depositions must be conducted in Austin unless the CPA can prove hardship thereby preventing the depositions being done in Austin. The administrative law judge prepares a recommended disposition of the matter. The State Board can then accept, modify, or reject the administrative law judge’s proposed decision. Board actions can be appealed to the Travis County district courts. When a Board order is finalized, the CPA’s name and a summary of the case is usually published in the Texas State Board Report, issued quarterly by the State Board. TSCPA/AICPA interviews are conducted by members of the Professional Ethics Committee and may be in person or by conference call. The complainant is not invited to the interview. After the interview, the committee determines whether a violation has occurred and imposes disciplinary action, if applicable. TSCPA and AICPA proceedings are conducted cooperatively, and the TSCPA Ethics Committee, the AICPA Professional Ethics Division, or both, can recommend educational/remedial penalties. These decisions are conveyed to the CPA in a letter of required corrective action that usually calls for continuing professional education courses to be taken within a stated period. However, if the violation is deemed to be serious enough by the Professional Ethics Committee of the TSCPA or by the AICPA, the CPA may be offered a non-negotiable settlement agreement. These agreements always involve membership issues. The CPA has the option of accepting the agreement or proceeding to the Joint Trial Board, as discussed in the next paragraph. A confidential record of this action is kept on file, but the CPA,s name is not published unless proceedings have progressed through the Trial Board stage. When a penalty stronger than corrective action is considered appropriate i.e., suspension or expulsion, and the CPA declines the settlement agreement, the TSCPA and AICPA refer the investigation to the Joint Trial Board for a formal hearing that resembles courtroom proceedings. In attendance are the Trial Board hearing panel, a TSCPA or AICPA committee representative to present the case, the respondent CPA and legal counsel/associate, and a stenographer. These elements of due process are necessary because a finding of a violation will result in publication and may also include suspension or expulsion from membership in either organization. The name of a CPA suspended or expelled because of a code of conduct violation is published along with a summary of the violation in an all-member publication of TSCPA, AICPA or both. To protect the CPA from damage to his or her reputation, AICPA and TSCPA disciplinary proceedings are confidential until the Joint Trial Board finds a CPA has violated the code of conduct. The State Board’s investigative proceedings remain confidential except to the respondent and legal counsel prior to a public hearing as provided by statute. Under JEEP procedures, the recipient of a letter of required corrective action may contest the conclusion before the Joint Trial Board. A Trial Board decision may be appealed to an appeals panel. What to Expect as a Complainant Investigation and hearing procedures may be lengthy.
Since TSCPA/AICPA committee members are volunteers who
have full-time responsibilities to their firms and employers,
TSCPA/AICPA proceedings may take up to a year or longer,
depending on the complexity and number of cases in progress. A complainant may receive feedback on applicable conduct rules but cannot expect to receive accounting advice or services from the State Board, TSCPA or AICPA personnel. TSCPA and AICPA only have the authority to investigate and prosecute a complaint. A complainant should not expect to receive a complaint status from TSCPA/AICPA — that information is confidential unless a disciplinary action requires publication. A complainant should not expect to recover monetary losses or seek monetary fines levied against a CPA on behalf of the complainant. None of the enforcement bodies — State Board, TSCPA, or AICPA — can order CPAs to pay losses or penalties to complainants. However, the State Board — not TSCPA or AICPA — has the authority to impose monetary administrative costs and penalties payable to the State Board. Ethics—Everyone’s Responsibility TSCPA supports a strong ethics enforcement program, and the Professional Ethics Committee encourages fairness, impartiality, and the vigorous enforcement of the Code of Professional Conduct in the interests of the public and the accounting profession. The public is advised to verify the credentials of practitioners prior to engaging their services. CPAs, clients, employers and the public may obtain information on the codes of conduct from the State Board and TSCPA. For State Board inquiries, address correspondence to: Enforcement Division TSCPA’s Professional Ethics Committee has members available to receive inquiries and give informal responses. Call 817-419-0167 or write to the
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