Professional Ethics and Conduct for CPAs Case Study

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Professional Ethics for CPABrowning, Levin & Wolod is a large accounting company that recruits college graduates. This accounting company engages in college job fairs throughout the country with the purpose of hiring the best accounting graduates every year. The firm only hires recent graduates with an excellent understanding of AICPA’s Code of Professional Ethics. As part of the recruitment process, the firm invites candidates to provide a writing sample demonstrating knowledge of the AIPCA Code of Professional Conduct. The selection process involves completing a PETH exam given the likelihood of certified public accountants (CPAs) engaging in unethical behavior. This paper discusses professional ethics exams for CPAs and provides a comparison of the two most recent disciplinary actions in Wisconsin relating to the behavior of CPAs.Part I - Professional Ethics Exams for CPAsBordeman & Westermann (2019) state that CPAs have become a crucial part of the United States’ financial framework. CPAs are indispensable in nearly every facet of the country’s financial framework ranging from small-town practitioners to the largest firms. Given their critical role in the U.S. financial framework, the behavior of these professionals has attracted considerable attention in recent years. This is primarily because the behaviors of CPAs have significant impacts on the stability of the financial services industry. Consequently, CPAs are held to certain standards of behavior and professional practice established by the American Institute of Certified Public Accountants (AICPA).Individuals seeking licensure to practice as CPAs must pass the Professional Ethics for CPAs (PETH) exam. This exam is critical because CPAs are likely to engage in unethical behavior as proven by the AICPA’s Acts Discreditable Rule. The ultimate purpose of the PETH exam is to determine how well an individual can handle professional ethics issues or questions that are likely to emerge across his/her accounting profession. It helps those seeking licensure to practice as CPAs to understand what is required and expected of them in terms of conduct when working in or with professional organizations.In Wisconsin, the PETH exam is administered by the Wisconsin Institute of Certified Public Accountants. It is a multiple-choice exam that covers national and state regulations relating to CPAs’ professional conduct. It comprises 50 multiple-choice questions in a self-study, open-book format that must be answered with a score of at least 80% (Colin, 2021). Wisconsin’s PETH exam and related materials cost $75 and are administered once an individual completes a CPA license application. An individual completes this exam after passing all four sections of the State’s CPA exam. The three key topics covered in this exam are the Code of the Professional Conduct, Ethics in Business, and Basic Concepts and Philosophy of Professional Conduct.Based on anecdotal evidence, the PETH exam is considered to be more difficult in comparison to the CPA exam. Completing such a difficult exam is beneficial to the accounting profession and individual accountants in terms of promoting ethical conduct in professional practice. For individual accountants, the exam helps to understand what is required of them in terms of professional conduct and improves understanding of ethics in practice (Bordeman & Westermann, 2019). For the accounting profession, it provides a means for ensuring individual accountants are answerable for their conduct in professional practice. To keep the candidate’s CPA license status as active in the state of licensure, the continuing education ethics requirement is familiarization with the national AICPA and state rules on professional conduct in the accounting profession. The pros of a take-home testing approach for the PETH exam include giving candidates enough time to prepare and complete the test and providing well-thought-out answers. However, its cons include the likelihood of copying or engaging in exam cheating.Part II – Disciplinary ActionsThe AICPA’s Acts Discreditable Rule demonstrates that CPAs participate in unethical behavior that could have significant impacts on their professional practice and the overall accounting profession. As a result, CPAs are required to familiarize themselves with national or AICPA as well as state rules governing professional conduct in the accounting profession. The PETH exam is one of the approaches used in the accounting profession to enhance a candidate’s understanding of the expected and required professional conduct in this field. However, CPAs still engage in behaviors that violate what is expected of their professional conduct in the accounting field. Consequently, disciplinary actions have been established to help institute necessary corrective actions or measures for CPAs who engage in unethical behavior.State Boards of Accountancy administer disciplinary actions to CPAs for violation of the professional code of conduct and involvement in unethical behavior. Disciplinary actions differ in each case depending on the specific details of the situation. In essence, the State Boards of Accountancy adopt a disciplinary action based on the specific violation of the professional code of conduct by a CPA. Prior to adopting a disciplinary action, the CPA involved in a violation of professional conduct undergoes a disciplinary process in relation to the due process in licensure within the state. While decisions on disciplinary actions for violation of professional conduct are influenced by the specific violation and the existing national and state rules, the penalties sometimes generate controversies. As shown in this section, some penalties for violation of the professional code of conduct by CPAs are deemed too harsh or too lenient.Disciplinary Action #1This disciplinary action relates to the case involving Lawrence P. Weisbrod and Weisbrod & Associates Inc. The disciplinary proceeding against Lawrence P. Weisbrod and Weisbrod & Associates Inc. was conducted before the Wisconsin Accounting Examining Board, Case No. 19 Acc 023. The effective date of the case is June 9, 2021. Lawrence P. Weisbrod who was born in 1964 is a licensed and certified CPA by the State of Wisconsin. His certification and license number, 11865-1, was issued on July 25, 1989, and has remained active until December 14, 2021 (Wisconsin Department of Safety and Professional Services, 2021).

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On the other hand, Weisbrod & Associates Inc. is a licensed accounting firm in the State of Wisconsin, having license number 1361-3. The accounting firm’s license was first issued on September 14, 2012, and remains active through December 14, 2021. However, the accounting firm’s license was expired between December 15, 2013 and February 10, 2020. Wisconsin’s Department of Legal Services and Compliance identified Lawrence P. Weisbrod as the responsible licensee in charge of Weisbrod & Associates Inc.Weisbrod & Associates, a respondent in this case, admitted to offering accounting services at a time when its license was expired. Some of the services offered by this accounting firm in the period between December 15, 2013 and February 10, 2020 include attesting services. The expiration of the license was identified after the department obtained an email from the Wisconsin Officer of the Commissioner of Insurance with a letter from Lawrence P. Weisbrod, the other respondent in this case. After receiving the email and letter, an investigation into Weisbrod & Associates’ expired license was opened as Department records demonstrated that the firm continued to operate while its license had expired on December 15, 2013. While the accounting firm’s license was renewed on February 10, 2020, the firm admitted to providing accounting services while its license was expired. Upon inquiry from the Department, Respondent Weisbrod stated that he was unaware that the firm’s license was expired and promised to renew it as soon as possible.CPA’s Violation and Penalty IssuedBy operating with an expired license, Weisbrod & Associates…

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…AICPA and state rules when carrying out their duties as certified public accountants. Their actions constituted infringement of what was required and expected of them as CPAs based on existing national and state rules/standards.Secondly, the disciplinary actions are similar in terms of the specific violations involved in the situation. In both cases, the respondents violated the Compliance With Standards Rule of the AICPA Code and the relevant state rule. This violation was evident in their practice with expired licenses. The board respondent to the violations by reprimanding the respondents and requiring them to pay the relevant costs. The reprimand was considered an appropriate disciplinary action in both instances regardless of the duration in which the respondents operated with an expired license.However, these cases are different in terms of the disciplinary actions adopted based on the specific violations. In the first disciplinary action, the reprimand was instituted since the only violation was operating with an expired license. In the second case, the disciplinary action involved more than a reprimand since the respondents violated other standards or rules. This implies that serious or more violations attract harsh disciplinary actions. Therefore, the board determines the disciplinary action based on the extent and impact of the violation. The consideration of the extent and impact of the violation helps to ensure that the punishment fits the crime and is neither too lenient nor too harsh.Due ProcessThe determination of an appropriate disciplinary action in each of these cases was made pursuant to Wis. Stat. § 442.12. This rule stipulates actions to be undertaken by the State Board of Accountancy in pursuing and resolving a disciplinary violation. Moreover, it stipulates some of the disciplinary actions to be considered by the relevant board when making decisions on disciplinary violations. Section (a) of this rule stipulates that the board should carry out investigations and conduct hearings as part of the due process in pursuing and resolving a disciplinary violation. In both cases, mailing was used as the mechanism for conducting investigations and hearings. Upon receipt of complaints in both instances, the board conducted investigations and hearings by contacting the respondents via email. Through this, the board provided the respondents the opportunity to answer allegations made against them. While the board has the discretion to determine the appropriate disciplinary action, it followed due process by contacting respondents prior to a final resolution of the matter. Therefore, the respondents in both cases had the opportunity to reply to allegations made against them. Moreover, the board did not consider the duration of the violations when conducting investigations in both cases.However, the board seemingly used different approaches in due process to pursue and resolve the disciplinary violations. In the first instance, the board emailed the respondent on why Weisbrod and Associates’ license was expired. This implies that the board sought to find out the reasons for the license expiration despite continued operations. In the second case, the board adopted a slightly different approach in pursuing the matter. The board did not ask why the respondents’ licenses had expired but seemingly focused on the other violations. This could have significantly affected the board’s resolution of the disciplinary violations in the two cases. Additionally, the board waited for a period of 30 days for communication from the respondent in the second case unlike in the first case.In conclusion, national and state standards are enacted to help guide professional practice in the accounting field. These standards/rules are the premises for the determination of what constitutes ethical and unethical behavior in this profession. Certified public accountants and accounting firms guilty of violating standards or rules of professional conduct are subjected to disciplinary actions. The relevant disciplinary actions are….....

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