VIRGINIA CPA ETHICS 2016 REQUIRED COURSE - PDF

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VIRGINIA CPA ETHICS 2016 REQUIRED COURSE Virginia CPA Ethics: 2016 Required Course CPE presentation developed by: Virginia Society of CPAs (VSCPA) Jim Cole, CPA Clare Levison, CPA Jim Shepherd, CPA Edited
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VIRGINIA CPA ETHICS 2016 REQUIRED COURSE Virginia CPA Ethics: 2016 Required Course CPE presentation developed by: Virginia Society of CPAs (VSCPA) Jim Cole, CPA Clare Levison, CPA Jim Shepherd, CPA Edited by: Cheryl Hyder, CPA Jill Mitchell, CIA John Riley, CPA Laura Seal, CPA Emily Walker, CAE This training has been created to meet the Virginia Board of Accountancy s (VBOA) annual 2-hour (100-minute) CPE requirement for In 2003, the Virginia General Assembly passed a regulation requiring all CPAs subject to Virginia CPE requirements to take an annual Ethics CPE course. Each year, the VBOA provides an outline of topics to be included, which can be found at tinyurl. com/2016vboaethicsoutline (DOCX). Developed using that outline as the course framework, attendees will be able to accomplish the following fundamental objectives: Clarify the impact of VBOA statute changes Summarize CPE reciprocity and mobility Paraphrase the VBOA policy changes and their effects Apply the steps of the AICPA Code of Professional Conduct conceptual framework Recall the safeguards and threat assessment and how to employ them in everyday practice Understand the CPA s obligation to protect a client or employer s electronic data Recognize the importance of compliance with professional standards The VBOA has confirmed that this class meets the need for 2 hours (100 minutes) of Ethics CPE in Virginia as well as 2 hours of Ethics CPE for CPAs licensed in these other states: Maryland: Satisfies 2 hours North Carolina: Group study and self study versions satisfy 2 hours for CPAs licensed in Virginia and North Carolina for CPAs who live and primarily work in Virginia Washington, D.C.: Satisfies 2 hours West Virginia: Satisfies 2 hours This course may also qualify for similar continuing education credit in other jurisdictions and fulfill Ethics requirements for particular specialized certifications. Attendees are encouraged to consult applicable regulations or regulatory bodies for additional information. Please note: This class is not intended to be an all-encompassing update or to present all significant events occurring during the prior year. The information provided and scenarios presented do not represent official positions of the VBOA, the American Institute of CPAs (AICPA), the U.S. Internal Revenue Service (IRS), the International Ethics Standards Board for Accountants (IESBA) or any other standard-setting or regulatory body discussed herein, nor do they represent the views of any individual course instructor unless specifically noted. For specific advice or clarification, please research the applicable standards or seek advice from the appropriate governing/regulating organization. 1 Table of Contents Virginia-Specific Ethics Course 2016 Outline Knowledge Check Introduction Chapter 1: Virginia Board of Accountancy Updates/Changes to Virginia s Accountancy Statutes Chapter 2: General Ethics Chapter 3: Trending Topics for Chapter 4: Conclusion Appendix I: Resources, Glossary and Acronyms Appendix II: Additional Case Studies for 2016 Ethics Appendix III: Section 2176 Sample Consent Forms Appendix IV: IRS Pubication Virginia-Specific Ethics Course 2016 Outline A. VBOA Updates Required discussion. z Changes to VBOA Statutes effective July 1, 2015 { Financial Statement Preparation Services { Firm Mobility z CPE Reciprocity/Mobility z Active CPE Exempt Status for licensed CPAs { Process overview, including pre-approval z New Virginia-Specific Ethics Course Requirements { Board Policy No. 2, Sponsors Providing Continuing Professional Education (CPE) { Board Policy No. 4, Continuing Professional Education (CPE) Guidelines B. General Ethics Required discussion. z Ethics Toolkit (Conceptual Framework for Public Practice and Business) { Five-step approach to addressing ethical dilemmas { Case studies C. Hot Topics for 2016 Required discussion.* z Compliance with Professional Standards { Department of Labor (DOL) Report May 2015 z Summary (CPA Profession Relevancy) z VBOA Responsibilities z Case Studies z Personal Information and Privacy (Data Security) { Informing CPAs { Professional Responsibilities { Case studies { Resources 3 Knowledge Check 1. What is the key to CPE compliance for CPAs licensed in Virginia, whether in public practice or business/industry? 2. What does the term principal place of business mean? How does it relate to CPE reciprocity? 3. What policy change related to Ethics course sponsors did the VBOA make in 2015? 4. What is the key to Active CPE Exempt status for CPAs licensed in Virginia, whether in public practice or business/industry? 4 Knowledge Check 5. What are the four steps of the AICPA conceptual framework? 6. List five of the top cybercrimes affecting CPAs? 7. What are the six core components of the plan to improve audits? 5 Introduction Behaving ethically is a lifelong process. It requires a constant effort to apply ethical principles throughout your career, from the formative years through retirement. You re only as ethical as the way you reacted to the last crisis, so invest in ethics. Take it seriously. Don t just put in your two hours to fulfill the requirement for another year. Really put yourself into the course. You get out of it what you put into it. Rapidly changing technology continues to shape the way CPAs perform their jobs. CPAs need to make an investment in understanding the ethical implications associated with technology, and portions of this course are devoted to the moving target that technological advances create. Technological advances affect the way CPAs communicate with clients and handle their personal information. And while those advances can bring new clients and time-saving process changes to savvy firms and professionals, they also bring threats from competition to bad actors looking to steal money and personal information. It s important to protect your practice, employer and clients from these kinds of risks and learn what you need to do to capitalize on technological advances while avoiding the pitfalls those advances bring. Our goal this year is to provide context for a variety of ethical dilemmas you may face in the workplace. From updates on VBOA activities to practical ethics case studies, read on to make your investment in ethics. 6 Chapter 1: Changes to Virginia s Accountancy Statutes Effective July 1, 2015, the accountancy statutes governing Virginia CPAs were changed, through the passage of SB 1125, by clarifying firm mobility for CPA firms and adding a new accounting service. Firm Mobility Virginia has long permitted out-of-state CPA firms to provide public accounting services to Virginia clients without having to obtain a Virginia CPA firm license, provided certain criteria are met. Such firms are automatically subject to the enforcement authority of the Virginia Board of Accountancy (VBOA). Clarifying language was added to the existing statute, effective July 2015, to ensure that these firms meet the same practice monitoring and firm ownership requirements as Virginialicensed CPA firms. This change means that all CPA firms providing public accounting services to Virginia clients should be subject to the same requirements, including peer review, regardless of where the CPA firm is licensed. Licensing requirements for firms can be found in the Code of Virginia, Section , entitled Licensing Requirements for Firms. Two applicable paragraphs of that section read as follows: A. Only a firm can provide attest services, compilation services or financial statement preparation services to persons or entities located in Virginia. However, this shall not affect the privilege of a person who is not licensed to include a statement on financial statements indicating that no assurance is provided on the financial statements, to say that financial statements have been compiled or to use the compilation language, as prescribed by subsections B and C of B. A firm that provides attest services, compilation services or financial statement preparation services to persons or entities located in Virginia shall obtain a Virginia license if the principal place of business in which it provides those services is in Virginia. C. A firm that is not required to obtain a Virginia license may provide attest services, compilation services, or financial statement preparation services to persons or entities located in Virginia if: 1. The firm is licensed in another state, meaning, it can lawfully provide attest services, compilation services or financial statement preparation services to persons or entities in the state where its principal place of business is located; and 2. The firm complies with statutes governing firm practice and firm ownership requirements for Virginia CPA firms and 3. The firm's personnel working on the engagement either hold a Virginia license or hold the license of another state which is considered to be substantially equivalent as defined by the VBOA or 4. The firm's personnel working on the engagement are under the supervision of a person who either holds a Virginia license or holds the license of another state and complies with the substantial equivalency provisions. These changes place non-virginia CPA firms under the same statutory requirements as Virginia CPA firms, providing equal footing in the practice of public accounting. This should provide further protection to the public by enhancing quality of services provided by the CPA profession to Virginia s citizens and businesses. If you have questions about the mobility of your license, visit cpamobility.org. Knowledge Check: What is the key to CPE compliance for CPAs licensed in Virginia, whether in public practice or business/industry? 7 Chapter 1: Changes to Virginia s Accountancy Statutes Financial Statement Preparation Services Effective July 1, 2015, the accountancy statutes governing Virginia CPAs were changed through the passage of SB 1125 by clarifying firm mobility for CPA firms and adding a new accounting service. Both a CPA firm license and peer review registration are required to prepare financial statements for clients in Virginia, without regard to the level of service being provided. The AICPA issued Statement on Standards for Accounting and Review Services (SSARS) No. 21 in This statement revised professional standards for reviews and compilations and introduced engagements to prepare financial statements as a separate engagement from compilations. These standards are effective for reports issued on or after December 2015, although early adoption is encouraged. SSARS 21 includes a provision that permits CPAs engaged to prepare a client s financial statements, and not also engaged to perform a compilation, review or audit of those financial statements, to prepare financial statements without actually presenting a compilation report ( Preparation of Financial Statements, Sec. 70). These assignments are not attest services, and as a result, CPAs are not required to make an independence determination. The Virginia accountancy statutes were amended effective July 1, 2015, to clearly include preparation of financial statements as a professional service and ensure consistency with AICPA professional standards. The change makes it clear to both Virginia CPAs and the public that financial statement preparation services are covered in the same manner as audit, review and compilation services. Under the amended statutes, a firm license is required for CPAs to undertake financial statement preparation services, whether or not the CPAs are providing audits, reviews and compilations. The provision of financial statement preparation services by a firm also requires that firm to enroll in the peer review program. Virginia s accounting statutes state that only a firm can perform a SSARS 21 Section 70 Engagement to Prepare Financial Statements, and that such a firm must be enrolled in peer review. However, the AICPA peer review program explicitly exempts firms that only perform the preparation of financial statements under SSARS 21 Section 70. Firms licensed in Virginia that perform the preparation of financial statements under SSARS 21 Section 70 as their highest level of service must still enroll in peer review under Virginia law despite the exemption in the Peer Review Program Standards. However, these firms can enroll in an inactive status and will actually not be subject to peer review. Firms otherwise subject to peer review that also perform the preparation of financial statements under SSARS 21 Section 70 will have such engagements included within the scope of their peer reviews. It is important to note that the amended language does NOT restrict a non-licensee (i.e., a non-cpa) from performing this service. Another notable change is the requirement to obtain a signed engagement letter for SSARS engagements. CPE Reciprocity/Mobility Given the ever-increasing mobility of the American workforce, the issue of CPE reciprocity among substantially equivalent jurisdictions has become a growing concern in the CPA profession. In order to clarify this issue for CPAs providing services in Virginia, on Oct. 5, 2015, the VSCPA and the VBOA jointly issued a letter of explanation to all state board of accountancy executive directors and all state CPA society executive directors. The letter reads in part: Virginia has a longstanding practice of CPE reciprocity for dual and multi-state licensees. The VBOA applies the following practices related to CPE reciprocity: If the licensee s principal place of business is Virginia, then the licensee must comply with Virginia s CPE requirements. If the licensee s principal place of business is in a substantially equivalent jurisdiction and the licensee holds a license of such substantially equivalent jurisdiction, then the licensee may claim a Home State Exemption through the CPE Tracking System for Virginia CPE compliance. The licensee must have an active CPA license in good standing in their principal place of business to qualify for the Home State Exemption. 8 The Virginia-specific Ethics requirement follows a similar pattern, as detailed in the VBOA regulations (emphasis ours): 18VAC Continuing professional education. A. If during the current calendar year a person who holds a Virginia license provided services to the public using the CPA title, he shall have obtained at least 120 hours of continuing professional education during the threecalendar-year period ending with the current calendar year. For each of the calendar years in that period, he shall have obtained at least 20 hours of continuing professional education, including an ethics course of at least two hours. 1. If the person also holds the license of another state and Virginia is not the principal place of business in which he provides services to the public using the CPA title, the ethics course taken to comply with this subsection either shall conform with the requirements prescribed by the board or shall be an ethics course acceptable to the board of accountancy of another state in which the person holds a license. 2. Otherwise, the ethics course shall conform with the requirements prescribed by the board.cpas licensed in multiple jurisdictions with Virginia being the principal place of business should check with the individual boards of accountancy where they hold additional licenses with respect to CPE mobility. For example, while the boards in both Washington, D.C., and Maryland allow CPE completed to comply with Virginia s requirement to be used towards their requirements (including the Ethics course), neither provides an exemption from audit/reporting requirements. Knowledge Check: What does the term principal place of business mean? How does it relate to CPE reciprocity? 9 Chapter 1: Changes to Virginia s Accountancy Statutes Case Study Members in Public Practice Dan Walker, CPA, is a sole practitioner whose residence and principal place of business is in Newburg, Md. Dan has an active Maryland license and also holds an active license in Virginia. Dan s reputation and Internet presence have allowed his firm to attract clients outside of Maryland. He was recently engaged to perform an audit of the financial statements of Skymill, Inc., located in Dahlgren, Va., about eight miles from his office in Newburg. Field work begins on Dec. 12 which follows the week that Dan annually schedules 40 hours of CPE. As Dan sits in the Maryland Ethics class on Dec. 9, he suddenly wonders whether he needs a Virginia-specific Ethics course for his upcoming work in Virginia. Will the Maryland Ethics course be sufficient for meeting his CPE requirements for his Virginia license? Assuming the same facts as above except that Dan resides in Maryland, still holds both a Maryland and Virginia license, but his principal place of business (i.e. his practice s office) is in Virginia, next to the Skymill factory which Ethics course does he need to meet his CPE requirements for his Virginia license? What if Dan s only CPA license was in Maryland? What are his responsibilities to the VBOA and his new client? Case Study Members in Business Chip Newsom, CPA, resides in Washington, D.C., and is employed full time as the CFO for the American Bankers Association, located in Alexandria. He holds both an active Virginia CPA license and an active District of Columbia license, yet he does not display the certificates, nor has he ever indicated to anyone, in any way, that he holds such licenses. Chip is currently planning his CPE for 2016 and is concerned that he takes the proper Ethics course. As a resident of the District of Columbia, he prefers to take the Ethics course to meet the guidelines of the District. Since Chip is not in public practice, does the District of Columbia s Ethics course also meet Chip s Virginia Ethics CPE requirement? Assuming the same facts as above, except the Bankers Association relocates to 16th Street in the District of Columbia, will Chip s Ethics requirement change in any way? What if Chip were only licensed in Virginia? 10 Active CPE Exempt Status Individuals holding an active CPA license issued by Virginia, but not currently providing services as a CPA or using skills traditionally attributed to accountants, may be eligible for the relatively new Active CPE Exempt status. A Virginia CPA is holding out as a CPA and therefore using the title, without regard to whether or not the individual publicizes their license. Board Regulation 18VAC states: holding a Virginia license constitutes using the CPA title. Not disclosing or publicizing or even actively concealing one s CPA license will not exempt a licensee from CPE requirements. On July 1, 2014, the VBOA implemented the new Active CPE Exempt status. A CPA who wishes to maintain his or her license, but who is not providing services to an employer or to the public and does not expect to provide such services for a period of time, may apply for the status. The CPE exemption itself is not new, just the requirement to apply for Active CPE Exempt status in order to take advantage of this exemption. VBOA regulations have specifically allowed for a CPE exemption for certain licensees since at least The status is now mandatory before a CPA can cease fulfilling CPE requirements. Previously, a grace period was allowed, but now Virginia CPAs must first obtain approval from the VBOA through a formal application process, including submission of employment information, job description and, if currently employed, information about the employer. To qualify for the exemption, a licensee must submit a formal application to the VBOA. The application can be found at tinyurl.com/vacpeexempt. Licensees who qualify for this status may continue to use the CPA designation, provided they renew their licenses annually and pay the renewal fee, but will not have to fulfill any CPE requirements. CPAs who obtain this status may continue to freely use the CPA title and will be allowed to renew their license annually by si
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