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CPA Now
Dec 02, 2019

Why Do Pa. CPAs Need 4 Hours of Ethics Each Reporting Period?

James J. Newhard, CPABy James J. Newhard, CPA


Most of us have had the experience of humming down the road, keeping pace with traffic, when suddenly there is a barrage of brake lights and traffic slows down. Moments later, we pass a police car with flashing lights who has pulled over a speeding violator. That instance is an immediate alert that the speed we found ourselves driving at did not match the legal expectations. Police do not even have to pull anybody over; just their presence signals an alert to ensure compliance and remind us of the requisite constraints on our behavior.

For CPAs, our ethics CPE education requirement each license renewal period is a similar kind of reminder: pay closer attention to the signs, limits, and constraints required to maintain objectivity and integrity in all aspects of professional practice, as well as to maintain true independence at times when such independence is required.

Map compass over the silhouette of a headProfessional ethics are the foundation of all CPA professional services, whether that is financial reporting, tax services, bookkeeping and write-up, consulting and advisory, forensics, and so on. Accordingly, everyone in society upon which is placed any trust or reliance has a code upon which that trust and reliance is based. For CPAs, who take great pride in being among the “most trusted professionals,” that code is the Code of Professional Conduct.

But why, then, does the Pennsylvania State Board of Accountancy mandate four hours of ethics education each biennial reporting period? The reasons are not mysterious:

  • To ensure that a consistent level of trust and reliance applies to all CPAs in all U.S. jurisdictions, all applicable state boards require ethics education for licensing.
  • To reinforce that the prevailing focus for the CPA is to protect the public interest rather than advocate for the client or employer (especially where such advocacy would be to the public’s detriment), and to instill a professional skepticism in identifying and steering clear of noncompliance, misleading data, or other failings (professionally or behaviorally) to the expense of the public good.
  • To more deeply instill awareness of our conceptual framework; that is, that we are accountable based on both how we see ourselves and how others see our actions and behaviors.
  • To establish and reestablish a higher bar of quality and conviction in professional services.
  • To provide a constant reminder of the extent to which the CPA is often the last line of defense in assuring ethical and “fair” conveyances and compliances in any professional financial services are provided, even when said professional services are not strictly defined as “assurance services.”

OK, you may be saying, but why, practically speaking, is it important that CPAs take ethics education every two years? Consider the following:

  • The AICPA’s Professional Ethics Executive Committee (PEEC) actively assesses matters for CPAs (with several subgroups) and makes additions and modifications to ethics guidance year-in and year-out. (See Mike Colgan's blog on the PEEC's most recent ethics consultation paper.) So, our profession’s ethics guidance is evolving, expanding, and responding to the constant changes in all matters that necessitate CPA services. Without regularly revisiting ethics in continuing education, CPAs may not realize or be aware of the changes. For example, a brand new “hosting” standard became effective in 2019, and likely impacts every CPA practice that uses a web portal for data/information or provides any cloud-based services.
  • As CPAs, our duties to the public, the profession, the tax and financial reporting systems, our colleagues, and even ourselves all rest heavily on the ethical foundation of the credibility and responsible standing we require and desire.
  • New areas of professional practice continue to be established where ethical guidance needs to be detailed, whether it’s responding to/ensuring cybersecurity, applying and managing big data, or using cloud-based data hosting/sharing. There are also the implications of having a remote practice, using of third-party service providers, and the constantly expanding scenarios where CPAs are requested to provide letters to third-parties that assert or purport some representation that the third-party may be intending to rely upon.
  • Making every effort to minimize and mitigate the risk of professional liability and litigation claims is of paramount concern. One of my most used Jim Newhard axioms is this: The U.S. Constitution guarantees that no one really needs a good reason to sue! Coloring outside the lines of our profession’s ethical guidance will make you more vulnerable to litigation.

In addition to the “big picture” reasons, you may find good cause for regular ethics education on a more personal level. Perhaps one of the following reasons for professional ethics education strikes a chord with you:

  • You want to attract ethical clients, and practicing with highly ethical values is far more likely to attract clients with the same or similar values.
  • You are hyperconcerned, and you recognize that exercising ethical behavior is by far the most effective means to avoid being penalized, sued, censured, or otherwise caught in a damning situation.
  • You are a pragmatist and understand that ethical behavior is necessary in the accounting profession to prevent fraudulent activities and to gain public trust. Further, you recognize that the main reason for ethical guidelines is not to provide an exact solution to every problem, but to aid in the decision-making process.
  • You are scriptural and wish to practice ethically so that you might do unto others as you would have them do unto you.
  • You have a super-hero complex. You wish to always protect those in need or who are vulnerable, and to stand for truth and justice; and ethical behavior is the path to such virtuous practice.
  • You really don’t need a good reason or justification. You just want to do what is required to renew your CPA license.

Finally, remember that by striving to have your professional compass point to the proverbial “true north” of ethical compliance, we will not only meet minimum requirements for professional CPA license renewal, but we (as CPAs and as human beings) will all be better off by rededicating ourselves to ethical practice with continuing education on CPA ethics.


James J. Newhard, CPA, is a sole practitioner in Paoli, a CPE presenter for Kaplan Financial Education - Powered by Loscalzo Institute, and a past-president of PICPA’s Greater Philadelphia Chapter. He serves on numerous state and chapter technical committees, and is a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at jim@jjncpa.com or @CatalystJimCPA.


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If you still need your mandatory Ethics CPE credits, the PICPA offers numerous options.



1 comment

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  • Michael Molder | Dec 04, 2019

    I have no problem with a continuing ethics education requirement, but let's not delude ourselves. No amount of mandatory ethics CPE will "prevent fraudulent activities." There is potential that it will prevent negligent behavior by putting practitioners on notice of a professional standard that may affect their practice. But fraudulent conduct is grounded in the concept of scienter, the mental state that the misleading/wrongful act or representation was made with knowledge or reckless disregard of its falsity. About the only thing that mandatory ethics CPE might do is move a negligent act/statement TO BECOME FRAUD. Because once you know that professional standards require certain behavior, doing it anyway suggests the required mental state for fraud. And don't even get me started with the way people sit through CPE reading the newspaper or answering emails.

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    Statements of fact and opinion are the authors’ responsibility alone and do not imply an opinion on the part of PICPA officers or members. The information contained in herein does not constitute accounting, legal, or professional advice. For professional advice, please engage or consult a qualified professional.