FUNDAMENTALS OF OHIO ACCOUNTANCY LAW

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FUNDAMENTALS OF OHIO ACCOUNTANCY LAW

• For Certified Public Accountants

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Speaker Information
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OHIO ACCOUNTANCY LAW

• What is the Practice of Public Accounting
• Use of the CPA and Similar Designations by Firms
  and Individuals
  
• Peer Review
• Work papers Retention

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INTRODUCTION

• Introduction
• What is Ethics?
• In the Greek tradition, ethics is the study of
  the good life.
  
• Immanuel Kant would define ethics as the study of
  mans duties and responsibilities to one another.

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INTRODUCTION

• Introduction
• What is Ethics?
• Kants definition probably more closely aligns
  with our present notion of ethics.
  
• With respect to CPAs, the baseline for ethical
  duties and responsibilities is set forth in the
  law.
  
• But the law is merely the baseline.
• The law does not and cannot hope to define
  aspirational aspects of ethical behavior.
  

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INTRODUCTION

• Introduction
• What is Ethics?
• The CPAs goal should be to strive to behave not
  only in a manner that conforms to the minimum
  standards established by accountancy law and
  professional standards, but also aspire to behave
  in conformance with the spirit of accountancy law
  and professional standards keeping in mind, of
  course, that purpose of the law and the
  professional standards is to protect the public
  and recognize the CPAs responsibility to the
  public.

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FUNDAMENTALS OF OHIO ACCOUNTANCY LAW

• What is the Practice of Public Accounting?

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OHIO Revised Code
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Attest Report
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Public Accounting
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OHIO Administrative Code
B. Ohio Administrative Code (OAC). OAC Rule
4701-7-04 is the rule under which the accountancy
board has interpreted ORC 4701.01(A).
(continued) (2) The performance of or offering
to perform services other than those described in
paragraph (A) of this rule, such as consulting
services, personal financial planning services,
or the preparation of tax returns or the
furnishing of advice on tax matters by a sole
proprietorship, partnership, limited liability
company, professional association, corporation,
or other business organization, that advertises
to the public as a certified public accountant,
CPA or public accountant, or PA.
(B) A certified public accountant or public
accountant who performs any services described in
paragraph (A) of this rule must obtain an Ohio
permit and be affiliated with a registered firm.
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OHIO Administrative Code
(C) Regulated services means the performance of
or offering to perform any of the following
services by a certified public accountant or
public accountant who uses the designation
certified public accountant, CPA or public
accountant, or PA in association with those
services and who is not affiliated with a
registered firm (1) Consulting services in accor
dance with professional standards defined in rule
4701-9-08 of the Administrative Code.
(2) Tax services in accordance with the
professional standards defined in rule 4701-9-09
of the Administrative Code. (3) Preparing financi
al reports, signing financial reports, preparing
reports on internal controls, or signing reports
on internal controls. (D) A certified public ac
countant or public accountant who performs
services described in paragraph (C) must hold an
Ohio permit.
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OHIO Administrative Code
(E) The mere use by the holder of an Ohio permit
issued under division (A) of section 4701.10 of
the Revised Code of the designation certified
public accountant, CPA or public accountant,
PA shall not imply that the Ohio permit holder
is actively engaged in the practice of public
accounting as defined in this rule, as long as
the Ohio permit holder has fully complied with
the applicable continuing education provisions
outlined in Chapter 4701-15 of the Administrative
Code and does not provide any services described
in paragraph (A) of this rule.
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FUNDAMENTALS OF OHIO ACCOUNTANCY LAW

• The Cardinal Rule for CPAs

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Integrity and Objectivity
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Integrity and Objectivity
OAC 4701-9-01. (B) If an Ohio permit holder h
as a conflict of interest between the interest of
a client or employer and another person, but the
Ohio permit holder believes that professional
services can be performed with objectivity, this
rule shall not prohibit the performance of
professional services by the Ohio permit holder
if the conflict of interest is disclosed to, and
consent is obtained from, such client or employer
and the other person.
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FUNDAMENTALS OF OHIO ACCOUNTANCY LAW

• Use of CPA and Similar Designations by
  Individuals

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More Integrity and Objectivity
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CPA Designation V. Permit
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Unlawful use of Titles
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Unlawful use of Titles
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Unlawful use of Titles
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Triennial Renewal of Permit
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Triennial Renewal of Permit
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License Qualifications
(c)License Qualifications OAC 4701-7-08
provides that   (A) A holder of a CPA certifica
te who holds an Ohio registration must use the
qualification inactive after the designation
certified public accountant or CPA each time
the designation is used. The qualification must
be displayed adjacent to the designation, in
print at least as prominent as that used for the
designation itself. (emphasis added)
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1st Ethical Dilemma

• Ethical Dilemma
• A CPA is in the full time practice of selling
  securities. Nevertheless, the CPA maintains a
  permit to practice and is in full compliance with
  the requirements to do so. The CPA appends the
  CPA designation to his name on his business
  card and letterhead.
• Is this a violation of Ohio accountancy law?

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1st Ethical Dilemma

• Ethical Dilemma
• A CPA is in the full time practice of selling
  securities. Nevertheless, the CPA maintains a
  permit to practice and is in full compliance with
  the requirements to do so. The CPA appends the
  CPA designation to his name on his business
  card and letterhead.
• Is this a violation of Ohio accountancy law?
• Is this in conformity with the aspirational
  ethical considerations?

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FUNDAMENTALS OF OHIO ACCOUNTANCY LAW

• Continuing Education

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Ohio Permit and Cont. Education
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Continuing Education
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The Board
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Controls and Reporting
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Cont. Ed. Verification
OAC 4701-15-12 Continuing Education
Verification   (A) The board annually conducts
a verification of continuing education programs
claimed for continuing education credit by
selected Ohio permit holders. Consequently, an
Ohio permit holder must retain evidence to
support fulfillment of the continuing education
requirement for a period of one year subsequent
to the end of the holder's most recent continuing
education reporting period.
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Measurement
OAC 4701-15-04 Measurement. (A) (Omitted) (B) Fo
r classroom programs, a fifty-minute period
equals one credit. Beyond the first credit, each
twenty-five minute period equals one-half credit.
The minimum acceptable length of a classroom
program is one credit... (C) College courses ear
n ten credits per quarter hour..
(D) Time devoted to reading, computer tutorials,
or other self-study does not earn continuing
education credit, unless these activities form
the basis of a program including one or more
examinations that must be successfully completed

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Measurement
(E) An instructor or discussion leader of a
continuing education program may be awarded
continuing education credit up to three times the
credit a program participant would receive
(F) Credit awarded for passing major professio
nal examinations that have been approved by the
board is normally five credits per half hour
session if the total examination session is at
least two and one half continuous hours in
length, up to a maximum of forty-five credits per
session.
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Reduction of Cont. Ed. Req.
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Deficiency Status
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Conv. to Ohio Permit Status
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Req. Cont. Ed. Programs
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Req. Cont. Ed. Programs
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Ohio Permit holder Practices Public Accounting
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Requirements for Reporting
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2nd Ethical Dilemma

• Ethical Dilemma
• An experienced and very busy CPA needs to earn
  some CPE. The CPA instructs one of his young
  professional employees to research the answers to
  a self-study quiz, complete the quiz and return
  it to the CPA. The CPA reviews the answers for
  correctness, signs his name and turns the quiz
  into the State Society for CPE credit.
• Has the CPA violated Ohio accountancy law?

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2nd Ethical Dilemma

• Ethical Dilemma
• An experienced and very busy CPA needs to earn
  some CPE. The CPA instructs one of his young
  professional employees to research the answers to
  a self-study quiz, complete the quiz and return
  it to the CPA. The CPA reviews the answers for
  correctness, signs his name and turns the quiz
  into the State Society for CPE credit.
• Has the CPA violated Ohio accountancy law?
• Is this in conformity with the aspirational
  ethical considerations?
  

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3rd Ethical Dilemma

• Ethical Dilemma
• You are presenting a CPE seminar. You notice that
  as soon as the seminar commences one of the
  participants in the back leaves the room to talk
  on his cell phone. The participant does this
  frequently during the presentation and really
  only attends 25 of the seminar.
• What is your responsibility under Ohio
  accountancy law?

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3rd Ethical Dilemma

• Ethical Dilemma
• You are presenting a CPE seminar. You notice that
  as soon as the seminar commences one of the
  participants in the back leaves the room to talk
  on his cell phone. The participant does this
  frequently during the presentation and really
  only attends 25 of the seminar.
• What is your responsibility under Ohio
  accountancy law?

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FUNDAMENTALS OF OHIO ACCOUNTANCY LAW

• Use of CPA and Similar Designations by Firms

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FIRM REGISTRATION
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Unlawful use of Titles and Designations
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Unlawful use of Titles and Designations
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Unlawful use of Titles and Designations
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Registration of Firms
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Registration of Firms
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Registration of Firms
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Registration of Firms
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Registration of Firms
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Registration of Firms
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Registration of Firms
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Registration of Firms
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Fees for Registration
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Fees for Registration
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Fees for Registration
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Definitions
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4th Ethical Dilemma

• Ethical Dilemma
• You are driving through a small community and you
  see a sign that says
  
• Consolidated Professional Associates, Inc.
• Tax and Accounting Services
• As a CPA do you have an ethical responsibility to
  notify the Accountancy Board for investigation?

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FUNDAMENTALS OF OHIO ACCOUNTANCY LAW

• Part III
• Peer Review

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Equity Interest, Peer Review
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Peer Review
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Peer Review
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Peer Review Administrator
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Peer review Committee
OAC 4701-13-03 Designated peer review
committee   (A) The board designates the peer r
eview acceptance committee of the Ohio Society
of Certified Public Accountants as its peer
review committee pursuant to division (G)(1) of
section 4701.04 of the Revised Code.    
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Purpose of Peer Review
OAC 4701-13-04 Purpose of Peer Review
  (A) The purpose of the peer review program is
to monitor compliance with applicable
professional standards defined in rule 4701-9-03,
4701-9-04, 4701-9-05, 4701-9-06, . . . of the
Administrative Code. In the event a public
accounting firm fails to comply with professional
standards, the board may take appropriate
disciplinary action against the public accounting
firm in accordance with division (H) of section
4701.04 of the Revised Code.
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Performing and Reports Stnds
OAC 4701-13-06 (A)The board hereby adopts Stan
dards for Performing and Reporting on Peer
Reviews promulgated by the American Institute
of Certified Public Accountants and published on
that organizations website (www.aicpa.org), as
its minimum standards for peer review of public
accounting firms. No public accounting firm
shall be required to become a member of any peer
review sponsoring organization.
  (B) Peer review sponsoring organizations shall
include the American Institute of Certified
Public Accountants peer review program, the
Ohio Society of Certified Public Accountants
peer review program, and other such organizations
which register with and are approved by the board
based upon their adherence to the peer review
standards defined in paragraph (A) of this rule.
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Performing and Reports Stnds
OAC 4701-13-06, cont.   (D) Any peer review com
pleted in accordance with the standards defined
in paragraph (A) of this rule must be submitted
to the board or its authorized peer review
program administrator for approval. The board or
its authorized peer review program administrator
shall issue an acceptance letter to the public
accounting firm for which a peer review was
performed if the designated peer review
committee, defined in rule 4701-13-03 of the
Administrative Code, approves the firms peer
review.
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Remedial Actions by the Board
OAC 4701-13-06, cont. (E). Based upon the peer
review outcome as stated in the acceptance
letter, the board or its authorized peer review
program administrator may impose remedial
actions, including specified continuing education
courses, that the public accounting firm must
complete as a condition for continued
registration under this chapter. The board may
issue a temporary registration to the firm that
will be valid until the deadline for completion
of remedial actions by the firm. The board must
approve any extensions to the deadline for
completion of remedial actions. After the firm
completes the required remedial actions, the peer
review program administrator will issue a final
acceptance letter to the firm approving the peer
review. Only the final acceptance letter issued
by the peer review program administrator and
accepted by the board will qualify a public
accounting firm for continued registration under
this chapter.
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Maintaining Documentation
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Maintaining Documentation
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Board Disciplinary Action
OAC 4701-13-06, cont. (F) The board may take d
isciplinary action against a public accounting
firm that does not comply with any remedial
action mandated by the peer review
administrator in accordance with paragraph (E)
of this rule.
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Board Disciplinary Action
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Board Disciplinary Action
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Board Disciplinary Action
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Submission of Peer Review
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Submission of Peer Review
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5th Ethical Dilemma

• Ethical Dilemma
• A CPA has failed to comply with the peer review
  administrators required remedial actions after
  receiving multiple extensions from the
  Accountancy Board to do so. The firms
  deficiencies are so serious that the firm
  receives an adverse peer review letter. The
  Accountancy Board provides notice and holds an
  ORC 119 hearing. The Board presents the adverse
  acceptance letter as evidence of the CPAs
  failure to comply with professional standards.
  The CPA presents other client work papers as
  evidence that he complies with professional
  standards.
• Has the CPA violated Ohio Accountancy Law by
  presenting the other work papers as evidence?
  
  

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5th Ethical Dilemma

• Ethical Dilemma
• A CPA has failed to comply with the peer review
  administrators required remedial actions after
  receiving multiple extensions from the
  Accountancy Board to do so. The firms
  deficiencies are so serious that the firm
  receives an adverse peer review letter. The
  Accountancy Board provides notice and holds an
  ORC 119 hearing. The Board presents the adverse
  acceptance letter as evidence of the CPAs
  failure to comply with professional standards.
  The CPA presents other client work papers as
  evidence that he complies with professional
  standards.
• Has the CPA violated Ohio Accountancy Law by
  presenting the other work papers as evidence?
  
  

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FUNDAMENTALS OF OHIO ACCOUNTANCY LAW

• Work papers
• Ownership and Retention

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Work Papers, Client Records
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Client request for records
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Client request for records
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Records and Workpapers

• (E) Workpapers may contain information that is
  not reflected in the client's books and records,
  with the result that the client's financial
  information is incomplete. These are defined as
  client records, and may include but are not
  limited to
• (1) Adjusting, closing, combining or
  consolidating journal entries
  
• (2) Depreciation and amortization schedules,
  including tax carryforward information and
  
• (3) Information normally contained in books of
  original entry, as well as general ledgers and
  subsidiary ledgers.
  

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Workpapers

• (D) Workpapers may also be in the form of data
  stored on tapes, films, or any media other than
  paper. Workpapers are considered to be the
  registered firm's or Ohio permit holder's
  property. In the event of a dispute between the
  registered firm or Ohio permit holder and the
  client concerning records, the board will
  determine whether or not a document may be
  classified either as a registered firm's or Ohio
  permit holder's workpaper, or as a client's
  record.

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Electronic Files
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Electronic Files
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OHIO ACCOUNTANCY LAW
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OHIO ACCOUNTANCY LAW
(I) In the event of a dispute between the client
and a registered firm or Ohio permit holder over
the return of records described in paragraph (E)
of this rule, the Ohio permit holder may request
an extension of the deadline specified in
paragraph (A) of this rule in order to mediate
the dispute. The request must be filed within
thirty days of the date the records retention
complaint is filed with the board. The mediation
must be conducted before a mediator mutually
agreed upon and selected by the parties, and must
be completed within sixty days of the date the
complaint is filed with the board. The mediator
may be the executive director of the board or a
designee if the parties agree. If either party
is dissatisfied with the recommendations of the
mediator, that party may request a hearing before
the board.
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Workpaper Retention
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Federal Tax Law
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Federal Securities Law
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Contact Information
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