The Account Balance - Newsletter of the Maryland Department of Labor, Licensing and Regulation - Board of Public Accountancy

we talk about ethics
Thomas S. Chambers

Thomas S. Chambers, Chair, Board of Public AccountancyWhy do we talk about ethics as members of the Board of Public Accountancy? Ethical behavior has been a cornerstone of our profession since its founding. It is said by many scholars that accountants were instrumental in almost every advance of human civilization, serving as an important linchpin in business and commerce throughout the ages. Recent history provides cautionary tales about the consequences of taking the quick and easy path. It is clear that a profession so necessary and influential to the creation, maintenance and advancement of economies be guided by sound principles of conduct that are embraced by individual CPAs and the entire accounting profession.

It is because of this acknowledgement of the importance of the CPA profession that the Board requires ethics courses as a part of an individual’s core training to be an accountant, to obtain an initial license and to renew a license.

Why is an ethics course included as a basic requirement to qualify for the CPA examination? The Board wants its exam applicants to think as principled CPA professionals. For the majority of students, attendance at a college or university is the first time they are not under the watchful eyes of their parents. It is at this time that they form or reaffirm their own ethical and professional foundations. An ethics course, whether it is in business, accounting or the philosophy of ethics, provides basic concepts that are useful to students in reinforcing their own core beliefs, and acquaints them with values toward business and professional conduct.

The Board follows up on this academic foundation by requiring applicants for a license to pass a professional ethics course that reviews real-world professional accounting conduct and standards adopted by the Securities and Exchange Commission, Government Accountability Office and other state and local agencies. This course provides ethical and technical guidance in the accounting-specific areas a licensee would expect to encounter in the real world.

Post-licensure continuing professional education (CPE) must include ethics. In 2006, the Board adopted the requirement that CPAs take a minimum of four hours in ethics CPE each license term in order to renew. The best type of ethics CPE comes from reviewing case studies about how individual CPAs and firms handled contemporary ethical dilemmas with their clients or in their work processes.  A good case study course is one that attempts to make the student “live in the moment.” It presents an interesting contemporary and relevant issue, establishes a conflict provoking situation and requires decisiveness of action. These are common elements present in problems that a CPA or firm will experience.

The Board’s emphasis on ethics education provides a strong foundation and reinforcement of principles that will serve its licensees very well.

April-may exam result

Congratulations to the 86 candidates who successfully completed the CPA Exam in the 2nd quarter! This latest group brings 2009’s current total of successful exam applicants to 173. If this trend continues, we can expect to see more successful applicants than we did in 2008, which is great news. View the pass list.

Maryland candidates sat for 770 examination sections in the 2nd quarter. Candidates performed best on the Regulation section of the exam with a 56.6% pass rate. Candidate passing rates for the other sections of the exam were Auditing and Attestation (52.3%), Business Environment and Concepts (47.0%), and Financial Accounting and Reporting (44.0%).

Successful CPA Exam Candidates Since the Launch of Computer-Based Testing

2004*

2005

2006

2007

2008

2009**

74

166

194

236

291

173

*  Successful candidates from the May 2004 launch date to December 2004
** Successful candidates during the period January 1, 2009 through June 30, 2009

firm licensing requirements

The Board has been receiving questions about firm licensure. Simply put, COMAR §2–401 specifies that even though a CPA may have an individual permit, if he or she practices via a firm, the firm must also have a permit. This applies to all firm categories: corporation, partnership, LLP and LLC. The majority of ownership of any CPA firm must be held by licensed CPAs. For more information on firm licensing requirements, click here and here.

reminder: board meetings

Remember that CPA Board Meetings are held at 9:00 am on the first Tuesday of each month (except for holidays) at 500 N. Calvert Street, 3rd floor. Meetings are open to the public, so if you would like to attend, feel free!

attention: Original license applicants!

The Board has received several inquiries about name issues. It may seem obvious, but please be certain that you spell your name correctly on your license application! Enter your name exactly as you wish to see it printed on your CPA certificate. (Note: this must be your legal name. Remember that name changes require court documents.) If your name is spelled incorrectly because you failed to check your application, the fee for a new certificate is $50.

NEW CPAs SWORN IN

New CPAs sworn in  (Photo by Bill Sheridan, courtesy of MACPA). Nearly 100 new CPAs were welcomed into the professional community on June 16, 2009. Stanley J. Botts, DLLR’s Commissioner of Occupational & Professional Licensing, administered the oath during a ceremony hosted by the MACPA at the Baltimore Convention Center. The oath, in which new CPAs vow to uphold the honor of their profession, is an outward commitment to the hard work it takes to become a CPA. Fittingly, the swearing-in concluded the first day of the Maryland Business and Accounting Expo. Board members Thomas J. Murphy, Ella H. Pierce and Raymond C. Speciale, as well as Executive Director Dennis L. Gring, Administrative Officer Linda Rhew and Occupational and Professional Licensing Deputy Commissioner Harry Loleas were in attendance. Congratulatory remarks were offered by MACPA Executive Director Tom Hood. Guest speaker Mark Olson, outgoing chair of the Public Company Accounting Oversight Board, encouraged the new CPAs to remember that the public’s trust is not to be taken lightly and that each CPA must be a model of ethical behavior. View a complete list of inductees as well as photo highlights. Welcome, new CPAs!
 (Photo by Bill Sheridan, courtesy of MACPA)

spotlight on code of professional conduct
Dennis L. Gring, Executive Director

This issue’s focus is independence (COMAR 09.24.01.06 A).

A standard for public officials exists today as a warning to avoid even the appearance of a conflict of interest. These admonitions hold just as true for certified public accountants as they do for politicians and other public figures.

The certified public accountant holds a very important position in the financial world. Financial decisions, big and not so big, are dependent upon the ability, skill and objectivity that a CPA brings to an engagement.  Large corporations, small family businesses and aspiring entrepreneurs look to the CPA for guidance in weathering the financial forces that may determine the success or failure of their businesses.

Central to that confidence is the concept of independence. This concept has been embraced by the accounting industry for over a century, and has been reinforced by the codes of professional conduct adopted by every state board of accountancy in the United States, local CPA societies, federal and international accounting standards boards, and standards of the American Institute of Certified Public Accountants (AICPA). 

In Maryland’s Code of Professional Conduct, independence is the very first topic addressed. A licensee who is performing an engagement for the purpose of issuing a written certificate or opinion, except where a lack of independence is disclosed, shall be independent with respect to the client in fact and appearance.  

Independence is considered to be impaired if a variety of relationships exist between the CPA and the client during the period of the engagement or at the time the written opinion or certificate was issued. Examples of these relationships include where the licensee has:

  • commitments to acquire direct or indirect financial interest in the client;
  • held, under certain circumstances, a joint, closely held business investment with the client or any officer, director or principal stockholder of the client;
  • obtained loans, under certain circumstances, from the client or any officer, director or principal stockholder of the client.

Independence is also considered to be impaired if, during the period covered by the financial statements, during the period of the engagement, or at the time of the issuing the written opinion, the CPA:

  • had a relationship with the client as a promoter, underwriter, voting trustee, director, or offices or acted in any capacity that is equivalent to a member of management or an employee;
  • was a trustee for any pension or profit-sharing trust of the client;
  • received or had a commitment to receive other compensation from the client or a third party, with respect to services or products procured or to be procured by the client. 

Sometimes the dictionary shows you all you need to know about the meaning of words. Look up the word independence.  It’s a noun. Of the many words that are used to describe its meaning are impartiality, objectivity, neutrality, and nonalignment.  

View the full text of the regulation.

FOCUS ON THE BOARD: RAYMOND C. SPECIALE, CPA, ESQ.

CPA Board Member, Raymond C. Speciale, CPA, ESQ.Governor O’Malley appointed Ray Speciale to the Maryland State Board of Public Accountancy in October 2007. As the Board’s educator member, Ray oversees educational requirements for Maryland CPAs. If there are questions about an applicant’s qualifications, Ray is the person the Board turns to for advice and counsel.

A lawyer as well as a CPA, Ray is an associate professor of law and accounting at Mount St. Mary’s University in Emmitsburg, Maryland. For the past 20 years, he has taught law and accounting-related classes. He’s also actively engaged as an advisory committee member for the accounting program at Frederick Community College.

Ray continues to maintain a private law practice in Frederick, Maryland. His areas of specialty are aviation, taxation, estate planning, and commercial transactions. He also continues to serve as counsel to Yodice Associates, general counsel to Aircraft Owners and Pilots Association, the world’s largest aviation organization with well over 400,000 members. Ray is an FAA-certified commercial pilot and flight instructor. In recent years, he’s authored two books (Aircraft Ownership: A Legal and Tax Guide and Fundamentals of Aviation Law, both published by McGraw-Hill) and several law review and journal articles. His writing typically focuses on aviation-related legal and tax matters.

Ray and his wife, an accountant with the Department of Energy, live in Frederick. They spend most of their free time with their seven-year-old daughter.
 

Board Members
Thomas S. Chambers, CPA, Chair, Industry Member (Caroline County)
H. Terry Hancock, CPA, Industry Member (Baltimore County)
Thomas J. “Tim” Murphy, CPA, Industry Member (Prince George’s County)
Raymond C. Speciale, Esq., CPA, Education Member (Frederick County)
Marjorie A. Root, Consumer Member (Frederick County)
 

Ella H. Pierce, Consumer Member (Baltimore City)
Muhammed A. Khan, CPA, Industry Member (Baltimore County)

Division Personnel
Stanley J. Botts, Commissioner, Occupational & Professional Licensing
Harry Loleas, Deputy Commissioner, Occupational & Professional Licensing

State Board of Public Accountancy Staff
Dennis L. Gring, Executive Director
Matthew A. Lawrence,
Board Counsel
Linda L. Rhew,
Administrative Officer
Bert Fenwick,
CPE Consultant
Barbara Hardy, Office Service Clerk
Alicia Coar,
Office Secretary
Shannon Davis,
Outreach Coordinator

Department of Labor, Licensing and Regulation / Maryland Board of Public Accountancy / 500 N. Calvert Street / Baltimore, MD 21202

Department of Labor, Licensing and Regulation / Maryland Board of Public Accountancy / 500 N. Calvert Street / Baltimore, MD 21202