By: Josh Goldman
Director of Professional Development, NCACPA
I recently had the opportunity to sit down with Executive Director Robert Brooks, and Deputy Executive Director David Nance, CPA, of the North Carolina State Board of CPA Examiners to spend some time discussing recent regulation changes and continuing professional education issues. The following is a summary of our discussions.
This is a somewhat rhetorical question, but an important place to begin; why is continuing education so important to the CPA profession?
Primarily, it is important for the protection of the public, or other stakeholder(s), who are relying on the professional judgment and competence of individuals holding the CPA credential.
Successfully passing the examination and receiving a CPA license, while certainly not easy, is only validating the minimum required knowledge and experience to enter the profession. We all know the day to day questions facing CPAs are complex and varied, while standards and regulations are constantly changing. CPAs operate in an environment of constant change—if you don’t keep up with the changes and how to apply your professional judgment, then you are standing still and therefore being left behind. It is also important to remember CPE is not solely responsible for protecting the public and stakeholders—peer review, the rules of professional ethics and conduct, and many professional standards contribute.
Several NC State Board of CPA Examiners’ regulations changed effective January 1, 2014. One of which discontinued the State Board Registry of CPE Providers; why discontinue it?
North Carolina licensees have never been required to take CPE from a CPE sponsor registered with the Board, or with the National Association of State Board of Accountancy’s (NASBA) National Registry of CPE Sponsors. It was certainly a good idea to take continuing education from an approved provider who specializes in meeting the quality standards and understands CPA needs, but it is not required. The amended rules have not changed that, with the exception of the annual ethics requirement mandating NASBA sponsor status as noted below. At the time the State Board Registry was discontinued, the Board approved sponsors totaled 81 organizations. There were significant administrative aspects of managing the program, such as processing and documenting all the notification of courses sent to the Board by sponsors, as well as being able to sufficiently audit the providers’ high volume of courses. These administrative time savings will be shifted to increasing CPE audits.
However, the Board is not defaulting to NASBA; it will be filing complaints with NASBA if there are complaints with providers serving North Carolina licensees. The Board will be assisting in monitoring and reporting on provider compliance and can be reached through Cammie Emery, Assistant in the Licensing Section at 919-733-1423 or [email protected].
Why is ethics required to be received from a provider on the NASBA registry for the annual renewal?
Prior to the changes approved on January 31, 2014, the 2 hour professional ethics course had to be taken from a provider registered with the Board, or by a provider listed on the NASBA registry. With the discontinuation of the State Board Registry, ethics must now be taken with a provider on the NASBA registry. It is simply a matter of discontinuing the registry at the state level.
The 8 hour Accountancy Law course, required for initial licensing, is still required to be taken from NCACPA.
Tell us more about the CPE audit process.
Each year the State Board staff selects about 800 randomly sampled CPAs. People have told us they have been audited multiple years in a row, but we use a random number generator to identify those selected for a random audit. Additionally, there are non-random audits. This past year there were 400 audits conducted on those who did not complete their annual CPE by December 31, and indicated on their yearly renewal they had completed it by June 30. Those CPAs have received a letter of warning after renewal. This brings the yearly CPE audit total to approximately 1,200 licensees, or six percent of active North Carolina licensees as of June 6, 2013. Currently, 4-6 percent of the yearly CPE audits in NC reveal some form of non-compliance. Some states report non-compliance as high as 35 percent during their CPE audits.
When selected for an audit the CPA will be asked to submit a form listing their CPE as well as submit copies of their certificates of completion. The State Board will also accept your NCACPA transcript in lieu of the certificates of completion. If there is an issue or concern noted during the review of the course list and certificates, then the State Board may ask for additional information, such as instructor information, course details, or sponsor details. Remember a licensee is required to keep the documentation in his or her files for five years.
What happens if a CPA doesn’t complete their annual requirement by December 31?
A CPA can indicate on their renewal form that they did not complete their requirement by December 31 but will complete it before June 30. This generates a letter of warning to be issued and the CPA is automatically added to the non-random audit list. If a CPA doesn’t complete by December 31 twice within a five year time period, they will automatically forfeit their license. Six CPAs forfeited their certificates during the last audit.
It is advisable for a licensee to maintain some carry-forward hours. The carry-forward regulation allows a CPA who takes more than 40 hours of CPE to carry-forward excess hours to the next year, up to a maximum of 20 hours. This is designed to be an insurance policy to help a licensee who cannot complete their requirements by December 31 or in case the board rejects some courses during the audit process.
What due diligence should a CPA undertake if taking CPE from a provider not on the NASBA registry?
Complete and accurate information regarding sponsors and courses is essential. The CPA is responsible for documenting and retaining the following when using a provider not on the NASBA registry:
- Proof of course completion including the licensee’s name as the course participant, course title, date of completion, sponsor’s name and address, and recommended CPE hours.
- The instructor’s biography, indicating both general teaching competence and particular mastery of the subject matter of the course.
- Information about the course developer and sponsor.
- A description of course objectives, prerequisites, experience level, content, advance preparation requirements, teaching method used, and CPE credit recommended.
These requirements and additional essential CPE information is outlined in the State Board’s March Activity Review.
It is important to note as part of the recent rule changes a licensee cannot receive CPE credit without a certificate of completion. CPE sponsor (approved or non-approved) have always been required to issue a certificate of completion to the CPA. The certificate of completion must contain:
- the participant’s name,
- the name of the course,
- the date the course was held or completed,
- the sponsor’s name and address,
- and the number of CPE hours calculated and recommended in accordance with 21 NCAC 08G .0409.
A CPA may take continuing education from any provider and claim credit if it enhances their professional competence as a CPA. As you can see, another benefit of using a provider on the NASBA registry is reducing the administrative burden to the CPA.
What are most common issues discovered during a CPE audit?
The most common issue is the CPA not having proof of course completion. Explanations and excuses take many forms when asked to provide proof of course completion, such as my hard drive has crashed, we moved offices and I can’t find it, I’m divorced and my spouse threw them away, or the provider did not issue me a certificate of completion.
We also see errors in miscalculation of qualifying time. We often see this occur with a provider who does not specialize in CPE and does not understand the regulations when providing qualifying hour estimates to the CPA attendee. For example, providers counting the hours for the lunch break. Ultimately, it is the CPA’s responsibility to report the correct number of hours which includes reducing the credit hours claimed if the CPA left the seminar early.
With the increase in on-demand/self-study programs we have seen issues with fully completing the courses and issues with the reported completion date. It is not enough to register for the on-demand course and finish the content. For on-demand/self-study a CPA must successfully complete the test at the end of the program and the date of test completion determines the course completion date. It is not calculated from the purchase date, so be sure to successfully finish on-demand/self-study courses and the course test before December 31.
The Board has only turned down a handful of courses during an audit for content qualification reasons. It is extremely rare because of the broad latitude given to the CPA to choose topics and content to enhance their professional competency as a CPA. Many state boards dictate how many hours of CPE must fall within certain technical areas such as Tax and A&A; in North Carolina CPAs define their own needs. If content is questioned, it is because it is not clear how the course enhanced the CPA’s professional competency. As an example, a course teaching how to defend a DUI was declined during a random audit for a CPA/Attorney. CPE credit may only be denied when it doesn’t enhance your professional competency as a CPA.
Finally, (and sadly,) we find the CPA just didn’t do it but self-reported completion anyway. We understand someone may have lost their job, or might believe they are too busy to complete 40 hours per year. We just can’t understand how something so important to the ability to hold yourself out as a CPA—your license to hold yourself out as a CPA, the trusted advisor—can be put on the line for forfeiture. This doesn’t even begin to speak to the ethics of reporting CPE completion while knowing it was not done.
If a CPA is ordered by the Board to forfeit their license because of failing a CPE audit, it is automatically forfeited for one year and the CPA is issued a $1,000 civil penalty. During the reinstatement process, the CPA must complete a new application including three letters of references, complete 40 hours of CPE including the 8-hour Accountancy Law course, and pay a $100.00 reinstatement fee. So, before we even begin to calculate the cost of potentially lost business or lost trust by the CPAs clients or co-workers, the CPA is out $1,100.00 minimally.
Want something from NCACPA for your calendar to remind you to think about your education and training needs? Professional Development Reminder.
Bob and David, any final thoughts to share with our members?
Please take advantage of the opportunity to learn, because work will always be there. Learning and becoming better at your chosen profession should not be viewed as an inconvenience or a punishment. If you can gain one insight, a different way to think about your work, or one new piece of knowledge, it is worth it. We must change the punitive perspective on CPE—it is a valuable part of your work as a CPA. You get to choose what you feel is most beneficial in enhancing your professional competence—take full advantage of your choices.
The tables turned, a question for NCACPA: Why did NCACPA pursue being an approved provider with NASBA?
We pursued NASBA’s registry primarily because our membership asked for it. In a 2011 study, 70 percent of members said NASBA sponsorship was important to them. We want every attendee to know that we are meeting both the NC State Board’s regulations in addition to nationally recognized standards for providing continuing professional education. We have always prided ourselves on offering high quality and relevant professional development opportunities, and we not only meet the standards, we exceed them. Did you know that NCACPA’s average speaker rating is 4.5 out of 5? We believe every moment an attendee spends with NCACPA must guarantee a significant return on their investment.
Josh is the Director of Professional Development for NCACPA and leads the strategy and oversight of the 700+ conferences, seminars, online, and just-in-time learning initiatives of NCACPA. He has over 10 years of program development, nonprofit, and association education experience. He and the NCACPA team strive to ensure NCAPCA’s educational programs are of the highest quality and value to the member’s and the profession. He received his bachelor degree from Indiana State University and his master’s degree from Bowling Green State University and holds memberships with the American Society of Association Executives, the Association Executives of North Carolina, the American National Standards Institute, and the Learning Resource Network (LERN).