 Hello and welcome to the session in which we would look at the licensing and disciplinary system that applies to CPAs. This topic is covered on the CPA exam and there are four parties that we need to be concerned about that can overseas the licensing and disciplinary actions towards CPAs. One is the State Board of Accountancies. In my opinion, the most important, the American Institute of Certified Public Accounting, the Securities and Exchange Commission as well as the IRS. Most likely if you are looking at this recording, it means you are studying for your CPA exam. If that's the case, please check out my website, farhatlectures.com. I don't replace your CPA review course. I don't replace your backer, Roger, Gleam or Wiley. I can be an alternative. I'll explain the material differently, no better nor less, no less, differently and slower and more in depth than your CPA review course. Therefore, I can add to your understanding. Therefore, I can add to your points on the CPA exam. Understanding the material is the key to pass. Here's your risk. One month of subscription to try. If you like it, you keep it. If not, you cancel. You lost one month if you don't like it. Your potential gain is passed in the exam. Are you willing to risk one month of subscription? That's my question to you. If not for anything, check out my website to find out how well or not well your university is doing on the CPA exam. I do have those results. Please check out my website for additional accounting, tax, finance and audit courses. Connect with me on LinkedIn and you can review my LinkedIn recommendation where people actually use my material to pass the exam. Connect with me on YouTube, on Instagram and Facebook as well. So starting with the State Board of Accountancy. The first thing you need to know is a governmental agency. Governmental agency in contrast to a private agency, to a private organization. Now here's what you need to know and this is important. The State Board of Accountancy is the only party that can grant you the license. And most likely, if you're studying for the exam, you must be registered with one of them. Since that's the only party that can give you the license, it's the only party that can suspend or revoke your license. So that's extremely important. Now they cannot do it arbitrarily. They will do it through some sort of an administrative process, board hearing. We'll talk about that shortly, but I want you to understand this important concept here. So they also set the requirements for licensor. For example, your education, your experience, so on and so forth. Now it varies from state to state, although the exam is uniform. It's the same across, not the US, it's across the world. The exam is administered by the AICP. It's the same. But the requirement to become a CPA is a little bit different. One is to pass the exam. Obviously you cannot be a CPA. Most likely you are studying to pass the exam as you are listening to me right now. Now educational requirements, experience, residency, CPE, continuous professional education to remain licensed and peer review if you have your own firm. Okay. Now again, those requirements, you're not being tested on them on the exam day, but you need to know that those are the requirements and they vary. They're very similar, but they vary from state to state. Now you have to understand we have state board of accountancies and we have something else called state CPA societies. They're kind of a little bit confusing because they start with the word state. State CPA societies are voluntary private entities that can suspend or expel its members from the society itself. That's it. It's a private society. If you don't want to join the your state society, you don't have to. I strongly suggest you do, even though you are still a student or not a CPA yet. They have membership for non CPAs. Why would you do so? Networking. Networking. And this is one of the meetings that I, you know, this has happened to take this picture. This is me in case you don't know who I am. And when you go to those meetings, you meet other people, you meet other CPAs, you meet other professional. And this is how you grow your career and expand your network and expand your mind. Make sure you attend, you know, attend CPAs. If you have the option to go online or in class, go in class because you have the chance to meet people. And this is what those state CPA societies for part of it is continuous professional education. Also, the IRS and the SEC, they can ban you from practicing in front of them in front of the IRS and in front of the SEC. They cannot revoke your license. They cannot revoke your license. They can make recommendation to the State Board of Accountancy to revoke your license, but they cannot do it themselves because they did not give it to you. Okay, so keep that in mind. The only party that can take your license is the only party that gave you the license in the first place. Now, disciplinary action by the State Board of Accountancies can go under three broad categories. So they can come after you for negligence, fraud, or dishonesty in performing your accounting duties. They can come after you for criminal conviction, for example, committing a felony, failure to file a tax return, or committing some sort of a crime relating to the practice. They could also go after you for misconduct outside the scope of accounting that could impact your accounting work. So this is a little bit on the edge, but they can do that as well. Now, they cannot just take away your license. There is a due process. So the accountant is entitled to a due process of law. I mean, think about it. You studied at least two years for your CPA. You went to school for four years. You work hard to get your experience. Now, you become a CPA. They cannot just take away that license from you. Well, if you are an ethical, they should. But what I'm trying to say is there is a due process. So first they may investigate, not they may. They will investigate and they will conduct a hearing to see exactly what happened. Now, all what they have to show is more likely than not that you committed that misconduct. They don't have to go beyond reasonable doubt, like in a criminal case. They just have more likely than not. And if you are fine guilty, they may impose some penalty on you. And the worst one is if they suspend or if they revocate your license, they take away your license or they suspend it. They could ask you to pay a fee. They could reprimand you or censor you. They could put you on probation or they could ask you to take additional CPEs. They're all serious, but this is the most serious. And you don't want your license to be revoked after you work six, seven years in your career to get your license. Remember, be ethical because you could always get a job. If somebody asking you to do something illegal or an ethical, don't do it. Don't do it. You could always find a job. But once you lose your credibility, once you lose your integrity, you're done. Now, we're done with the State Board of Accountancies. Let's move to the second party, the AICPA, the American Institute of Certified Public Accountant. It's a voluntary, private entity. Voluntary means whether you want to join or not. It's up to you and it's private. It's not government. It's like the national state society. Make sure you also join the AICPA, whether you are a student or a professional. Why? Networking. You expand your network. This is why you do so. And you'll get discounts all the time. They'll send me all sorts of discount. The AICPA, they have no authority over non-members directly. So if you're not a member, they have no authority over you. However, most state, they adopted the AICPA ethics rules. So you are affected by them, although you may not be a member of the AICPA. You could be also a member of the, for example, I'm a member of the PI CPA. I'm also a member of the AI CPA. So look for your state and join the national. Those are both societies, private societies. They have a professional ethics division that investigate any ethics violation by any member and impose sanction in less serious cases like, you know, CPE courses as a remedial measure. Just, they'll ask you to take more courses, usually from them. More serious issues and fractions, they will put you in front of a joint trial board, which can acquit you from the issue, suspend you or expel you as a member. So notice everything that they do is at the end of the day, you would lose your membership with them. They cannot take away your license. They can't because they never gave it to you in the first place. Okay. They administer the AICPA exam. They write the questions, but they don't give you the license. It's the state that gives you the license. Okay. It may also take disciplinary action like remedial or corrective actions as it deems appropriate. Now the joint trial board, basically we need to talk a little bit more about this. What they do, they publish a CPA letter, public, publishes information about suspension and expulsion. And I still remember when I was a college student, when I was at Bloomsburg University, my favorite professor, Professor Mike Shapiro, and if you went to Bloomsburg, I'm sure you heard of him because you cannot graduate from Bloomsburg without meeting Mike Shapiro. He's a great guy. He's my basically I consider him my mentor. So he would always bring that CPA letter and especially he would look for names that he knew, and he will, you know, read us their story and we would all laugh in class, but it was a good lesson. You know, and I always remember he would always say, be ethical. I mean, you can always get a job, but if you lose your integrity, you're done as a CPA. So you don't want your name on this letter or any obituary, right? Those two places you don't want your name on in there. Okay, so a decision of a trial board panel may be appealed if you don't like the decision to a full trial board, but once that's done, you're done. That's the final decision, like the Supreme Court of the accountant ward, right? All right. So upon the member exhaustion of the legal appeals, okay, once you're done with this automatic expulsion without a hearing result. Notice when a member has been convicted of what has received an adverse judgment for if you committed a felony, they could let you go. You don't have to have a hearing willful failing willful failing to file a tax return or filing a fraudulent tax return or aiding in the preparation of a tax return. Okay, expulsion from the AI CPA or state societies does not bar the individual from practicing public accounting. So if they kick you out, it doesn't mean you lost your license. You can kick you out. They don't want you. They don't want to associate with you. That's fine. However, if you lose your license, you are automatically out. If you lose your CPA license, then you're automatically out. But if they kick you out of those societies, you don't lose your license unless the state, remember, the state will take away your license. There's something called the Joint Ethics Enforcement Program. The joint means it's two groups. Well, the AI CPA is one of them and the state board, the state societies. So they will conduct one investigation. It's an agreement between the two parties, the AI CPA and the state society that permit referral of an ethics complaint, either to the AI CPA or the state society. Usually, the AI CPA would handle matters that involving more than one state, okay, because it's a national level. They can also promote cooperation between the ethics committees of the AI CPA and that of the state societies. As I told you, most state societies, they follow the ethics committees rules of the AI CPA anyway. Again, when they expel you, they don't have to have a hearing. There is no due process if they told you to leave our organization. It's basically they can kick you out of the club. They can suspend your membership. So it's not the end of the war. You don't want that, but it's not like losing your license. Okay, let's talk about the IRS. The IRS can they also prohibit you from practicing before them. And that makes sense. They don't want you to practice in front of the IRS. If you are incompetent, you don't have a good reputation. You don't comply with tax rules and regulation. They simply don't want you. Now, bear in mind the IRS, they can have criminal penalties, not crime, criminal penalties. They can impose criminal penalties for fraud on you. And this means you could go to jail. Here, the burden of proof is on them, and it has to be beyond reasonable doubt. This is a criminal case. They can also obviously impose civil penalties. One of the penalties is they will prohibit you from practicing before them. So you cannot have clients or you cannot represent clients in front of the IRS. And most importantly, what they like the most is impose fines. They want money. That's that's what they can do. The SEC. The SEC may sound very powerful. It's a powerful organization. It's a federal government organization, but they can only impose civil penalties. They cannot impose criminal penalties on you. They can turn the evidence to the FBI to the US Attorney or to some other authority, but they cannot do it themselves. They may also seek an injunction from court to prohibit you if you are violating the securities laws, that they can do. They may conduct also what's called quasi-judicial proceeding. And those quasi-judicial proceeding, they're not basically official court, but they can suspend you or they can take your license and practicing in front before the SEC, including the right to sign any document filed by the SEC registered. And that's a big problem. Why is it a problem? It means you cannot sign the audit report for publicly traded company. And for some firm, that's a huge revenue. It could be millions and millions of dollars. The fees that they make you pay is not a big deal. It's when they suspend you from practicing in front of the SEC. Also, they could suspend you if you don't have the qualification to represent others and you are trying to do so. You lack character or integrity or engage in ethical or unprofessional conduct, willfully violated or added in the violation of the federal securities law. Basically, you violated their laws. They can kick you out. Think of it this way. More about the SEC, they could also suspension by the SEC also may result from conviction of a felony or a misdemeanor, including moral turpitude. So they can just suspend you because of that. Okay? Revocation or suspension of a license to practice. If you lost your state license, they can get you out as well. In violation of any federal securities, we talked about this. Now, bear in mind, those proceeding, they don't only go after the individual, they may go after the firm itself. By doing so, that firm can no longer practice can in front of them, which they might lose clients that file report with the SEC. And that is a big deal. You're losing a lot of money there. Okay? So the SEC may order a violator to account for and surrender any profit from the wrongdoing and issue cease and desist order for violation. And obviously, your favorite thing is to impose money just to put fines on you. At the end of this recording, I'm going to remind you if you're a CPA candidate, please check out my website, farhatlectures.com. I explained the material differently than your CPA review course. I don't replace them. I don't intend to do so. I can do so. I would love to do so, but I can't, but I can be a useful addition to you. Your CPA is important. You know, make an investment. Get that extra help from my website so you could move on, focus on your career. And most importantly, stay ethical. If you're going to remember anything from this recording, stay ethical. Oh, yes. And one more thing. Join those societies. Once COVID is done, go out there and meet people. It's the best thing you can do. Network, network, network. Good luck, study hard, and stay safe until we get the vaccine in our hand.