Continuing Profession Education

It’s a Long Road That Never Turns

Continuing Professional Education (CPE) for Certified Public Accountants (CPAs) is crucial to maintaining professional competence and staying current and compliant in the rapidly evolving accounting field.

CPE is not just a requirement but a vital tool for professional growth and development. It can give you a deeper understanding. It can give you a broader perspective. It can also give you a much-needed break from actual (but paying) number crunching. However, the system can also be somewhat complex due to the various rules and requirements of the many reporting jurisdictions. And because of this array of rules and reporting jurisdictions, it can be found to be a non-compliance trap.

After we briefly examine CPE’s importance, shortcomings, and criticisms, we will explore the rules and boobytraps the CPA faces every reporting period.

Importance of CPE

CPE is critical in ensuring that CPAs provide high-quality services, comply with ethical standards, and adapt to the ever-changing financial landscape. It helps CPAs:

1. Obtain, maintain, and improve professional competence
2. Stay informed about industry changes
3. Obtain ethical training and reminders
4. Become comfortable with specialization
5. Become more flexible in learning methods
6. Become more open to new technologies
7. With career advancement.
8. Fulfill regulatory requirements

Shortcomings and Criticisms

Despite its importance, the current CPE program faces several criticisms:

1. Relevance: Some CPAs argue that many CPE courses are not directly applicable to their specific practice areas.
2. Quality: The quality of CPE programs can vary significantly, with some offering little practical value.
3. Flexibility: Many CPAs find balancing work commitments with CPE requirements challenging.
4. Cost: High-quality CPE programs, particularly for independent practitioners or small firms, can be expensive.

How did this happen?

What is the genesis of the accounting profession having such a heavy CPE load compared to other professions? For example, in Tennessee, CPAs must obtain 80 hours of CPE each two-year reporting cycle, with those 80 hours being stratified into many compliance categories. On the other hand, the Tennessee Supreme Court requires its lawyers to obtain 15 CLE hours per year, with only two compliance categories (general and ethics.) What’s up with that?

Many of the accounting profession’s CPE woes can probably be traced to the Savings & Loan (S&L)crises during the 1980s and early 1990s. The S&L crisis was a massive financial disaster that caused the failure of 1,000-plus savings and loan associations in the United States. This widespread collapse highlighted the need for improved financial oversight and accounting practices in the minds of some in the U.S. Congress. To prevent congressional action, I believe, in part, the profession’s response was the promise of increased self-regulation manifested by stringent CPE requirements.

Additionally, pressure came to bear on the profession due to financial scandals in the early 2000s following major accounting disasters such as Enron and WorldCom. These events precipitated a general loss of confidence in the accounting profession and financial reporting.

Other events and matters came to bear, pushing the profession toward a robust education structure. These events and matters, and the complexity that followed were:

1. Sarbanes-Oxley Act of 2002
2. Technological advancements
3. Globalization of business
4. Increased complexity of accounting standards, partially because of the items listed above.

That is a lot to learn. However, in my opinion, the primary current behind the emphasis on heavy CPE requirements for the accounting profession was the desire to thwart U.S. legislative control of accounting principles and auditing standards. This effort was, at best, only partially successful.

Now, with that being said, below are the CPE requirements mandated by the following:

1. Tennessee State Board of Accountancy
2. AICPA – General Membership Requirements
3. AICPA – Accreditation in Business Valuations credentials
4. AICPA – Certified in Financial Forensics credentials

Tennessee State Board of Accountancy Requirements

General requirements:

1. 80 credit hours of CPE every two years, based on a fixed two-year period (not a rolling two-year period.)
2. Minimum of 20 hours each year
3. Reporting period based on calendar year (January 1 to December 31)
4. Even-numbered licenses report during even-numbered years, odd-numbered licenses during odd-numbered years.

Subject requirements:

1. At least 40 hours must be in technical fields, which include accounting (including governmental accounting), auditing (including governmental auditing), business law, economics, finance, information technology, management services, regulatory ethics, specialized knowledge, statistics, and taxes.
2. 20 hours of the 40 technical hours must be in accounting and auditing if performing attestation services (including compilations)
3. If the CPA provides expert witness testimony, then at least 20 hours must be in the general area in which the court deems the accountant an expert, such as tax, auditing, etc.
4. Ethics. The CPA must obtain two hours of Board-approved ethics for every two-year licensing period.

Carryover hours:

1. Hours in excess of the requirement of 80 hours in a regular two-year fixed reporting period may be applied, up to 24 hours, to the subsequent reporting period. Such carryover hours come over as non-technical hours and do not help meet the requirements for yearly minimums, technical CPE, or other benchmarks.

See the Tennessee State Board of Accountancy website for further information.

AICPA Requirements

General Membership: CPAs who are members of the AICPA must comply with the following general membership CPE requirements:

1. Earn 120 CPE credits every three years (A fixed three-year period, not a rolling three-year period) with no ethics requirement.
2. The three-year reporting period begins on January 1 of the year following admission to the AICPA.
3. A grace period is available for the two months immediately following the reporting period. Hours credited toward a prior year deficiency may not be counted toward the reporting period that the courses are taken. (No double-dipping.)

Accredited in Business Valuation (ABV) Credential: CPAs who have the ABV credential must comply with the following:

1. Sixty hours of CPE within the credential body of knowledge every three years, with at least ten hours earned annually.


• NOTE. The AICPA’s ABV Credential Handbook is silent as to whether the three-year period is a fixed or a rolling three-year period. However, my conversations with the AICPA’s ABV division confirmed that the ABV three-year period is a fixed three-year period, consistent with the general membership fixed three-year requirement.


2. Four hours of professional ethics education every three years (in addition to the 60-hour requirement.)


• HEADS-UP – Tennessee CPAs with the AICPA’s ABV credentials must be careful of the ethics trap. Tennessee only requires two ethics hours every two years. The ABV credentials require four ethics hours every three years. The strategy to always obtain the Tennessee ethics the first year (or second year) of each two-year cycle will leave you short, at some point, as to the AICPA requirement of four hours of ethics over a three-year cycle.

Certified in Financial Forensics (CFF) Credential: CPAs who have the CFF credential must comply with the following:

1. Complete 20 hours of CPE within the credential body of knowledge annually.
2. There is no ethics requirement.

Enforcement and Ramifications

Tennessee State Board of Accountancy

The Tennessee State Board of Accountancy conducts annual CPE audits:

1. Ten percent of renewing licenses are randomly selected each year
2. The Board typically sends audit notifications in early May
3. Selected CPAs must submit documentation of CPE credits earned in the previous two-year reporting period
4. All audit responses must be submitted through the core.tn.gov website
5. Board members are audited each renewal cycle
6. Failure to comply may result in license suspension or revocation
7. Monetary penalties may be imposed
8. Damage to professional reputation.

AICPA

The AICPA also conducts periodic audits of its members’ CPE compliance:

1. Non-compliance may lead to membership suspension or termination
2. Credential revocation for specialized certifications
3. Reinstatement requirements must be met to regain membership or credentials.

Conclusion

In conclusion, while CPE may be a long road that never turns, it remains essential to maintaining professional competence for CPAs. Yes, there is room for improvement in the current system. Addressing the challenges of relevance, quality, flexibility, and cost could enhance the effectiveness of CPE programs and better serve the needs of accounting professionals. As the field evolves, CPAs must stay informed about their specific CPE requirements and ensure compliance to maintain their licenses, memberships, and credentials.