Indiana Looks to Expand Ethics Requirement for CPAs

Mar 4th 2016
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A proposed rule change approved by the Indiana Board of Accountancy that would amend the ethics requirement for Indiana CPAs could open the door for Indiana to become the first state in the nation to allow competency- or experience-based ethics education.

Under the proposal, which the board approved at the end of last year, the state’s current ethics requirement for CPAs would remain in effect (completing a minimum of four hours of ethics education in a classroom setting), but two new competency-based options for meeting the requirement would be added.

According to the Indiana CPA Society, those two new options are:

  • Completing a competency-based ethics course; or
  • Achieving verified, relevant experience in ethics through a noncompensated role with a professional or trade organization.

Indiana CPA Society President and CEO Gary Bolinger, CAE, said the Indiana Board of Accountancy’s action is the first step in transforming and improving the outmoded, hours-based learning model of CPE that is “no longer relevant, effective, or applicable to the business environment that Indiana CPAs work in and serve.”

Bolinger said the Indiana CPA Society has been a leader in promoting competency-based education though its CPA Center of Excellence, which developed a series of competency-based courses that count toward up to 16 hours of a CPE waiver through a pilot program approved by the Indiana Board of Accountancy in 2014.

But now, the proposed rule change paves the way for additional competency-based education and puts Indiana on a path toward widespread change in professional development for CPAs.

The move, Bolinger believes, could also usher in changes in competency-based ethics education across the country.

“Regulation of the CPA profession is handled on a state-by-state basis, but Indiana’s success with transformational change of the decades-old, hours-based system is likely to have a carryover effect across the nation,” Bolinger said. “This is a process that will take time, but it is a long time coming.”

The board of accountancy’s support of the proposed rule change coincided with the development and release of a competency-based online ethics course module by the CPA Center of Excellence. Established in 2014, the center provides new learning opportunities, resources, and tools for Indiana CPAs.

Currently, CPAs in Indiana and all other states that require CPE have their education measured by the number of hours they sit in a classroom or spend learning online. Alternatively, competency-based education is a method in which participants must demonstrate mastery of subject material before advancing through or completing a course.

A competency-based approach also enables other significant learning options, such as flexibility, the ability to work at one’s own pace, and personalization. It is a learner-focused approach to education, and it is regarded as being a much more effective means of skill development.

Sherrill Rude, CAE, vice president of advocacy for the Indiana CPA Society, said the CPA Center of Excellence’s online, competency-based interactive course would count as one of the new options if the rule change is approved by the state’s governor. The course allows participants to work at their own pace and on any type of device. CPAs would then demonstrate that they have absorbed the material before they achieve credit.

Under the second option, certain types of ethics-related volunteer activities, such as serving on an ethics committee for a professional association, would also enable CPAs to achieve the ethics requirement without necessitating that they take a course, Rude said.

“This experience must be verified, but the belief is that it is at least as valuable, if not more so, than any ethics course would be,” she added.

Both of those options, Bolinger said, better serve the needs of today’s CPAs than the hours-based system of CPE. While it served a purpose over the years, the hours-based system, Bolinger said, is “no longer a viable model for enhancing the competencies of CPAs to serve the needs, opportunities, and challenges of businesses of today and into the future.”

Recent findings from the CPA Center of Excellence’s report, What Competencies Are CPAs Lacking? The Great Skills Divide: Where CPAs Report Being vs. Where They Think They Should Be, seem to underscore that point.

The report found:

  • Only 4 percent of CPA managers ranked themselves high in leadership.
  • Thirty-five percent of managers ranked themselves low in relationship building.
  • Less than half of all CPAs ranked themselves high in communication skills.
  • Zero percent of senior/staff accountants ranked themselves high in critical thinking.

“Today’s CPA has an expanded role in business and serves as a trusted business advisor to clients and employers. In order to be successful in those capacities, CPAs must embrace continuous learning and the need to constantly improve themselves,” Bolinger said. “The competency-based system provides CPAs with the assurances that they are learning successfully and enhancing their competency levels to stay at the top of their profession. Competency-based learning also provides for flexibility and personal preferences in terms of the method and pace of learning – two factors that are also important in today’s business environment.”

The proposal is now in the rule promulgation process, which includes consideration first by the State Budget Agency and then by the Indiana Economic Development Corporation. Following that, the Indiana Board of Accountancy will hold a public hearing, and then, ultimately, the governor would approve the rule. The rule would go into effect 30 days after that.

Related article:

CPAs Give Themselves Low Marks in Key Business Skills


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By dshatkowski
Mar 4th 2016 19:14

Deanna has done a great job of capturing the essence of not only the effort to change the ethics rule in Indiana, but also the need for CPAs to broaden their skills as they expand their role in business. The approval of this ethics proposal will be a ground breaking event for the future methods and models of CPA learning. And it is also recognition of the CPA Center of Excellence for its innovative approach to online education. The addition of both the options of a competency-based module and experience to fulfilling the ethics requirement in Indiana could point the profession toward transformational change in the future.

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