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Audit quality update – Professional competency

Written on Nov 27, 2018

This article was published in the 2018 November/December issue of CPA Voice

Is it time to update the profession’s CPE requirements?

By Laura Hay, CPA, CAE

Professional competency and due care are requirements of the CPA profession to provide quality services to the public. With today’s pace of change in technology, globalization and regulation, the half-life of the CPA’s knowledge is much shorter than it has ever been. What got us there yesterday, without continuous cultivation, won’t give us what we need to deliver value for the future.

“Left untended, knowledge and skill, like all assets, depreciate in value – surprisingly quickly.”

- David Maister, business author

Competency is acquired in a variety of ways, and research in the accounting profession has focused on how to better measure outputs over inputs. As businesses seek ROI, it is easy to focus on cost and compliance of employee education and forget to measure the Return on Learning – tying learning to business strategies to increase value.

Having a regulatory model for how the profession obtains competency can drive a disconnect between accumulating mandatory CPE credits in the most convenient and cost-effective manner, versus selecting activities that provide real learning. To address this priority, employers are moving from simply monitoring compliance to establishing curriculum frameworks that identify gaps between development goals and areas of specialty that need to be addressed, and employees’ current knowledge.

One of these gaps that is receiving significant global attention is the relationship between professional competence and audit quality. Several significant initiatives are making a difference. Of note, the Enhancing Audit Quality efforts of the AICPA and its Audit Quality Centers have increased the tools, resources, and networks available to CPAs to obtain the competence necessary to perform high quality audits. Recent enhancements to licensure, discipline and peer review have strengthened the profession’s self-regulatory effectiveness. But weaknesses of these initiatives are that discipline and peer review are after-the-fact, and CPAs can self-select into preventive behaviors.

Taking a fresh look at the technical CPE requirement

A task force of OSCPA’s Professional Ethics Committee has been exploring how the profession can take the lead in practices to perform quality audits the first time – every time. One of the task force’s recommendations relates to the CPE requirement for credits in accounting and auditing.

The technical component of the CPE requirement differs by state. Ohio currently requires 24 credits of accounting and auditing (A&A) CPE in each three-year reporting cycle for CPAs in public accounting who work on attest engagements, and 24 credits of tax CPE for CPAs in public accounting who work on tax engagements. It’s important to note that these are minimum levels for licensing; they do not assure that professionals will have the competence to perform a given engagement.

In ethics enforcement, the committee observed that in many cases of significant audit deficiencies, a high proportion of the CPA’s continuing education is in tax, and the A&A requirement does not have to specifically relate to the CPA’s practice. In the AICPA’s enhanced oversight of government audits in the peer review program, while they did not find a statistical correlation between audit quality and total A&A hours, they did find a spike in non-conforming engagements for those who obtained fewer CPE credits specific to government audits.


The committee is recommending that the OSCPA Executive Board advocate with the Accountancy Board of Ohio to review the technical requirements within the CPE rules. Specifically, the committee recommends:

•Increasing the A&A requirement from 24 credits every three years to 36 credits every three years for CPAs performing audits

•Require CPE specific to the industry for CPAs performing audits in specialized industries (including government and employee benefit plan audits)

Some committee responses to frequently asked questions follow:

Is it an appropriate role for OSCPA to advocate for greater regulation of the profession that it represents?

This really isn’t increased regulation; the 120-hour total requirement would remain unchanged. It is, however, an effort to more specifically tailor the requirement to the specific composition of each firm’s practice. As such, it merely reflects the increasing specialization that we’re seeing in practice. This is consistent with OSCPA’s mission “to empower CPAs and related professionals to drive value as trusted business advisers by fostering professional ethics and integrity, building community, and advocating for members and those they serve.” Our leadership drives a premier business climate, helping CPAs deliver quality work and be trusted business advisers.

In a political environment encouraging reducing barriers to work, is this the right timing to advance this recommendation?

Again, this is not additional regulation, but an attempt to reflect market conditions in the composition of the existing requirements. By voluntarily improving existing regulations, the profession would be sending a clear message that the public interest is paramount. The recommendation does not increase the cost or total credits per reporting cycle of 120; instead it recommends a reallocation within the 120 to more directly relate to the work the auditor is doing. There is no change recommended in the CPE requirements for CPAs who do not perform audits.

Will adopting a technical requirement in Ohio that is greater than surrounding states be anti-competitive, perhaps causing firms to locate outside of the state?

In initial exposure of this recommendation to OSCPA membership groups, most CPAs performing audits responded that they are already obtaining more than the current 24 credit hour requirement to stay current. Ohio should serve as a leader in championing and modeling CPE reform nationally.

Isn’t the number of credit hours arbitrary?

The existing CPE requirement for 120 hours every three years was arbitrary when first established and has not been revisited in decades to account for dramatic changes in accounting and auditing standards, increased regulation and specialization in the profession.

Wouldn’t a more appropriate role for OSCPA be serving as a convener and facilitator for referral, networking and education in areas where practice deficiencies have been identified?

OSCPA continues to refine its educational offerings to address patterns of deficiencies that the profession identifies. A weakness of stopping at this stage is self-selection: will those who need the knowledge participate?

The committee emphasizes it is important that the profession establish high standards to continue to serve the vital roles of protecting the public trust and investor confidence. Doing so will allow it to fulfill another duty: that of promoting the integrity and relevance of the credential.

Request for you

The OSCPA Executive Board is seeking member feedback on the proposal. Contact Laura Hay, staff liaison to the committee, at 614.764.2727 or [email protected] to share your thoughts.

Laura Hay, CPA, CAE, is executive vice president of The Ohio Society of CPAs.

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