Do State Accountancy Boards Diligently Exercise Their Disciplinary Powers?

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Gary Colbert
Dennis Murray
Ronald Reed

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Abstract

Certified public accountants (CPAs), similar to many other professionals, are regulated by the individual jurisdictions within the United States.  State accountancy boards issue licenses, which enable CPAs to offer their services to the public.  In addition to issuing licenses only to qualified applicants, state boards help protect the public by disciplining CPAs who violate provisions of their state accountancy laws.  This paper investigates the diligence with which state boards exercise their disciplinary powers.  We identified 73 CPAs who were disciplined by the Securities and Exchange Commission between 1996 and 1998.  State boards acted in 59 (80.8 percent) of these cases.  Overall, we conclude that state boards appear to be exercising their disciplinary powers in those cases where the SEC has disciplined a CPA.  Protection of the public appears to be a priority for many boards.  There is some evidence, however, that for a few boards their disciplinary efforts could be more forcefully exercised.

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