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A Back and Forth Discussion of CPA Ethics A CPE Ethics Course for Texas CPAs #595925

Course Overview

Credit

Amount

CPA

Course Author: Allison M. McLeod, CPA Field of Study (CPA): Regulatory Ethics

Course Description

Beacon Hill Financial Educators is an approved sponsor with the Texas State Board of Public Accountancy (Sponsor ID 009349).

We have three courses that qualify for the Texas State Board of Public Accountancy (TSBPA) ethics CPE requirement: This course; A CPA’s Guidebook to Ethical Behavior; and Ethics and Professional Conduct for Texas CPAs. The courses are approved by the TSBPA and are listed on page 1 and 11 respectively, on the TSBPA list of Board Approved Ethics Courses.

Course publication/revision date: This course was updated on 12/24/2025.

A CPA is challenged in today’s work world to not only serve his/her client or employer but also to protect the public interest by ensuring that there is transparency in financial reporting or there is fair administration of the tax laws. In balancing the two interests, a CPA may find him or herself in an ethical dilemma. This course covers not only basic ethical frameworks, but also specific rules governing CPA practice and responsibilities. It concludes with a section on how a CPA can put his or her ethics into action.

Please consult the Texas State Board of Accountancy for specific requirements (see our Support page).

Texas License Renewal Date: Last day of birth month annually
CPE Reporting Period: Ends on last day of the CPA’s birth month, over a three year rolling period
General Requirement: 120 hours, with a minimum of 20 per year; 4 hour board approved ethics course every 2 years

Table of Contents

INTRODUCTION7

PART I: UNDERSTANDING MORALITY AND ESTABLISHING OUR OWN ETHICAL FRAMEWORK8

Defining Ethics	8
Are Ethics Absolute?	8
The Role of Ethical Standards	9
Written Ethical Rules vs. Customs	10
Case Study: Pay to Play: Avon's Expansion Into China	11
Case Study: "No harm, no foul?"	14
When Ethics and Morals Converge	16
Moral vs. Ethical Actions	17
Case Study: Toyota Managing Counsel Dimitrios Biller	17
Clean Hands Dilemma	19
Case Study: The Police Officer and the NFL Player	19
Countering the Clean Hands Dilemma	20
Case Study: Student Suspended after Carrying Classmate to Nurse	21
What is Ethical Reasoning?	22
Case Study: SEC Charges The Kraft Heinz Company	24
Case Study: Yale Med School Administrator Embezzlement of $40 million	27
A Framework for Ethical Decision Making	28
Case Study: A Saint in Sin City	29
Other Barriers to Ethical Behavior	30
Bounded Ethicality	31
Ethical Fading	32
Convictions, Prison Time: A Look at College Admissions Scam	32
Cognitive Dissonance	34
Loss Aversion	34
Why did no one stop Madoff?	35
Whistleblowing	37
Next Steps	38

PART II: STANDARDS TO LIVE BY: CPA CODES OF CONDUCT39

Texas Rules of Professional Conduct	39
AICPA Code of Professional Conduct	40
TX RPC §501.73 Integrity and Objectivity	42
ET § 1.100.001.01/2.100.001.01 Integrity and Objectivity Rule	43
TX RPC §501.70 Independence	44
ET § 0.400.21 (Definitions)- Independence	44
Case Study: Ernst and Young $100m Fine for Auditors Cheating on Exam	45
THREATS TO INDEPENDENCE	47
ET § 1.210.010 Conceptual Framework for Independence	47
THREATS TO INTEGRITY AND OBJECTIVITY	50
ET § 1.130.020 Subordination of Judgment	50
Case Study: Gimme Shelter	51
ET §§ 1.110.010/2.110.010 Conflicts of Interest	53
ET § 1.130.010 Knowing Misrepresentations in the Preparation of Financial Statements or Records
ET § 1.140.010 Client Advocacy	54
DEALING WITH THREATS	55
ET § 1.000.10/2.000.10 Conceptual Framework for Members	55
RESPONSIBILITIES TO THE PUBLIC	56
TX RPC §501.83 Firm Names	57
ET § 1.820.030 Misleading Firm Names	58
ET § 1.400.090 False, Misleading, or Deceptive Acts in Promoting or Marketing Professional Services	58
TX RPC §501.82 Advertising	59
ET § 1.600.001 Advertising and Other Forms of Solicitation Rule	59
RESPONSIBILITIES TO CLIENTS/EMPLOYERS	61
TX RPC §501.74 Competence	63
ET § 0.300.060 Due Care	63
ET § 1.300.010 Competence	63
TX RPC §501.76 Records and Work Papers	64
ET § 1.230.010 Unpaid Fees	65
ET §1.400.200 Records Requests	65
TX RPC §501.75 Confidential Client Communications	66
ET § 1.400.070/2.400.070 Confidential Information Obtained From Employment or Volunteer Activities	67
ET § 1.700.001 Confidential Client Information Rule	68
TX RPC §501.72 Contingency Fees	68
ET § 1.510.001 Contingent Fees Rule	69
TX RPC §501.71 Receipt of Commission, Compensation or Other Benefit	69
ET § 1.520.001 Commissions and Referral Fees Rule	69
ET § 1.700.020 Disclosing Information From Previous Engagements	70
ET § 1.700.030 Disclosing Information to Persons or Entities Associated With Clients	70
RESPONSIBILITIES TO THE BOARD/PROFESSION	71
ET § 0.300.020 Responsibilities	71
TX RPC §501.90 Discreditable Acts	71
ET § 1.400.001 Acts Discreditable Rule	73
ET § 1.400.010/2.400.010 Discrimination and Harassment in Employment Practices	73
ET § 1.400.030/2.400.030 Failure to File a Tax Return or Pay a Tax Liability	73
ET § 1.400.040 Negligence in the Preparation of Financial Statements or Records	73
Case Study: Steven Martinez	74
ET § 1.400.050 Governmental Bodies, Commissions, or Other Regulatory Agencies	74
TX RPC §501.80 Practice of Public Accountancy	75
ET § 1.400.100 Use of the CPA Credential	75
ET § 1.800.001 Form of Organization and Name Rule	75
ET § 2.400.040 Negligence in the Preparation of Financial Statements or Records	76
Case Study: KPMG'S $456 Million Penalty	76
ACCOUNTANTS CONFIDENTIAL ASSISTANCE NETWORK	78

PART III: CONQUERING ETHICAL CONUNDRUMS AND INCREASING YOUR ETHICAL PRESENCE81

Case Study: Stealing Lunch Money at the Rialto Unified School District	84
Case Study: Rose Valland: An Unexpected Hero	88

Review Questions91

Review Questions: Answers and Explanations94

Key Terms 99

Course Details

Author: Allison M. McLeod, CPA

Publication/Revision Date: 12/24/2025

Course Exam Questions (online): 20 (multiple-choice)

Program Delivery Method: Self-Study (NASBA QAS Self-Study)

Available Formats of Course Text: Downloadable PDF, Printed/Mailed

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors I.D.: 107615

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

To educate licensees in the ethics of professional accounting as CPAs.
To convey the intent of the AICPA Code of Professional Conduct and/or specific state board rules in the performance of professional accounting services/work, not to adhere to the mere technical compliance of such rules.
To aid the CPA in applying ethical judgment in interpreting the rules and determining public interest. Public interest should be placed ahead of self-interest, even if it means a loss of job or client.
To review and discuss the AICPA Code of Professional Conduct and their implications for persons in a variety of practices, including:
1. CPAs in client practice of public accountancy who perform attest and nonattest services.
2. CPAs employed in industry who provide internal accounting and auditing services.
3. CPAs employed in education or in government accounting or auditing.

Online Book, Online Exam

Hardcopy Book, Online Exam

$49.00