Accountancy board authority, discipline triggers, sanctions, and corrective actions tested in REG.
This chapter explains how the CPA profession is regulated through licensing bodies and disciplinary systems. The exam emphasis is practical: know who has authority, what conduct leads to investigation, and what remedies or sanctions can follow.
REG questions in this area often turn on the relationship between misconduct, jurisdiction, and consequence. A fact pattern may involve tax practice, attest work, licensing status, continuing education, misleading conduct, or failure to cooperate with an investigation.
| Fact-pattern issue | What to identify first | Common REG trap |
|---|---|---|
| Licensing status | Whether the person or firm is authorized to perform the service. | Treating technical competence as enough when licensing authority is missing. |
| Enforcing body | Which state board, agency, or professional rule system has authority. | Assuming every penalty comes from the IRS or a court. |
| Misconduct | Whether the conduct involves fraud, negligence, independence, confidentiality, standards, or cooperation. | Labeling all violations as ethical issues without matching the rule breached. |
| Sanction or remedy | Whether the consequence is discipline, suspension, revocation, penalty, education, or corrective action. | Choosing the harshest sanction without considering proportionality and procedure. |
| Step | REG question to ask | Why it matters |
|---|---|---|
| 1. Confirm who is regulated | Is the fact pattern about an individual CPA, firm, preparer, or other practitioner? | Licensing authority and sanctions depend on the person or entity subject to regulation. |
| 2. Identify the service or conduct | Does the conduct involve attest work, tax practice, representation, advertising, confidentiality, or cooperation? | The relevant rule changes with the professional role and service performed. |
| 3. Match the enforcing authority | Is the issue controlled by a state board, IRS practice rule, professional standard, or court process? | REG answers often turn on which body can impose the consequence. |
| 4. Evaluate severity and procedure | Is the violation technical, negligent, intentional, repeated, or tied to public protection? | Sanctions should be proportionate and usually follow notice and process. |
| 5. Choose the likely consequence | Is the outcome education, remediation, monetary penalty, suspension, revocation, or other discipline? | The best answer connects misconduct to a realistic remedy rather than a generic punishment. |
| Checkpoint | Ask before selecting a sanction | Regulatory effect |
|---|---|---|
| Regulated person | Is the issue about an individual CPA, firm, preparer, representative, or other practitioner? | Licensing authority depends on who is regulated. |
| Service context | Does the conduct involve attest work, tax practice, representation, advertising, confidentiality, or cooperation? | The service context points to the governing rule. |
| Enforcing body | Is the matter controlled by a state board, IRS practice rule, professional standard, or court process? | Different authorities impose different remedies. |
| Severity and intent | Is the conduct technical, negligent, intentional, repeated, deceptive, or harmful to the public? | Sanctions should be proportionate to severity and procedure. |
| Corrective outcome | Is education, remediation, penalty, suspension, revocation, or other discipline most realistic? | REG often tests the likely consequence rather than the harshest possible result. |