The ethics requirement for licensure: the AICPA exam and state-specific rules

In this lesson you will

Distinguish the ethics content on the CPA Exam from a board’s separate ethics requirement
State the passing score the AICPA sets for its licensure ethics course
Identify how good moral character fits into the UAA licensure standard
Plan the ethics step so it does not delay a license application

Ethics appears in three places

Ethics enters the licensure process three ways:

On the exam. AUD Area I (Ethics, Professional Responsibilities and General Principles, 15-25%) and REG Area I (Ethics, Professional Responsibilities and Federal Tax Procedures, 10-20%) test the AICPA Code, independence rules of other regulators, and tax practice duties.
A board ethics requirement. Many boards require a separate ethics exam or course before issuing the certificate. The board decides which exam it accepts, the passing score and how recent it must be.
Good moral character. UAA Ninth Edition Section 5(a) grants the certificate to persons of good moral character who meet the education, experience and examination requirements.

The AICPA comprehensive ethics course

The AICPA offers "Professional Ethics: The AICPA's Comprehensive Course (For Licensure)." The AICPA's course page states:

Candidates taking it for licensure must pass with a score of 90 percent or higher for it to count toward the CPA license; those maintaining an existing license need 70 percent.
It carries 9 CPE credits.
It covers the AICPA Code of Professional Conduct and its conceptual framework, independence rules of the AICPA, SEC and PCAOB, ethics rules for government audits and employee benefit plan audits, gifts and entertainment, responding to noncompliance with laws and regulations, and Treasury Circular 230.
Many states do not accept the AICPA course to meet the ethics requirement for earning or maintaining a license, and candidates should confirm with their board which course it requires.

That last point drives the planning. Before buying any course, read the board's rule for the accepted provider, the passing score and any time limit between passing the ethics exam and applying for the license.

Good moral character

UAA Section 5(b) defines good moral character as the propensity to provide professional services in a fair, honest and open manner. The board may refuse a certificate on this ground only if there is a substantial connection between the lack of good moral character and the professional responsibilities of a licensee, and the finding is supported by clear and convincing evidence. If the board finds an applicant unqualified on this ground, it must provide its findings, the record of evidence and notice of the right of appeal. Disclose past matters on the application accurately; an inaccurate answer creates its own integrity problem.

State-specific ethics

Beyond initial licensure, boards set ethics CPE for renewal. The UAA Model Rule 6-4(b)(3) model is an average of two ethics CPE credits per annual period in the reporting period (lesson 11). Some boards require ethics courses specific to their own statutes and rules. A CPA who holds licenses in several states tracks each board's ethics requirement separately.

Mistakes that delay licenses

Taking the AICPA course in a state that requires a different provider.
Passing with 85% and assuming it counts; the AICPA licensure threshold is 90%.
Letting the ethics result age past the board's limit before applying.
Treating Code study for AUD as a substitute for the board's ethics step.

The Code of Professional Conduct overview is the best single study source for both the AUD ethics area and the board requirement, and the how to become a CPA guide puts the ethics step in sequence.

Worked example

Reading an ethics score against two rules

Ava Chen passes all four exam sections and takes an ethics exam with 50 questions. (The question count is hypothetical; use your provider's actual format.)

Attempt 1: 44 correct. 44 / 50 = 88%. Under the AICPA's licensure threshold of 90% or higher, this does not count toward licensure. She retakes.

Attempt 2: 46 correct. 46 / 50 = 92%. This meets the 90% threshold.

Board check: Ava's board publishes its own ethics rule. It accepts the AICPA course for initial licensure and requires that the ethics exam be passed within a set period before the license application. She took attempt 2 in March and plans to apply in May, inside that period.

Second state: Ava also plans to apply in a neighboring state where her firm has an office. That board's rules state that it does not accept the AICPA course and require its own state-specific ethics course. Her 92% does not satisfy that board.

Conclusion: the same score satisfies one board and not the other. Ava files in her home state in May and enrolls in the neighboring state's required course before applying there.

Self-check

Answer each question before you open the answer.

What score does the AICPA require on its comprehensive ethics course for the result to count toward licensure?
Show answer
90 percent or higher. A 70 percent threshold applies only to those taking the course to maintain an existing license.
Does every state accept the AICPA ethics course?
Show answer
No. The AICPA itself states that many states do not accept it, so the board’s rule on accepted courses controls.
Under UAA Section 5(b), when may a board deny a certificate for lack of good moral character?
Show answer
Only if there is a substantial connection between the lack of good moral character and a licensee’s professional responsibilities and the finding is supported by clear and convincing evidence.

Sources

Back to the syllabus

Standards are paraphrased from the primary sources listed above; read the source before relying on a requirement. This lesson is training material, not professional advice. Report an error