At its meeting of April 18, 2013, the Pennsylvania State Board of Accountancy [“Board”] affirmed the dismissals of two separate licensing complaints. Attorney Jeffrey T. McGuire of Cipriani & Werner’s [“C&W”] Harrisburg, Pennsylvania office obtained both dismissals before the Board.

Case 1 The first case arose when the CPA dropped his AICPA membership and switched from a requirement of obtaining his Peer Review every three years to every five years. His license renewal came during the window between the third and fifth year. So his Peer Review Acceptance Letter [“Letter”] made it appear that his Peer Review was expired when it was not. During the renewal period, he renewed online and paid the renewal fee with a credit card. He then mailed the Letter to the Board. The Board, apparently believing that the Peer Review was out of date, placed his license on hold. However, they accepted and never returned the application, nor the application fee. Also, the Board never notified the CPA that they had suspended his license. Within a year, the CPA learned from the Bureau of Charitable Organizations of the Department of State that his license was expired. He then promptly filed a reactivation application and was granted his license. The prosecutor for the Department of State then brought a licensing violation claim against the CPA alleging that the he had practiced without a license. A hearing was held before a Hearing Examiner for the Department of State who, after hearing all the evidence, determined that the case should be dismissed. Because he had completed the entire renewal process, was eligible for a license, and the Board had failed to provide any notice to the him that his license was not renewed while at the same time accepting the application and fee, the Board was equitably estopped from prosecuting. The CPA was justified in relying on the silence of the Board to mean that his license was active. For these reasons, the Hearing Examiner recommended that the charges be dismissed. Thereafter, the Board, as was its right, issued a notice of intent to review and the Prosecutor filed exceptions. The prosecutor argued that there could not be justified reliance because the firm never received a copy of its license in the mail. The Board agreed with the Hearing Examiner and dismissed the charges. The Prosecutor did not appeal the Board’s decision.

Case 2 The second case arose when the CPA switched firms and failed to notify the Board of a change of address which led to an inadvertent failure to renew his license. When he realized his mistake he contacted the Board to rectify the situation. Unfortunately, this was at the end of a calendar year, December of 2006. When a license is in lapsed status, in order to reactivate it, the CPA must have the full eighty continuing education [“CE”] hours within two years from the time the renewal application is sent. In order to have eighty CE hours the CPA had to use almost all his CE hours from 2006 leaving him with less than twenty hours remaining for the calendar year 2006. Because he was concerned that he would not have twenty CE hours in 2006 required for his next renewal, he specifically asked the Board representative about this and was told that he simply needed to activate his license right away and he would deal with his next renewal later. Therefore, believing it was the correct thing to do, he followed the instructions from the Board representative. At the end of 2007, for the next renewal, he mailed in his renewal application along with a check for the renewal fee. He properly checked off the box, indicating that he did not have twenty CE hours in each calendar year. Based upon his application, the Board returned his application, but not his check, and asked him to clarify or explain why he did not meet the twenty hour requirement. The Board also placed his license on lapsed status. Upon receipt of the returned application, the CPA called the Board to explain his situation and resolve the issues. The representative he spoke with indicated to him that the situation would be reviewed. Two weeks later he received a letter from a prosecutor who indicated that he would not be prosecuted for practicing without a license. Unfortunately, the CPA misinterpreted this as a response to his current situation and believed that this meant that his license would be issued. In fact this letter pertained to the period prior to December 2006. He received nothing further from the Board concerning his application. Next he wrote to the Board in April 2008 after tax season inquiring why the Board had not cashed his check or sent his paper license. Unfortunately, he received no further response from the Board and he assumed his license was active and he forgot about the matter. At his next renewal, when he filed his renewal application, he learned that his license was again in a lapsed status and once again he promptly reactivated his license. The prosecutor for the Department of State then brought a licensing violation claim against the CPA alleging that he had practiced without a license in 2008 and 2009. A hearing was held before a Hearing Examiner for the Department of State who, after hearing all the evidence, determined that the case should be dismissed. Because the CPA had followed the instructions of the Board representative and attempted to follow-up with the Board with no response, the Board was equitably estopped from prosecuting. The CPA was justified in relying on the instructions of the Board and its silence to mean that his license was active. For these reasons, the Hearing Examiner recommended that the charges be dismissed. Thereafter, the Board, as was its right, issued a notice of intent to review and the Prosecutor filed exceptions. In this case, as well as the first case, the prosecutor argued that there could not be justified reliance because the firm never received a copy of its license in the mail. The Board agreed with the Hearing Examiner and dismissed the charges. The Prosecutor did not appeal the Board’s decision. A lesson to be learned from this case is to make certain that you have enough hours in each year for your renewal if you find yourself in the position of reapplying late in the year. You can do that by taking extra CE courses before or after you apply so long as you do it in the correct calendar year. The Board essentially will not grant an exception to the twenty hours.

[1]The Pennsylvania CPA Law requires firms to periodically undergo a peer review. Although the renewal process has now changed, at the time of the firm’s renewal a copy of the Peer Review Acceptance letter was required to be provided to the Pennsylvania State Board of Accountancy. Today a firm merely must certify that they have undergone their required peer review.