CPAs Facing Ethical Challenges Due to PPP

The coronavirus pandemic has brought about economic issues for the whole country. Individuals and businesses alike have been struggling to pay bills. Adults received stimulus checks to help with necessities. To pay for business expenses, small businesses and non-profit organizations were given the opportunity to apply for a loan through the Paycheck Protection Program (PPP).

Loans are provided to help business owners pay for expenses such as payroll, utilities, rent and mortgage interest. As long as the money is used to cover those costs, then the loan does not have to be repaid; it is forgiven. However, there are some stipulations. For example, 75% of the loan must go toward payroll and you must have a certain number of workers on the payroll.

The loan amount is based on average monthly payroll expenses for 2019. These guidelines were created by the Treasury Department.

The Paycheck Protection Program, created by the Small Business Administration, has not been without its flaws. It already has experienced glitches and has faced backlash for giving funds to billionaire companies (such as the Los Angeles Lakers and Shake Shack) instead of smaller businesses who are struggling financially.

The biggest challenges, however, may come about when the loan forgiveness stage kicks in. CPAs are being asked about this part of the process, and unfortunately, they have not been provided sufficient guidance by the Treasury Department. CPAs are being asked for guidance from clients and the truth is that they are often not certain of the answer. They want to be able to guide their clients, but don’t know how. With the loan covering expenses for an eight-week period, many companies are halfway through this period already. So what happens now?

CPAs could face ethical issues if they make a mistake and miscalculate how the loan is used or give their clients inaccurate advice. That’s why they need to make sure they understand computation and categorization. For example, how do they find out a loan’s forgiveness amount? Who are considered “full-time equivalent” employees?

Complicating things further is that many CPAs are small business owners themselves. Can they apply for a PPP loan from the Small Business Administration as well? Yes, as long as they meet the requirements. As long as the bank who services the loan is not a client of the CPA firm, then there is no conflict of interest involved..

To help compute how much money is spent on certain areas, documentation is key. Bank statements, invoices, payroll reports and tax filings are also helpful.

For further assistance, the AICPA Center for Plain English Accounting (CPEA) has created a document that may be helpful. This special report outlines common concerns that CPAs may have about the process. 

Keep Your License With Help From a Tampa Certified Public Accountant Licensing Lawyer

CPAs work with finances and therefore are held to strict standards. If they lie, cheat or engage in any other type of unethical behavior, they can face license discipline issues.

Get help from Tampa certified public accountant licensing lawyer David P. Rankin. Schedule a consultation by calling our office at (813) 968-6633 or filling out the online form.

Resources:

aicpa.org/content/dam/aicpa/interestareas/centerforplainenglishaccounting/resources/2020/special-report-sba-ppp-loans.pdf

bench.co/blog/operations/ppp-loan-forgiveness/

https://www.davidrankinlaw.com/no-cpa-ethics-exam-required-in-florida/