Jeffers, Kevin of New Albany, OH 


As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and the Ohio Society of CPAs, Mr. Jeffers, with the firm of M.K. Jeffers & Company, entered into a settlement agreement under the Joint Ethics Enforcement Program effective November 8, 2016.

 

Information came to the attention of the Ethics Charging Authority (“ECA”) (comprised of the AICPA Professional Ethics Executive Committee and the Ohio Society of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Jeffers’ performance of professional services on the audit of the financial statements of an employee benefit plan as of and for the year ended March 31, 2014.

 

The ECA reviewed the findings of the U.S. Department of Labor’s Employee Benefits Security Administration and Mr. Jeffers’ responses to such findings as well as other relevant documents he submitted to support his response.  Based on this information, there appears to be prima facie evidence of violations of the rules of the AICPA’s and Ohio Society of CPAs’ codes of professional conduct as follows:

 

Rule 201 - General Standards, A. Professional Competence

The auditor undertook an engagement that he could not reasonably expect to complete in accordance with professional standards.

 

Rule 202 - Compliance with Standards

1.   The introductory paragraph of the auditor's report failed to appropriately identify the period covered by each financial statement presented. (AU-C 700.25)

2.   The auditor's report failed to state whether the auditor believes that the audit evidence the auditor has obtained is sufficient and appropriate to provide a basis for the auditor's opinion. (AU-C 700.33)

3.   The auditor's report failed to include an opinion on the results of the plan's operations or change in financial position. (AU-C 700.35)

4.   The auditor initially failed to obtain sufficient appropriate audit evidence to express an opinion on the financial statements in the following areas (AU-C 200):

a.   Planning; (AU-C 210, AU-C 315.26, AU-C 330)

b.   Contributions; (Audit and Accounting Guide for Employee Benefit Plans (AAG-EBP) 7.58-7.61, 7.182-.186)

c.   Participant data and eligibility; (AAG-EBP 7.182-.186)

d.   Plan obligations; (AAG-EBP 7.89-.102, 7.211-.214)

e.   Benefit payments; (AAG-EBP 7.79-.84, 7.197-.206)

f.    Plan expenses; (AAG-EBP 7.85-.88, 7.207-.210)

g.   Plan’s tax status; (AU-C 250, AAG-EBP 9.20-.25)

h.   Party-in-interest; (AU-C 550, AAG-EBP 2.89-2.107)

i.    Commitments and contingencies; (AU-C 200.19, AAG-EBP 10.09-.10); and

j.    Subsequent events. (AU-C 855, AAG-EBP 10.14)

5.   The auditor failed to document changes made to the audit file after the documentation completion date. (AU-C 230)

6.   The auditor failed to obtain a signed engagement letter. (AU-C 210)

7.   The auditor failed to dual date or re-date his report in light of the additional procedures performed. (AU-C 700)

 

8.   The auditor did not initially obtain written representation from management. The revised management representation letter was not properly tailored to the engagement. (AU-C 580)

9.   The auditor failed to obtain an understanding of the nature and significance of the services provided by a service organization and the effects on the plan’s internal controls relevant to the audit. (AU-C 402)

 

Rule 203 - Accounting Principles

1.   The following omissions and errors were included in the notes to the financial statements:

a.   The receivables balance on the Statements of Net Assets Available for Benefits and the contributions amount on the Statements of Changes in Net Assets Available for Benefits are not separately identified by source. (ASC 965-310-45, ARB 43)

b.   The financial statements failed to include information about the plan's benefit obligations. (ASC 965-205-45, ASC 965-30-35)

c.   The amount of administrative expenses is not presented separately in the 2014 Statement of Changes in Net Assets Available for Benefits. (ASC 965-20-45)

d.   The financial statements failed to disclose: (ASC 965-205-50)

·         The plan's benefit provisions, including insured versus self-insured benefits, and

·         The plan's type and extent of insurance coverage, as well as extent to which risk is transferred.

e.   The financial statements failed to disclose the date through which subsequent events were evaluated. (FASB ASC 855-10-50)

f.    The financial statement failed to disclose information related to party-in-interest transactions. (ASC 850-10-50)

2.   The statement of net assets inappropriately reports benefit obligations. (ASC 965-205-45)

 

Agreement:

In consideration of the ECA forgoing further investigation of Mr. Jeffers conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Jeffers agreed as follows: 

a.    To waive his rights to further investigation of this matter in accordance with the Joint Ethics Enforcement Program (JEEP) Manual of Procedures.

b.    To waive his rights to a hearing under AICPA bylaws section 7.4 and the Ohio Society of CPAs’ bylaws article VII, section B.

c.   To neither admit nor deny the above specified charges.

d.   To his admonishment by the AICPA and the Ohio Society of CPAs.

e.   To comply immediately with professional standards applicable to the professional services he performs and to submit evidence of such compliance.

f.    To complete 46 hours of continuing professional education (CPE) courses (Auditing Employee Benefit Plans: Audit Documentation- Audit Staff Essentials, Level 1; Audit Workpapers: Reviewing Field Work Documentation; Audit Workpapers: Documenting Field Work; Understanding the Entity and Assessing Risk-Part 1-Audit Staff Essentials, Level II; Understanding the Entity and Assessing Risk-Part 2-Audit Staff Essentials, Level II; Internal Control and Risk Assessment: Key Factors in a Successful Audit; Annual Accounting and Auditing Workshop) within 12 months of the effective date of this agreement and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

g.   To comply with directive e. above, he agrees to hire an outside party, acceptable to the ECA to perform a pre-issuance review of the reports, financial statements, and working papers on all employee benefit plan audits performed by him for one year from the date the reviewer has been approved by the ECA or until completion of the CPE specified in directive f. above, if later. In addition, he must undergo a pre-issuance review on five non-employee benefit plan audits performed by him that year.  He must submit the names of the chosen reviewers to the ECA for approval no later than 30 days after the effective date of this agreement. Also, no later than 30 days after the effective date of this agreement, he must submit a list to the ECA of the non-employee benefit plan audits on which he expects to issue reports in the upcoming 12 months from which the five non-employee benefit plan audits will be selected.  The following information should be included regarding the engagements listed: anticipated number of hours to be spent on the engagement, level of professional services rendered, his role and anticipated hours on each engagement, type of organization, and whether it was an initial engagement.

 

He agrees to permit the outside party to report quarterly to the ECA on his progress in complying with this agreement as stated herein to comply with professional standards. The report should provide the reviewer’s comments in detail for each engagement and should include a description of the nature of the entity reviewed, the entity’s year end and the date of the review.   The first report is due 120 days after the reviewer has been approved by the ECA with subsequent reports due every 90 days thereafter.  He agrees to have this pre-issuance review performed at his expense.  The ECA has the right to extend the period of time and number of engagements subject to pre-issuance review if there are deficiencies.

 

He agrees to inform the ECA of any changes in the composition of his practice, changes in his role during the period he is subject to the pre-issuance reviews or if he has not performed any audits.  If his practice changes and he is no longer involved with audits, no longer acts in a supervisory capacity on such engagements, or has not performed such engagements during the above specified period, he must inform the ECA of this and the ECA may require that he attest every six months for three years as to the nature of his practice. If, during the three-year attestation period he returns to performing such engagements he must inform the ECA and undergo the pre-issuance reviews.

h.   To further comply with directive e. above, submit six months after completion of the pre-issuance reviews a list of the highest level (audits, reviews, and compilations with note disclosures) of engagements that he performed in the period between the date of completion of those pre-issuance reviews and the end of the six-month period following completion of the pre-issuance reviews. The following information should be included regarding the engagements listed: number of hours spent on the engagement, his role and total hours on each engagement, level of professional services rendered, type of report issued, type of organization, and whether it was an initial engagement. The ECA will select one of these engagements for review. He will be informed of this selection and will be asked to submit information to include a copy of his report, the financial statements, and working papers related to that engagement for review by ECA. The ECA may extend the period to select an engagement to ensure a suitable selection is available.  A peer review undergone by his firm would not exempt him from this requirement.

He agrees to inform the ECA of any changes in the composition of his practice, changes in his role or if he has not performed any audits, reviews, compilations with note disclosures until a suitable work product is selected for review. If his practice changes and he is no longer involved with audits, reviews, and compilations with note disclosures, no longer acts in a supervisory capacity on such engagements, or has not performed such engagements during the above specified period, he must inform the ECA of this and the ECA may require that he attest every six months for three years as to the nature of his practice. If, during the three-year attestation period he returns to performing such engagements he must inform the ECA of this change and the ECA will select a suitable work product for review.

 

After an initial review of such report, financial statements, and working papers, the ECA may decide he has substantially complied with professional standards and close this matter. Or, the ECA may decide that an ethics investigation of the engagement he submitted is warranted. If at the conclusion of the investigation, the ECA finds that professional standards have in fact been violated, the ECA may refer the matter to the trial board for a hearing or take such other action as it deems appropriate.

i.    To submit within 30-days after he has signed this agreement evidence that his firm has submitted an application to join the Employee Benefit Plan Audit Quality Center. Upon membership in that Center, he agrees that his firm will comply with the directives of that Center.

j.    To be prohibited from serving as a member of any ethics or peer review committee of the AICPA or the Ohio Society of CPAs until he has completed all directives in this letter.  This restriction will be communicated to those responsible for appointments to such committees.   In addition, if he applies to join any other committee of the AICPA or the Ohio Society of CPAs he must inform those responsible for such appointments of the results of this ethics investigation.  This requirement shall remain in effect until the ECA determines that the work product submitted to comply with directive h. above substantially complies with professional standards. 

k.   To be prohibited from teaching continuing professional education courses approved by the AICPA or the state societies in the areas of auditing and accounting and employee benefit plans until he has completed all of the directives included in this letter.  This restriction will be communicated to those responsible for engaging CPE instructors at the AICPA and the Ohio Society of CPAs. This requirement shall remain in effect until the ECA determines that the work product submitted to comply with directive h. above substantially complies with professional standards. 

l.    To be prohibited from performing peer reviews in any capacity until the directives in this letter have been completed.  This prohibition will remain in effect until the ECA determines that the work product he submitted to comply with directive h. above substantially complies with professional standards. This restriction will be communicated to his peer review oversight agency.

m.  That the ECA shall provide a copy of this settlement agreement to the AICPA’s Peer Review Division staff, his peer review administering entities and his firm’s peer reviewer.

n.   That the ECA shall publish his name, the name of his firm, the charges, and the terms of this settlement agreement.

o.   That the ECA shall monitor his compliance with the terms of this settlement agreement and initiate an investigation where the ECA finds there has been noncompliance.

 




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