McCorry, James M. of Marshfield, MA 


As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and the Massachusetts Society of CPAs, Mr. McCorry, with the firm of James M. McCorry, CPA, entered into a settlement agreement under the Joint Ethics Enforcement Program effective October 12, 2016.

 

Information came to the attention of the Ethics Charging Authority (“ECA”) (comprised of the AICPA Professional Ethics Executive Committee and the Massachusetts Society of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. McCorry’s performance of professional services on the audit of the financial statements of an employee benefit plan as of and for the year ended December 31, 2011.

 

The ECA reviewed the auditor’s report, financial statements and working papers for the engagement as well as Mr. McCorry’s responses to the findings and 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 Massachusetts 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 auditor failed to obtain sufficient appropriate audit evidence to support the opinion on the financial statements in substantially all areas (SAS 106; AU §326).

2.   The opening paragraph of the auditor’s report does not identify the supplementary information accompanying the basic financial statements (SAS 119; AU §551.06, .12-.14).

3.   The financial statements failed to adequately disclose the termination of the plan, the formation of a new plan, and the transfers of assets between the plans (SAS 32; AU §431).

 

Rule 203 – Accounting Principles

1.   The investments and fair value measurement notes in the revised financial statements were not comparative (FASB ASC 205-10-45).

2.   The financial statements did not disclose or incompletely disclosed the following:

a.   Disclosures required for assets measured at fair value on a recurring basis (FASB ASC 820-10-50);

b.   Material party-in-interest transactions (FASB ASC 850-10-50); and

c.   Subsequent events disclosures required by FASB ASC 855-10-50.

 

Rule 501, Interpretation 501-5 – Failure to follow requirements of governmental bodies, commissions, or other regulatory agencies

1.   The supplemental schedule of assets held at end of year did not identify all assets as required by DOL 29 CFR 2520.103-10.

2.   As the partner responsible for his firm’s peer review compliance, Mr. McCorry failed to ensure it complied with state board requirements, and those of the AICPA and Massachusetts Society of CPAs to undergo a peer review.

 

Agreement:

In consideration of the ECA forgoing further investigation of Mr. McCorry’s conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. McCorry 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 Article VII. of the  Massachusetts Society of CPAs bylaws.

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

d.   To his suspension from membership in the AICPA and the Massachusetts Society of CPAs for a period of two years from the effective date of this agreement. During the period of suspension, he is prohibited from representing himself as a member of the AICPA and the Massachusetts Society of CPAs and from using any AICPA credentials.

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

f.    To provide an attestation immediately, then every six months for a period of three years that he is no longer performing audit or review engagements. If he returns to performing such work, he agrees:

·         To complete 40 hours of continuing professional education (CPE) courses (Annual Update for Accountants and Auditors; Annual Update for Compilation and Review Engagements; Understanding the Entity and Assessing Risk – Part 1 – Audit Staff Essentials, Level ll; Understanding the Entity and Assessing Risk – Part 2 – Audit Staff Essentials, Level ll; Audit Workpapers: Documenting Field Work; Audit Workpapers: Reviewing Field Work Documentation; Upcoming Peer Review: Is Your Firm Ready?) prior to commencing such work and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

·         To comply with directive e. above, hire an outside party, acceptable to the ECA to perform a pre-issuance review of the reports, financial statements, and working papers on all audit and review engagements performed by him for one year from the date the reviewer has been approved by the ECA. He must submit the names of the chosen reviewers to the ECA for approval no later than 30 days after he commences performing such engagements.

 

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 these pre-issuance reviews 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 or reviews. If his practice changes and he is no longer involved with audits or reviews, 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.

·         To further comply with directive e. above, submit six months after the completion of the pre-issuance reviews above, 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, or 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, or 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.

g.   To provide a second attestation immediately, then every six months for a period of three years that he is no longer performing employee benefit plan audits. If he returns to performing such work, he agrees:

·         To complete a 12 hour CPE course (Auditing Employee Benefit Plans) in addition to those in f. above prior to commencing such work and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

·         To further comply with directive e. above, 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 audit engagements performed by him for one year from the date the reviewer has been approved by the ECA. He must submit the names of the chosen reviewers to the ECA for approval no later than 30 days after he commences performing such engagements.

 

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 employee benefit plan audits. If his practice changes and he is no longer involved with employee benefit plan 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.

·         To further comply with directive e. above, submit six months after the completion of the pre-issuance reviews above, 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 the 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, or 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, or 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.

·         To submit within 30-days after he has accepted an engagement to audit an employee benefit plan 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.

h.   To schedule a system peer review of his firm upon his firm’s return to applicable engagements, and submit evidence of the scheduled system review by submitting a copy of the review team approval letter issued by his firm’s administering entity within 60 days of returning to such work. The period covered should be mutually agreed upon by his firm and the peer reviewer. His firm’s accepted peer review documents will be due to the ECA within 10 months of the enrollment in a peer review program.

i.    To be prohibited from serving as a member of any ethics or peer review committee of the AICPA or the Massachusetts 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 Massachusetts 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 f. or g. above substantially complies with professional standards.

j.    To be prohibited from teaching continuing professional education courses approved by the AICPA or the state societies in accounting and auditing 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 Massachusetts Society of CPAs. This requirement shall remain in effect until the ECA determines that the work product submitted to comply with directive f. or g. above substantially complies with professional standards. 

k.   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 f. or g. above substantially complies with professional standards. This restriction will be communicated to his peer review oversight agency.

l.    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.

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

n.   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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