Keller, Thomas of Montoursville, PA 


As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and the Pennsylvania Institute of CPAs, Mr. Keller, with the firm of Thomas B. Keller, CPA entered into a settlement agreement under the Joint Ethics Enforcement Program, effective May 3, 2017.

 

Information came to the attention of the Ethics Charging Authority (ECA) (comprised of the AICPA Professional Ethics Executive Committee and the Pennsylvania Institute of CPAs’ Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Keller’s performance of professional services on the audit of the financial statements of a not for profit entity as of and for the fiscal year ended June 20, 2012.

 

The ECA reviewed the auditor’s report, financial statements and working papers for the engagement as well as Mr. Keller’s responses 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 Pennsylvania Institute of CPAs’ codes of professional conduct as follows:

 

Rule 202 – Compliance with Standards

1.   The auditor originally did not identify and test all major programs. (AICPA Audit Guide – Government Auditing Standards and Circular A-133 Audits (AAG-SLA) 8.12, 8.40)

2.   The auditor’s assessed level of control risk was not appropriate given that there was no documentation of control testing.  (AU-C 230, AU-C 315)

3.   The original schedule of findings and questioned costs improperly listed the CFDA# for the child care and development block grant. (AAG-SLA 13.39)

4.   The original agreed-upon-procedures report failed to reference the LIHEAP program as required. (AT-C 201)

 

Rule 203 – Accounting Principles

1.   The financial statements are not presented in accordance with professional standards in that: (FASB ASC 958-205-45; 958-210-45; 958-225-45; 958-605-25; 958-605-45; 958-720-45; 230-10-45; 330-10-45; AICPA Audit Guide – Not-for-Profit Entities 13.07)

a.    No explanation of how the basis of accounting utilized in the financial statements differs from generally accepted accounting principles;

b.    They fail to include a statement of cash flows;

c.    They refer to expenditures as opposed to expenses;

d.    Interfund balances are not eliminated;

e.    In-kind support is recorded for services which do not meet standards for recognition;

f.     In-kind expense is not a natural expense classification;

g.    They fail to present temporarily restricted support, amounts released from restrictions and changes in net assets for each net asset class; and

h.    They fail to identify program and supporting services.

2.   The financial statements fail to disclose the nature of temporarily restricted net assets. (FASB ASC 958-210-50)

 

Rule 501 – Acts Discreditable

The auditor failed to meet the continuing professional education requirements of Government Auditing Standards. (GAGAS 3.76)

 

Agreement:

In consideration of the ECA forgoing further investigation of Mr. Keller’s conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Keller 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 Pennsylvania Institute of CPAs bylaws Article XIV.

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

d.   To his admonishment by the AICPA and the Pennsylvania Institute 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 43.5 hours of continuing professional education (CPE) courses (Alternatives to GAAP: Using Special Purpose Frameworks; Not-for-Profit Accounting & Reporting: From Start to Finish; Fundaments of Governmental Accounting and Reporting; Case Studies in Not-for-Profit Accounting and Auditing; Real-World Business Ethics for CPAs in A&A) within twelve 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 audits subject to Government Auditing Standards and/or OMB Circular A-133/Uniform Guidance performed by him for one year from the date the reviewer has been approved by the ECA. In addition, he must undergo a pre-issuance review on two audits not subject to Government Auditing Standards and/or OMB Circular A-133/Uniform Guidance performed by him that year. He must submit the name of the chosen reviewer 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 highest level of engagements (audits, reviews and compilations with note disclosures) on which he expects to issue reports in the upcoming 12 months from which the two audits not subject to Government Auditing Standards and/or OMB Circular A-133/Uniform Guidance 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 to be rendered, his role and anticipated hours on each engagement, type of organization, and whether it is 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 the number and composition 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 subject to Government Auditing Standards and/or OMB Circular A-133.  If his practice changes, and he is no longer involved with audits subject to Government Auditing Standards and/or OMB Circular A-133, 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 the 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, 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.

i.    To be prohibited from serving as a member of any ethics or peer review committee of the AICPA or the Pennsylvania Institute 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 Pennsylvania Institute 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. 

j.    To be prohibited from teaching continuing professional education courses approved by the AICPA or the state societies in the areas of accounting, auditing and audits subject to Government Auditing Standards and/or OMB Circular A-133/Uniform Guidance 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 Pennsylvania Institute 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. 

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 h. 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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