As a result of a decision by a hearing panel of the Joint Trial Board, Mr. Fardy was admonished by the AICPA, effective September 4, 2013. Mr. Fardy was also directed to complete 28 hours of specified continuing professional education courses within six months of the hearing panel’s decision and to be prohibited from performing peer reviews in any capacity until all of the continuing education courses are completed.
Mr. Fardy (the “auditor”) was found guilty of violating the following rules of the AICPA’s Code of Professional Conduct:
Rule 201 - General Standards B. Due Professional Care
The notes to the financial statements were contradictory when they disclosed that all contributions by employers and employees are immediately vested, but another note disclosed the existence of a forfeited non-vested balance that would be used to reduce future employer contributions.
Rule 202 – Compliance with Standards
1. The auditor failed to ensure that the following items related to the impact of the common collective trusts reported at contract value were properly reflected in the financial statements and notes. (AICPA Employee Benefit Plans Audit and Accounting Guide (“AAG-EBP”) effective March 1, 2007, par. 2.32, 3.34, 3.35):
a. The Statement of Changes in Net Assets Available for Benefits did not reflect adjustments to contract value and therefore, net assets available for benefits were not appropriately presented to agree to the Statement of Net Assets Available for Benefits;
b. The disclosure of investments representing 5% or more of Plan net assets improperly disclosed common collective trusts at fair market value rather than contract value;
c. The supplementary Schedule of Assets Held for Investment at End of Year inappropriately reports all investments at fair value rather than reporting appropriate Common Collective Trusts at contract value; and
d. The notes to the financial statements failed to disclose an accounting policy including the methods and significant assumptions used to determine the reported value of common collective trusts at contract value.
2. The auditor failed to modify his report when the disclosure representing investments that were 5% or more of the Plan’s net assets was not comparative though the auditor opined on comparative Statements of Net Assets Available for Benefits. (SAS 58, as amended by SAS 64, SAS 79, SAS 85, and SAS 93, AU §508.14; ARB 43 Ch. 2A)
3. The auditor’s opinion incorrectly identified the entity certifying the Plan’s investments as Automatic Data Processing, Inc. rather than JP Morgan Chase Bank, N.A. (AAG-EBP effective March 1, 2007 par. 13.26)
4. The notes to the financial statements did not disclose a reconciliation between the net assets reported in the financial statements and the assets reported in the Form 5500 with respect to fully benefit responsive investment contracts that do not qualify for contract-value reporting in the Form 5500 but are reported in the financial statements at contract value. (AAG-EBP par. A.51c and 3.35q)
5. The net change in fair value of each significant type of investment was not disclosed on the face of the Statement of Changes in Net Assets Available for Benefits or disclosed in the notes to the financial statements. (AAG-EBP par. 3.32)
6. The auditor’s opinion failed to include the verbiage “and do not” with respect to issuing an opinion on the financial statements taken as a whole. (SAS 58 as amended by SAS 64, SAS 79, and SAS 93, AU §508.04)
7. The auditor failed to ensure that financial statement disclosures addressing information certified by the trustee included all information that was certified as complete and accurate. (AAG-EBP par. 5.02)