Bingaman, Richard E. - Phoenix, AZ 


As a result of an investigation of alleged violations of the Code of Professional Conduct of the AICPA, Mr. Bingaman, with the firm of Richard E. Bingaman, CPA, PC, entered into a settlement agreement under the Joint Ethics Enforcement Program, effective June 26, 2015.        

 

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

 

The ECA reviewed the auditor’s report, financial statements for the year ended December 31, 2011 and certain other documents he submitted.  Based on this information, there appears to be prima facie evidence of violations by Mr. Bingaman of the rules of the AICPA’s Code of Professional Conduct as follows:

 

Rule 201 – General Standards, A. Professional Competence

The auditor lacked the competence to complete the engagement in accordance with professional standards.

 

Rule 202 – Compliance with Standards

1.      The auditor failed to sufficiently plan the audit in the following areas:

               a.   The original risk assessment noted did not include an assessment for contracts with
       insurance companies and similar contracts.  (SAS 106; AU 326)

               b.   The auditor did not perform preliminary analytics. (SAS 56; AU 329)

2.      The auditor failed to obtain sufficient appropriate audit evidence to support the opinion in the original financial statements in the following areas: (SAS 106; AU 326)

               a.    Participant data

               b.    Benefit payments

               c.    Contributions

 

Rule 203 – Accounting Principles

1.      The Statement of Net Assets Available for Benefits does not include an adjustment to contract value for a benefit responsive contract. (FASB ASC 962-325-35)

2.      The Statement of Net Assets Available for Benefits classifies participant loans as “investments” and not as “notes receivable from participants”. (FASB ASC 962-325-45)

3.      The original financial statements omitted several disclosures.  In addition, some disclosures were incomplete or incorrect.  This included the following:

a.      Disclosure of transactions with parties in interest and related parties. (FASB ASC

         850-10-50)

b.      Investments are not disaggregated into appropriate classes.  In addition, the Key Guaranteed Portfolio Fund is not separately identified.  (FASB ASC 820-10-50)

c.      The fair value disclosure incorrectly includes forfeitures, and presents forfeitures as a level 3 asset.  (FASB ASC 820-10-50)

d.      The fair value disclosure presents participant loans as a level 3 asset but does not include a reconciliation of activity for the years presented.  (FASB ASC 820-10-50)

e.      The disclosure of fully benefit- responsive contracts does not include average yield

         or crediting interest rate information. (FASB ASC 962-325-50)

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

 

1.      The financial statements omit a reconciliation of net assets between the financial statements

         and Form 5500. (ERISA; AAG-EBP Appx. A, A.51a)

2.     The original Schedule of Assets (Held at End of the Year) was not in the prescribed format.

         (DOL 29 CFR 2520.103-10)

3.     As the partner responsible for his firm’s peer review compliance, the respondent failed to

         ensure it complied with the requirements of his state board of accountancy and those of the

         AICPA. 

 

Agreement:

In consideration of the ECA forgoing further investigation of Mr. Bingaman’s conduct as described above, and in consideration of the ECA forgoing any further proceedings in this matter, Mr. Bingaman 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.

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

d.      To his suspension of membership in the AICPA for a period of two years from the effective date of this agreement.

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 audits or reviews.  If he returns to performing such work, he agrees:

               
                
i.   To complete the following continuing professional education (CPE) courses prior to

returning to such work and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

 

                             Accounting Update: A Review of Recent Activities       8 hours

                             Are you ready for your peer review?                             2 hours

                                                            Total                                             10 hours

 

               ii.   To hire an outside party, acceptable to the ECA to perform a pre-issuance review of

                     the reports, financial statements, and working papers on three audit and/or review

                     engagements performed by him during the 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 returning to performing audits or

                     reviews. 

 

                     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 or

                     changes in his role as an engagement partner during the period he is subject to the 
                     pre-
issuance reviews.  If his practice changes and he is no longer involved with 
                     audits and 
reviews or no longer acts in a supervisory capacity on such engagements,
                     he must
inform the ECA of this change 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.

 

             iii.    To submit six months after completion of the pre-issuance reviews above,  a list of the

                     audit and review 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 or

                     changes in his role until a suitable work product is selected for review.   If his practice

                     changes and he is no longer involved with audits and reviews or no longer acts in a

                     supervisory capacity on such engagements, he must inform the ECA of this change 
                     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 separate 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:

 

         i.    To complete the following continuing professional education (CPE) course prior to

               returning to such work, in addition to that in fi. above, and provide evidence of such

               completion (e.g., attendance sheets, course completion certificates, etc.).

              

               Auditing Employee Benefit Plans: Mastering the Fundamentals    12 hours

 

         ii.   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

               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 the effective date of this agreement.

 

               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 or changes in his role as an engagement partner during the period he is subject to the pre-issuance reviews.  If his practice changes and he is no longer involved with audits of employee benefit plans or no longer acts in a supervisory capacity on such engagements, he must inform the ECA of this change 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 submit six months after completion of the pre-issuance reviews above, a list of the

               audits of employee benefit plans 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 or

               Changes in his role until a suitable work product is selected for review.   If his practice

               changes and he is no longer involved with audits of employee benefit plans or no

               longer acts in a supervisory capacity on such engagements, he must inform the ECA of

               this change 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.

 

         iv.  To submit within 30-days after returning to such work, 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 peer review of his firm’s system of quality control through his firm’s

         administering entity within 60 days of returning to performing audits, reviews or

         compilations.  He must submit evidence of the scheduled review by submitting a copy of

         the review team approval letter issued by his firm’s administering entity. In addition, his

         firm’s peer review will be due to the ECA 6 months after the peer review has been

         scheduled.

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

         AICPA 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 committee of the AICPA, 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 directives

         fiii and giii above substantially comply with professional standards. 

j.       To be prohibited from teaching continuing professional education courses approved by the

         AICPA in accounting and auditing 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.  This requirement shall remain in

         effect until the ECA determines that the work product submitted to comply with directives

         fiii and giii above substantially comply with professional standards. 

k.      To be prohibited from performing peer reviews in any capacity until the directives in this

         letter have been completed.  This requirement shall remain in effect until the ECA

         determines that the work product submitted to comply with directives fiii. and giii. above

         substantially comply 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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