As a result of an investigation of alleged violations of the Codes of Professional Conduct of the AICPA and Colorado Society of CPAs, Ms. Swanhorst entered into a settlement agreement under the Joint Ethics Enforcement Program, effective April 30, 2013, except for item d. of the agreement, which is effective on March 17, 2010.
Information came to the attention of the Ethics Charging Authority (“ECA”) (comprised of the AICPA Professional Ethics Executive Committee and the Professional Ethics Committee of the Colorado Society of CPAs) alleging a potential disciplinary matter with respect to Ms. Swanhorst’s performance of professional services on the audit of the financial statements of a governmental entity as of and for the year ended December 31, 2001.
After an investigation, Ms. Swanhorst (the “auditor” or “successor auditor”) was charged with violating the rules of the AICPA and the Colorado Society of CPAs’ Codes of Professional Conduct as follows:
Rule 201 – General Standards B. Due Professional Care
1. The auditor failed to note that the threshold for determining Type A and Type B programs on the
revised 2001 Data Collection Form was incorrect; the revised threshold was $1,614,997; the original
threshold of $1,381,030 was set forth on the Data Collection Form. (OMB Circular A-133, §__.320
(b)(2)(viii) Report Submission)
Rule 202 – Compliance With Standards
1. The communications between the predecessor and successor auditor were not adequate, the prior
year’s audit working papers were not reviewed by the successor auditor nor were other appropriate
first year audit procedures performed. (SAS 84, as amended by SAS 93, AU Section 315.11-.12)
2. The calculations for determining Type A programs were incorrect as only expenditures in the first ten
months of 2001 were considered. (SAS 74, as amended by SAS 75, AU Section 801.10, OMB
Circular A-133, §__.520 Major Program Determination)
3. The auditor’s consideration and testing of the entity’s internal control over compliance was
inadequately documented. (SAS 74, as amended by SAS 75, AU Section 801.10, OMB Circular A-
133, §__.500 Scope of Audit, Government Auditing Standards, 1994 Revision, par. 4.35)
4. The auditor elected to deviate from the risk criteria pursuant to OMB Circular A-133, paragraph .520
(i). This election was permitted as 2001 qualified as a first-year audit. Under this election the auditor is
not required to perform a risk assessment for the Type A and Type B programs. However, the
auditor is required to audit all Type A programs as major programs. The auditor failed to audit the
following Type A programs as major programs: (SAS 22, AU Section 311, SAS 74, as amended by
SAS 75, AU Section 801.10, OMB Circular A-133, §__.520 (i) Major Program Determination)
CFDA Number Name
93.667 Title XX Social Services Block Grant
93.658 Title IV-E Foster Care
93.563 Title IV-D Child Support Enforcement
93.600 Head Start
Food Stamp Cluster
10.551 Food Assistance – Non-Cash
10.561 State Administrative Matching Grants
5. The auditor failed to note that there was no disclosure regarding the basis of accounting and the
significant accounting policies used in preparing the Schedule of Expenditures of Federal Awards
(SOP 98-3, paragraph 10.12).
In consideration of the ECA forgoing further investigation of Ms. Swanhorst’s conduct as described above, and in consideration of the ECA forgoing any further proceedings in this matter, Ms. Swanhorst agrees as follows:
a. To waive her rights to a hearing under Section 7.4 of the AICPA bylaws and Article III, Section 5 of
the Colorado Society of CPAs’ bylaws.
b. To neither admit nor deny the above-specified charges.
c. To comply immediately with professional standards applicable to the professional services she performs
and to submit evidence of such compliance.
d. To suspension from membership in the AICPA and the Colorado Society of CPAs for a period of two
years, to be effective March 17, 2010.
e. That the ECA shall publish her name, the charges and terms of this settlement agreement.
f. To complete the following continuing professional education (CPE) courses within one year of the
effective date of the agreement and provide evidence of such completion. Credit will be awarded for
CPE containing similar content taken within one year of the effective date of the agreement, to be
approved by the ECA:
Professional Ethics: The AICPA’s Comprehensive Course** 8.0 hours
Governmental Accounting and Auditing Update 13.5 hours
Applying A-133 to Nonprofit and Governmental Organizations 20.0 hours
The 2011 Revised Yellow Book for Financial Audits 8.0 hours
Annual Update for Accountants and Auditors 20.0 hours
Audit Workpapers: Documenting and Reviewing Field Work 8.0 hours
Total 77.5 hours
**When completing the registration for this course, Ms. Swanhorst agrees to indicate her state of
licensure and obtain a score of 90% or better.
g. To comply with directive c. above, she agrees to submit six months after the completion of the CPE
courses prescribed above, a list of the highest level (audit, review, and compilation with note
disclosures) of engagements that she performed in the period between the date of completion of those
courses and the end of the six-month period following completion of the courses. The following
information should be included regarding the engagements listed: total hours spent on each
engagement, her role and total hours on each engagement, level of professional services rendered, type
of report issued, type of organization, whether it was subject to Government Auditing Standards
and/or OMB Circular A-133, and whether it was an initial engagement. The ECA will select one of
these engagements for review. She will be informed of this selection and will be asked to submit
information to include a copy of her 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 her firm will not exempt her from this
Ms. Swanhorst agrees to inform the ECA of any changes in the composition of her practice or changes
in her role until a suitable work product is selected for review. If her practice changes and she is no
longer involved with performing audits, reviews and/or compilations or engagements subject to
Government Auditing Standards and/or OMB Circular A-133 or no longer acts in a supervisory
capacity on such engagements, she must inform the ECA of this change and the ECA may require that
she attest every six months for three years as to the nature of her practice. If, during the three-year
attestation period she returns to performing such engagements, she 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
she has substantially complied with professional standards and close this matter. Or, the ECA may
decide that an ethics investigation of the engagement she 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.
h. 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.