As a result of an investigation of alleged violations of the Code of Professional Conduct of the AICPA, Mr. Alpern, with the firm of Jacobs & Alpern, LLC, entered into a settlement agreement under the Joint Ethics Enforcement Program, effective August 3, 2015.
Information came to the attention of the Ethics Charging Authority (“ECA”) (comprised of the AICPA Professional Ethics Executive Committee and the Illinois CPA Society Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Alpern’s failure to ensure his firm obtained an appropriate peer review.
The ECA reviewed the allegations in the referral, publicly available information from the United States Department of Labor’s EFAST website and Mr. Alpern’s responses to inquiries. The ECA charged Mr. Alpern with violations of the AICPA and the Illinois CPA Society codes of professional conduct as follows:
Rule 201 – General Standards, A. Professional Competence
The auditor lacked the competence to complete the audit in accordance with professional standards.
Rule 501, Interpretation 5 – Failure to follow requirements of governmental bodies, commissions, or other regulatory agencies
As the partner responsible for his firm’s peer review compliance, Mr. Alpern failed to ensure it complied with state board requirements and those of the AICPA and the Illinois CPA Society to undergo a peer review.
Rule 202 – Compliance with Standards
Although Mr. Alpern issued a limited scope audit opinion, he failed to perform audit procedures on information that was not certified as complete and accurate (AICPA Audit and Accounting Guide Employee Benefit Plans 5.12).
In consideration of the ECA forgoing further investigation of Mr. Alpern’s conduct as described above, and in consideration of the ECA forgoing any further proceedings in this matter, Mr. Alpern agreed as follows:
a. To waive his right to a hearing under AICPA bylaws section 7.4 and the Illinois CPA
Society’s bylaws Article VII, 7.2 and 7.3.
b. To neither admit nor deny the above specified charges.
c. To comply immediately with professional standards applicable to the professional services he performs and to submit evidence of such compliance.
d. To his suspension from membership in the AICPA and Illinois CPA Society for a period of two years from the effective date of this agreement.
e. To complete the following continuing professional education (CPE) courses within 12 months of the date he signs this agreement and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).
Annual Update for Accountants and Auditors 12 Hours
Auditing Employee Benefit Plans:
Mastering the Fundamentals 12 Hours
Get Ready for Peer Review –
Upcoming Peer Review: Is Your Firm Ready? 12 Hours
Risk Assessment Standards:
Applied to Audits of Smaller, Less Complex Entities 8 Hours
Audit Workpapers: Reviewing Field Work Documentation 4 Hours
Audit Workpapers: Documenting Field Work 3.5 Hours
Total 51.5 Hours
f. To comply with directive c. above, Mr. Alpern 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 employee benefit plan audits performed by him for one year from the date the reviewer has been approved by the ECA or until completion of the CPE specified in directive e. above, if later. 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.
g. To further comply with directive c. above, he must submit six months after the due date for completion of the pre-issuance reviews above, a list of the highest level of engagements (audits, reviews and compilation with disclosures) that he performed in the period between the date of completion of those pre-issuances 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 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, reviews and compilations with note disclosures 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.
h. To be prohibited from serving as a member of any ethics or peer review committee of the AICPA or the Illinois CPA Society 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 or the Illinois CPA Society, 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 g. above substantially complies with professional standards.
i. To be prohibited from teaching continuing professional education courses approved by the AICPA or the state CPA societies in auditing and accounting 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 and the Illinois CPA Society. This requirement shall remain in effect until the ECA determines that the work product submitted to comply with directive g. above substantially complies with professional standards.
j. To submit the peer review of his firm’s system of quality control currently in process by June 30, 2015.
k. To submit within 30-days after he has signed this agreement 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.
l. 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 g. above substantially complies with professional standards. This restriction will be communicated to his peer review oversight agency.
m. 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.
n. That the ECA shall publish his name, the name of his firm, the charges, and the terms of this settlement agreement.
o. 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.