Causey, Donald W. of Birmingham, AL

As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and the Alabama Society of CPAs, Mr. Causey, with the firm of Donald W. Causey & Associates, P.C., entered into a settlement agreement under the Joint Ethics Enforcement Program, effective October 23, 2015.

 

Information came to the attention of the Ethics Charging Authority (“ECA”) (comprised of the AICPA Professional Ethics Executive Committee and the Alabama Society of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Causey’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, and working papers for the engagement, as well as Mr. Causey’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 by Mr. Causey of the rules of the AICPA and the Alabama Society of CPAs’ Codes of Professional Conduct as follows:

 

Rule 201 – General Standards – A. Professional Competence

The auditor undertook an engagement that he could not competently complete in accordance with professional standards.

 

Rule 202 – Compliance with Standards

1.   The auditor did not obtain sufficient appropriate audit evidence to support the opinion on the financial statements in substantially all areas of the audit (SAS 106).

2.   The auditor failed to adequately supervise and review the work of his staff on the audit engagement (SAS 108, SAS 114; AU §311.28-.32).

 

Rule 203 – Accounting Principles

1.   The auditor failed to ensure participant loans were disclosed on the statement of net assets available for benefits, the notes, or the supplemental schedule of assets held at end of year (FASB ASC 962-310-35-2, AAG-EBP 3.42).

2.   The original financial statements did not disclose the following:

      a.   For assets and liabilities measured at fair value on a recurring basis, the fair value disclosures required by FASB ASC 820; and

      b.   Subsequent events disclosures required by FASB ASC 855-10-50.

 

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

1.   As the partner responsible for his firm’s peer review compliance, Mr. Causey failed to ensure it complied with state board and AICPA requirements to obtain an appropriate peer review by failing to have an audit of an employee benefit plan reviewed.

2.   The supplemental schedule of assets held at end of year did not identify parties-in-interest as required by DOL 29 CFR 2520.103-10.

3.   The supplemental schedule of assets held at end of year improperly excluded participant loans. (AAG-EBP Exhibit A-1).

 

Agreement:

In consideration of the ECA forgoing further investigation of Mr. Causey’s conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Causey agreed as follows:

 

a.   To waive his rights to further investigation of this matter in accordance with the Joint Ethics Enforcement Program Manual of Procedures.

b.   To waive his rights to a hearing under AICPA bylaws section 7.4. and the Alabama Society of CPAs bylaws Article IX section 9.7.1.

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

d.   To his suspension of membership in the AICPA and the Alabama Society of CPAs 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 complete the following continuing professional education courses within 18 months of the date he signs this agreement and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

 

      Auditing Update: A Review of Recent Activities                       13 hours

      Audit Workpapers: Documenting Field Work                          3.5 hours

      Audit Workpapers: Reviewing Field Work Documentation         4 hours

      Fair Value Accounting                                                             9.5 hours

      Real-World Business Ethics for CPAs in A&A                           7 hours

      Upcoming Peer Review: Is Your Firm Ready?                           11 hours

      Risk Assessment and Internal Control: Best Practices

            for Small Business Audits                                                     15 hours

                                                                        Total                      63 hours

 

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 five engagements performed by him during the year after 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. Also, no later than 30 days after the effective date of this agreement, he must submit a list to ECA of the highest level of engagements (audits, reviews, compilations with note disclosures) on which he expects to issue reports in the upcoming 12 months. 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, type of organization, his role and anticipated hours on each engagement anticipated date the report will be released and whether it is an initial engagement. The ECA will select 5 engagements for pre-issuance review.

 

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 are 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, reviews, or 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 and undergo required the pre-issuance reviews.

h.   To comply with directive e. above, submit six months after the completion of the pre-issuance reviews and CPE above, whichever is later, a list of the highest level (audits, reviews, compilations with note disclosures) of engagements that he performed in the period between the date of completion of those pre-issuance reviews or CPE and the end of the six-month period following completion of the pre-issuance reviews or CPE. 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, reviews, or 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.

i.    To provide an 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 to the following:

 

      a.   To complete the following 26 hours of employee benefit plan specific CPE courses prior to returning to performing such work and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

 

            Employee Benefit Plans: Audit and Accounting Essentials        12 hours

            Service Organization Control Reports: What Companies                 

                  and Customers Need to Know                                           6 hours

            Advanced Employee Benefit Plan Topics                                  8 hours

                                                                                      Total           26 hours

 

      b.   To further comply with directive e. above, 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.  He must submit the names of the chosen reviewers to the ECA for approval no later than 30 days after he commences performing such engagements.

 

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 required pre-issuance reviews.

 

      c.   To further comply with directive e. above, submit, after completion of the pre-issuance reviews a list of the highest level (audits, reviews, compilations with note disclosures) of engagements that he performed in the period between completion of the pre-issuance reviews and the end of the six-month period following the 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 his 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, reviews, or compilations with note disclosures or with employee benefit plan audits 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.

 

      d.   To submit within 30 days after he has agreed to audit an employee benefit plan, 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.

j.    To be prohibited from serving as a member of any ethics or peer review committee of the AICPA or the Alabama Society 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 committee of the AICPA or the Alabama Society 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. or i.c. above substantially complies with professional standards. 

k.   To be prohibited from teaching continuing professional education courses approved by the AICPA or the state societies in accounting, auditing & 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 Alabama Society of CPAs.  This requirement shall remain in effect until the ECA determines that the work product submitted to comply with directive h. or i.c. above substantially complies with professional standards. 

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 h. or i.c. above substantially complies with professional standards.  This restriction will be communicated to his peer review oversight agency.

m.  Submit written evidence that he has provided this settlement agreement to the partner at your firm responsible for coordinating his firm’s peer review and the firm’s managing partner within 30 days of accepting this agreement.   

n.   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.

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.

p.   That the ECA shall publish his name, the name of his current firm, the charges, and the terms of this settlement agreement.