DuBrock, Gregory D., of Albuquerque, NM

As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and the New Mexico Society of CPAs, Mr. DuBrock, with the firm of Gregory D. DuBrock, CPA, entered into a settlement agreement under the Joint Ethics Enforcement Program effective August 8, 2016.

Information came to the attention of the Ethics Charging Authority (“ECA”) (comprised of the AICPA Professional Ethics Executive Committee and the New Mexico Society of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. DuBrock’s performance of professional services on the audit of the financial statements of 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. DuBrock’s responses and other relevant documents he submitted to support his response.  The ECA charged Mr. DuBrock with violations of the rules of the AICPA’s and New Mexico Society of CPAs codes of professional conduct as follows:

Rule 202 – Compliance with Standards

  1. The auditor failed to obtain sufficient competent evidential matter to support the opinion on the financial statements in the areas of planning, contributions, participant data, and benefit payments. (SAS 106)

  2. The auditor failed to prepare audit documentation that would enable an experienced auditor, having no previous connection to the audit, to understand the work performed in the areas of commitments and contingencies and parties-in-interest. (SAS 103)

Rule 203 – Accounting Principles

  1. The original financial statements did not include fair value measurement disclosures required by FASB ASC 820 for assets and liabilities measured at fair value on a recurring basis.

  2. The original and revised financial statements failed to disclose the following:

    1. Related party (party-in-interest) transactions. (FASB ASC 962-205-50)

    2. The use of estimates in the preparation of the financial statements. (SOP 94-6)

    3. The amounts and disposition of forfeited nonvested accounts. (FASB ASC 962-205-50)

    4. Subsequent events disclosures required by ASC 855.

Rule 501 – Acts Discreditable

The auditor mischaracterized his practice composition to his firm’s peer reviewer by not disclosing that he performed ERISA audits.

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

The supplemental Schedule of Assets Held at End of Year was not formatted in conformity with DOL 29 CFR 2520.103-10.

Agreement:

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

  1. To waive his rights to a hearing under AICPA bylaws section 7.4 and New Mexico Society of CPAs Article XIV.

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

  3. To his suspension from membership in the AICPA and the New Mexico Society of CPAs for a period of two years from the effective date of this agreement.

  4. To comply immediately with professional standards applicable to the professional services he performs and to submit evidence of such compliance.

  5. To complete the following 27 hours of continuing professional education (CPE) courses (Applying the Risk Assessment to Smaller Business Audits; Get Ready for Peer Review-Upcoming Peer Review: Is Your Firm Ready?; Annual Update for Accountants and Auditors) within six months of the date he signs this agreement and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

  6. To provide an attestation immediately, then every six months for a period of three years that he is no longer performing employee benefit plan audit engagements.  If he returns to performing such work, he agrees:

    • To complete the following 16 hours of CPE (Auditing Defined Contribution Plans; Auditing Employee Benefit Plans) prior to commencing audits of employee benefit plans and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

    • 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 audit 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 he returns to performing employee benefit plan audits.

      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 and composition 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, changes in his role as an engagement partner or if has not performed any employee benefit plans 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, no longer acts in a supervisory capacity on such engagements, or if he has not performed any employee benefit plan audits, 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 comply with directive d. above, submit six months after completion of the pre-issuance reviews a list of the highest level (audits, reviews, and compilations with note disclosures) of 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, changes in his role or if he has not performed any audits, reviews or compilations with note disclosures 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, no longer acts in a supervisory capacity on such engagements, or has not performed any 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.

    • To submit within 30-days after he has commenced performing audits of employee benefit plans 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.

  7. To be prohibited from serving as a member of any ethics or peer review committee of the AICPA or the New Mexico 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 New Mexico 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 f. above, if applicable, substantially complies with professional standards.  

  8. To be prohibited from teaching continuing professional education courses approved by the AICPA or the state societies in the area of audit 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 New Mexico Society of CPAs.  This requirement shall remain in effect until the ECA determines that the work product submitted to comply with directive f. above, if applicable, substantially complies with professional standards. 

  9. 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 f. above, if applicable, substantially complies with professional standards.  This restriction will be communicated to his peer review oversight agency.

  10. 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.

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

  12. 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.