Englard, Murry of Hewlett, NY

As a result of an investigation of alleged violations of the Code of Professional Conduct of the AICPA, Mr. Englard, with the firm of Englard, CPA, PC, entered into a settlement agreement under the Joint Ethics Enforcement Program, effective October 8, 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. Englard’s performance of professional services in connection with the audit of the financial statements for an employee benefit plan as of and for the fiscal year ended December 31, 2011.

 

The ECA reviewed the financial statements and working papers for the year ended December 31, 2011 and certain other documents Mr. Englard submitted to support his response. Based on this information, there appears to be prima facie evidence of violations of the rules of the AICPA’s Code of Professional Conduct as follows:

 

Rule 202 – Compliance with Standards

1.   The auditor failed to sufficiently plan the audit as the risk assessment did not include an assessment for investments or contracts with insurance companies and similar contracts. In addition, the auditor failed to identify all parties-in-interest. (SAS 106; AU 326)

2.   The auditor failed to properly document audit work performed in the following areas: (SAS 103; AU 339)

           a) Participant data

           b) Benefit payments

3.   The auditor failed to obtain a proper representation letter. (SAS 85; AU 333)

 

Rule 203 – Accounting Principles

The notes to the original financial statements omitted the following:

a.   Disclosures required by FASB ASC 820 for assets measured at fair value on a recurring basis.

b.   A reconciliation of Level 3 assets. (FASB ASC 820-10-50)

c.   Investments by type. (FASB ASC 820-10-50)

d.   Disclosures for benefit-responsive contracts. (FASB 962-325-50)

e.   All investments that represent 5% or more of net assets available. (FASB ASC 962-325-45)

 

Rule 501 – Acts Discreditable

As the partner responsible for his firm’s peer review compliance, Mr. Englard failed to ensure it complied with AICPA requirements to undergo a peer review.

 

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

The original and revised Schedule of Assets (Held at End of Year) was not in the prescribed format in that the fixed income contract is incorrectly presented at contract value, and investment descriptions are not accurate.  In addition, the Schedule of Assets (Acquired and Disposed of Within Year) is included with the financial statements but it was not required. (DOL 29 CFR 2520.103-10)

 

Agreement:

 

In consideration of the ECA forgoing further investigation of Mr. Englard’s conduct as described above, and in consideration of the ECA forgoing any further proceedings in this matter, Mr. Englard 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 the 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 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 (CPE) course within three months of the date he signs this agreement and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

                 Get Ready for Peer Review –Upcoming Peer Review: Is Your Firm Ready?    12 hours
g.   To provide an attestation immediately, then every six months for a period of three years that he is
      no longer performing audits.  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.).

 

             Audit Workpapers:

                 Reviewing Field Work Documentation                      4 hours

             Audit Workpapers:

                 Documenting Field Work                                        3.5 hours

             Auditing Update:

                 A Review of Recent Activities                                13 hours

             Applying the Risk Assessment to Smaller

                 Business Audits                                                        8 hours

                                                            Total                        28.5 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 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 being engaged to perform an audit.


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 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 audits 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 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 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 in addition to that in gi above prior to returning to such work 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 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 being engaged to perform an employee benefit plan audit.

 

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 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 employee benefit plan audits 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 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.

 

i.    To schedule a peer review for the year ended December 31, 2014. The review should be scheduled through his firm’s administering entity within 60 days of the effective date of this agreement (consult with peer review as to a reasonable time).  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 six months after the peer review has been scheduled.

j.    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 directive giii and hiii above, if applicable, substantially comply with professional standards.

k.   To be prohibited from teaching continuing professional education courses approved by the AICPA or the state societies 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 directive giii and hiii above, if applicable, substantially comply with professional standards. 

l.    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 directive giii and hiii above, if applicable, substantially comply 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.