As a result of an investigation of the alleged violations of the codes of professional conduct of the AICPA and the Society of Louisiana CPAs, Mr. Ford, with the firm of Mark Ford, CPA, LLC, entered into a settlement agreement under the Joint Ethics Enforcement Program, effective January 4, 2016.
Information came to the attention of the Ethics Charging Authority (“ECA”) (comprised of the AICPA Professional Ethics Executive Committee and the Society of Louisiana CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Ford’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. Ford’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 of the rules of the AICPA’s and Society of Louisiana’s codes of professional conduct as follows:
Rule 202 – Compliance with Standards
1. The auditor failed to obtain sufficient appropriate audit evidence to support the opinion on the Plan’s financial statements in the following areas: planning, internal control and plan tax status. (SAS 106)
2. The auditor’s report inappropriately contained language for both full scope and limited scope audits. (SAS 58; AAG-EBP 13.26)
3. The financial statement disclosures of information certified by the trustee incorrectly included non-investment information. (AAG-EBP 5.02)
4. The plan’s fully-benefit responsive investment contract was incorrectly presented on the original Statement of Net Assets Available for Benefits at contract value rather than fair value with adjustments to contract value. (FSP AAG INV-1 and SOP 94-4-1 ¶6; AAG-EBP 3.17)
Rule 203 – Accounting Principles
1. The financial statements failed to disclose:
2. The methods and significant assumptions used to determine the fair value of investments (FASB ASC 820);
3. Identification of investments that represent 5 percent or more of total net assets available for benefits (FASB ASC 962-325-45-7);
4. The accounting policy for and the amount and disposition of forfeited nonvested account (FASB ASC 962-205-50);
5. Related party (party-in-interest) transactions (FASB ASC 850j); and
6. Subsequent events (FASB ASC 855-10-50-2).
Rule 501, Interpretation 5 – Failure to follow the requirements of governmental bodies, commissions, or other regulatory agencies
1. A Schedule of Assets Held for Investment Purposes was not attached to the original financial statements. (29 CFR 2520.103.10)
2. The auditor misrepresented his practice composition to his firm’s peer reviewer during his 2011 peer review by not disclosing that he performed ERISA audits and as a result, failed to obtain the appropriate peer review.
In consideration of the ECA forgoing further investigation of Mr. Ford’s conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Ford 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 AICPA bylaws section 7.4 and Society of Louisiana CPAs’ bylaws Article VI – Section 1.
c. To neither admit nor deny the above specified charges.
d. To his suspension from membership in the AICPA and Society of Louisiana 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 18.5 hours of continuing professional education (CPE) courses (Audit Workpapers: Documenting and Reviewing Fieldwork; Accounting and Auditing Update for Small Businesses) within twelve months of the date he signs this agreement and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).
g. 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 complete 20 hours of continuing professional education (CPE) courses (Auditing Employee Benefit Plans; Auditing Defined Contribution Plans) prior to performing and audit of an employee benefit plan 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 plans 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 returning to performing an employee benefit plan audit engagement.
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.
· To submit six months after the completion of the pre-issuance reviews a list of the highest level (audit, review, compilation with note disclosures) of engagements that he performed during 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 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 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.
· 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.
h. 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, if applicable, substantially complies with professional standards. This restriction will be communicated to his peer review oversight agency.
i. To be prohibited from serving as a member of any ethics or peer review committee of the AICPA or the Society of Louisiana CPAs until he has completed all directives in this agreement. 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 Society of Louisiana 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 g. above, if applicable, substantially complies with professional standards.
j. To be prohibited from teaching continuing professional education courses approved by the AICPA or the state CPA societies in areas 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 Society of Louisiana CPAs. This requirement shall remain in effect until the ECA determines that the work product submitted to comply with directive g. above, if applicable, substantially complies with professional standards.
k. 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.
l. That the ECA shall publish his name, the name of his current firm, the charges, and the terms of this settlement agreement.
m. 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.