Gersten, Harvey G. of Forest Hills, NY

As a result of an investigation of alleged violations of the Code of Professional Conduct of the AICPA, Mr. Gersten with the firm of Harvey Gersten, CPA, entered into a settlement agreement under the Joint Ethics Enforcement Program effective May 19, 2016.

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. Gersten’s failure to ensure his firm obtained an appropriate peer review.

The ECA reviewed the allegations in the referral and information publicly available on the United States Department of Labor’s EFAST website and Mr. Gersten’s responses to such allegations.  The ECA charged Mr. Gersten with violations of the AICPA Code of Professional Conduct as follows:

Rule 203 – Accounting Principles

The financial statements failed to properly disclose information for investments measured at fair value that are required by FASB ASC 820, including the incorrect leveling of pooled separate accounts, the failure to disaggregate investments, and failure to make net asset value disclosures for investments measured at net asset value as a practical expedient.

Rule 501 – Acts Discreditable

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

Agreement:

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

  1. To waive his rights to a hearing under AICPA bylaws section 7.4.

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

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

  4. To his suspension from membership in the AICPA for a period of two years from the effective date of this agreement.

  5. To complete 18 hours of continuing professional education (CPE) courses (Auditing Employee Benefit Plans; Annual Update for Accountants and Auditors) within six months of the effective date of this agreement and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

  6. To comply with directive c. above, submit six months after completion of the CPE described in e. above 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 CPE courses and the end of the six-month period following completion of the CPE courses. 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 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.

  7. To schedule a peer review of his firm’s system of quality control for the year ended June 30, 2015. The review should be scheduled through his firm’s administering entity within 60 days of the effective date of this agreement. Mr. Gersten 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 (6) months after being scheduled.

  8. 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 substantially complies with professional standards. This restriction will be communicated to his peer review oversight agency.

  9. 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 he submitted to comply with directive f. above substantially complies with professional standards. 

  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 monitor his compliance with the terms of this settlement agreement and initiate an investigation where the ECA finds there has been noncompliance.

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