Harrison, Sandra G. of Woodbury, CT

As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and the Connecticut Society of CPAs, Ms. Harrison, with the firm of Kelley & Fitzgerald, P.C., 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 Connecticut Society of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Ms. Harrison’s performance of professional services in connection with 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 financial statements and working papers for the year ended December 31, 2011 and certain other documents Ms. Harrison submitted to support her response. Based on this information, there appears to be prima facie evidence of violations of the rules of the AICPA and the Connecticut Society of CPAs’ codes of professional conduct as follows:

Rule 101 – Independence, 101-3 Nonattest Services

The respondent was not independent from the plan while performing the audit of the financial statements.

Rule 202 – Compliance with Standards

  1. The auditor failed to adequately plan the audit. (AU 311)

  2. The auditor failed to obtain a sufficient understanding of the plan’s internal control structure. (SAS 109; AU 314)

  3. The auditor initially failed to obtain sufficient appropriate audit evidence to support the opinion on the original financial statements in the following areas: (SAS 106; AU 326)

    1. Participant loans;

    2. Contributions;

    3. Benefit payments;

    4. Participant data & individual participant accounts; and

    5. Parties-in-interest/prohibited transactions.

  4. 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 and conclusions reached in the following areas: (SAS 103; AU 339)

    1. Income tax status;

    2. Commitments & contingencies; and

    3. Subsequent events

  5. The auditor failed to compare the information provided by the trustee to the information in the financial statements. (SAS 106; AU 326)

  6. The auditor’s report failed to refer to a note in the revised financial statements disclosing information certified by the trustee and the note disclosures regarding certified information failed to include investment income. (AICPA Audit and Accounting Guide-Employee Benefit Plans (AAG-EBP) 5.13)

Rule 203 – Accounting Principles

The following information in the notes to the financial statements is incorrect or omitted:

  1. Disclosure of uncertain tax positions, including open tax years, is omitted. (FASB ASC 740-10-50-15)

  2. Information required for investments measured at fair value on a recurring basis is incorrect as it presents investments as “mutual funds” instead of pooled separate accounts. It also classifies these investments incorrectly as a Level 1 when they should be a Level 2. Finally, the disclosure does not include a description of valuation methods. (FASB ASC 820-10-50)

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

Participant loans in the Schedule of Assets (Held at End of Year) do not include all information required by ERISA. (DOL 29 CFR 2520.103-10)

Agreement:

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

  1. To waive her rights to further investigation of this matter in accordance with the Joint Ethics Enforcement Program (JEEP) Manual of Procedures.

  2. To waive her rights to a hearing under AICPA bylaws section 7.4 and Connecticut Society of CPAs bylaws section 10.2.

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

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

  5. To her suspension from membership in the AICPA and Connecticut Society of CPAs for a period of two years from the effective date of this agreement.

  6. To complete 33.5 hours of continuing professional education (CPE) courses (Audit Workpapers: Documenting and Reviewing Fieldwork; Risk Assessment and Internal Control: Best Practices for Small Business Audits; Independence; Annual Update for Accountants and Auditors) within 12 months of the effective date of this agreement and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

  7. To hire an outside party, acceptable to the ECA to perform a pre-issuance review of the reports, financial statements, and working papers on three audit engagements performed by her during the six months following the date the reviewer has been approved by the ECA. She 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, she must submit a list to the ECA of the audit engagements on which she expects to issue reports in the upcoming six 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, your 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 three of these engagements for review.

    She agrees to permit the outside party to report quarterly to the ECA on her 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. She agrees to have this pre-issuance review performed at her 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.

    She agrees to inform the ECA of any changes in the composition of her practice or changes in her role as an engagement partner during the period she is subject to the pre-issuance reviews. If her practice changes and she is no longer involved with audit engagements or no longer acts in a supervisory capacity on such engagements, she must inform the ECA of this change and the ECA may require that she attest every six months for three years as to the nature of her practice. If, during the three-year attestation period she returns to performing such engagements she must inform the ECA and undergo the pre-issuance reviews.

  8. To further comply with directive 1. above, she agrees to submit six months after completion of the CPE and the pre-issuance reviews a list of the audits and reviews that she performed in the period between the date of completion of the CPE and the pre-issuance reviews and the end of the six-month period following completion of the CPE and pre-issuance reviews. The following information should be included regarding the engagements listed: number of hours spent on the 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. You will be informed of this selection and will be asked to submit information to include a copy of your 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 your firm would not exempt you from this requirement.

    She agrees to inform the ECA of any changes in the composition of her practice or changes in her role until a suitable work product is selected for review. If her practice changes and she is no longer involved with audit engagements or no longer acts in a supervisory capacity on such engagements, she must inform the ECA of this change and the ECA may require that she attest every six months for three years as to the nature of her practice. If, during the three-year attestation period she returns to performing such engagements she 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 she has substantially complied with professional standards and close this matter. Or, the ECA may decide that an ethics investigation of the engagement she 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.

  9. To provide an attestation immediately, then every six (6) months for a period of three (3) years that she is no longer performing employee benefit plan audits. If she returns to performing such work, she agrees:

    • To complete 22 hours of continuing professional education (CPE) courses (Auditing Defined Contribution Plans; Auditing Employee Benefit Plans; SOC 1(SM) Reports: How to Effectively Use the EBPAQC Tool) prior to returning to such work, 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 engagements performed by her for one year from the date the reviewer has been approved by the ECA. She 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.

      She agrees to permit the outside party to report quarterly to the ECA on her 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. She agrees to have this pre-issuance review performed at her 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.

      She agrees to inform the ECA of any changes in the composition of her practice or changes in her role as an engagement partner during the period she is subject to the pre-issuance reviews. If her practice changes and she is no longer involved with audits of employee benefit plans or no longer acts in a supervisory capacity on such engagements, she must inform the ECA of this change and the ECA may require that she attest every six months for three years as to the nature of her practice. If, during the three-year attestation period she returns to performing such engagements she must inform the ECA and undergo the pre-issuance reviews.

    • To submit six months after completion of the pre-issuance reviews in ii above, a list of the audits of employee benefit plans that she 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, her 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. She will be informed of this selection and will be asked to submit information to include a copy of her 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 her firm would not exempt her from this requirement.

      She agrees to inform the ECA of any changes in the composition of her practice or changes in her role until a suitable work product is selected for review. If her practice changes and she is no longer involved with audits of employee benefit plans or no longer acts in a supervisory capacity on such engagements, she must inform the ECA of this change and the ECA may require that she attest every six months for three years as to the nature of her practice. If, during the three-year attestation period she returns to performing such engagements she 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 she has substantially complied with professional standards and close this matter. Or, the ECA may decide that an ethics investigation of the engagement she 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 returning to such work, evidence that the firm Kelley & Fitzgerald, PC has submitted an application to join the Employee Benefit Plan Audit Quality Center. Upon membership in that Center, she agrees that her firm will comply with the directives of that Center.

  10. That the ECA shall provide a copy of this settlement agreement to the AICPA’s Peer Review Division staff, her peer review administering entities and her firm’s peer reviewer.

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

  12. 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 she submitted to comply with directives h. and i. above substantially complies with professional standards. This restriction will be communicated to your peer review oversight agency.

  13. To be prohibited from serving as a member of any ethics or peer review committee of the AICPA or the Connecticut Society of CPAs until she has completed all directives in this letter. This restriction will be communicated to those responsible for appointments to such committees. In addition, if she applies to join any committee of the AICPA or the Connecticut Society of CPAs she 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 she submitted to comply with directives h. and i. above substantially complies with professional standards.

  14. 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 she 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 state societies. This requirement shall remain in effect until the ECA determines that the work product you submitted to comply with directives h. and i. above substantially complies with professional standards.

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