As a result of an investigation of alleged violations of the Code of Professional Conduct of the AICPA, Mr. Sra, with the firm of K. SRA CPA P.C., entered into a settlement agreement under the Joint Ethics Enforcement Program, effective January 20, 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. Sra’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. Sra’s responses to such findings. The ECA charged Mr. Sra with violations of the AICPA Code of Professional Conduct as follows:
Rule 202 – Compliance with Standards
The financial statements presented a December 31, 2010 Statement in Changes in New Assets; however, the auditor’s report did not extend to the statement. (AU 508.08 & .65)
Rule 203 – Accounting Principles
1. The financial statements failed to make certain disclosures (or made certain disclosures improperly) required under FASB ASC 820 for assets measured at fair market value on a recurring basis.
2. Corrective Distributions paid in 2011 were not recorded as liabilities as of December 31, 2010. (Audit and Accounting Guide (AAG-EBP) 9.06)
Rule 501 – Acts Discreditable
As the partner responsible for his firm’s peer review compliance, Mr. Sra failed to ensure it complied with AICPA requirements to undergo a peer review.
In consideration of the ECA forgoing further investigation of Mr. Sra’s conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Sra agreed as follows:
a. To waive his right to a hearing under AICPA bylaws section 7.4.
b. To neither admit nor deny the above specified charges.
c. To comply immediately with professional standards applicable to the professional services he performs and to submit evidence of such compliance.
d. To his suspension from membership in the AICPA for a period of two years from the effective date of this agreement.
e. To provide an attestation immediately, then every 6 months for a period of 3 years that he is no longer performing audits. If he returns to performing such work, he agrees to complete the following:
· 34 hours of continuing professional education (CPE) courses (Auditing Employee Benefit Plans; Upcoming Peer Review: Is Your Firm Ready?; Accounting and Auditing Update for Small Businesses) prior to commencing an audit engagement and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.)
· To submit six months after completion of the CPE courses, a list of the highest level of engagements (audits, reviews and compilations with note disclosures) that he performed in the period between the date of completion of the CPE and the end of the six-month period following completion of the CPE. 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.
· If he resumes performing employee benefit plans, he agrees to submit, within 30-days after returning to such work, 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.
f. To be prohibited from serving as a member of any ethics or peer review committee of the AICPA or the state societies 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 other committee of the AICPA or the state societies, 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 e. above, if applicable, substantially complies with professional standards.
g. 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 e. above substantially complies with professional standards. This restriction will be communicated to your peer review oversight agency.
h. 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.
i. That the ECA shall publish his name, the name of his firm, the charges, and the terms of this settlement agreement.
j. 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.