As a result of an investigation of alleged violations of the Code of Professional Conduct of the AICPA, Mr. Barbeite, with the firm of Lopez & Figueras, LLC, entered into a settlement agreement under the Joint Ethics Enforcement Program effective October 26, 2017.
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. Barbeite’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. Barbeite’s responses to such allegations. The ECA charged Mr. Barbeite with violations of the AICPA Code of Professional Conduct as follows:
Rule 203 – Accounting Principles
The financial statements did not disclose the following:
1. For assets and liabilities measured at fair value on a recurring basis, the disclosures required by FASB ASC 820-10-50;
2. Subsequent events disclosures required by FASB ASC 850-10-50.
Rule 501 – Acts Discreditable
As the partner responsible for his firm’s peer review compliance, Mr. Barbeite failed to ensure it complied with the requirements of the AICPA to undergo a peer review.
Rule 501 – Interpretation 501-5 - Failure to follow requirements of governmental bodies, commissions, or other regulatory agencies
The financial statements did not present a comparative statement of net assets as required by DOL regulations (29 CFR 2520.103-1(b)(2)(i)).
In consideration of the ECA forgoing further investigation of Mr. Barbeite’s conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Barbeite agreed as follows:
a. To waive his rights to a hearing under AICPA bylaws section 7.4.
b. To neither admit nor deny the above specified charges.
c. To his suspension from membership in the AICPA for a period of two years from the effective date of this agreement. During the period of suspension, he is prohibited from representing himself as a member of the AICPA and from using any AICPA credentials or certificates.
d. To comply immediately with professional standards applicable to the professional services he performs and to submit evidence of such compliance.
e. To complete 32 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) within six (6) months of the effective date of this agreement and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).
f. To comply with directive d. above, he agrees to hire an outside party, acceptable to the to perform a pre-issuance review of the reports, financial statements, and working papers on all 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 for approval no later than 30 days of the date he signs this letter.
The first report is due 120 days after the reviewer has been approved by the with subsequent reports due every 90 days thereafter. If none of the engagements selected for pre-issuance review were performed during a reporting period, he agrees to inform the ECA of such. 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, changes in his role or if he has not performed any 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, no longer act in a supervisory capacity on such engagements or he has not performed such engagements during the above specified period, 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 undergo the required pre-issuance reviews.
g. To further comply with directive d. above, submit six months after completion of the pre-issuance reviews a list of the highest level (audits, reviews, and compilations with note disclosures) of engagements that he performed in the six month period following the date he completed the pre-issuance reviews. 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, changes in his role or if he has not performed any audits, reviews, and compilations with note disclosures until a suitable work product is selected for review. If his practice changes and he is no longer involved with , no longer acts in a supervisory capacity on such engagements or he has not performed such engagements during the above specified period, 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 reports, 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 AICPA joint trial board for a hearing or take such other action as it deems appropriate.
h. Provide a copy of his firm’s most recently accepted peer review documents within 30 days of the effective date of this agreement.
i. To be prohibited from performing peer reviews in any capacity until the above 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 substantially complies with professional standards. This prohibition will be communicated to his peer review oversight agency.
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 prohibition will be communicated to those responsible for appointments to such committees. In addition, if he applies to join any other committee of the AICPA he must inform those responsible for such appointments of the results of this ethics investigation. This prohibition shall remain in effect until the ECA determines that the work product he submitted to comply with directive g., above substantially complies with professional standards.
k. To be prohibited from teaching continuing professional education courses approved by the AICPA or the state CPA societies in the area of employee benefit plans until he has completed all directives in this letter. This prohibition will be communicated to those responsible for engaging CPE instructors at the AICPA. This prohibition shall remain in effect until the ECA determines that the work product he submitted to comply with directive g., above substantially complies with professional standards.
l. 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.
m. That the ECA shall publish his name, the name of his firm and the terms of this settlement agreement.
n. 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.