As a result of an investigation of alleged violations of the AICPA Code of Professional Conduct, Mr. Gross with the firm of Richard J. Gross, CPA, PA, entered into a settlement agreement under the Joint Ethics Enforcement Program effective September 19, 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. Gross’ 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. Gross’ responses to such findings as well as other relevant documents Mr. Gross submitted to support his response. The ECA charged Mr. Gross with violations of the AICPA Code of Professional Conduct as follows:
Rule 201 – General Standards, B. - Due Professional Care
The Schedule of Assets Held for Investment Purposes was improperly included as a basic financial statement.
Rule 202 – Compliance with Standards
The auditor’s report failed to comply with clarified standards. (AU-C §700)
Rule 203 – Accounting Principles
The financial statements failed to disclose investments comprising 5% or more of the plan’s total net assets. (FASB ASC 960-325-45)
Rule 501 – Acts Discreditable
As the partner responsible for his firm’s peer review compliance, Mr. Gross failed to ensure it complied with 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
Parties-in-interest were not indicated on the Schedule of Assets Held for Investment Purposes as required by DOL 29 CFR 2520.103-10.
In consideration of the ECA forgoing further investigation of Mr. Gross’ conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Gross 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.
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 Business) 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, submit six (6) months after completion of the CPE courses a list of the highest level (audit, review, and compilation with note disclosures) of engagements that he performed in the six (6) month period following the date he completed the CPE courses.
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 audits, reviews, and compilations with note disclosures, 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 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 AICPA joint trial board for a hearing or take such other action as it deems appropriate.
g. Provide a copy of his firm’s most recently accepted peer review documents within 60 days of the effective date of this agreement.
h. 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 f. above substantially complies with professional standards. This prohibition 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 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 f. above 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 the areas of accounting, auditing and 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 f. above 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 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.