As a result of an investigation of alleged violations of the AICPA Code of Professional Conduct, Mr. Rossello with the firm of JR Financial Services, Inc., entered into a settlement agreement under the Joint Ethics Enforcement Program effective February 23, 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. Rossello’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. Rossello’s responses to such allegations. The ECA charged Mr. Rossello with violations of the AICPA Code of Professional Conduct as follows:
Rule 202 - Compliance with Standards
1. The note in the financial statements disclosing the information certified by the trustee failed to include investment income. Audit and Accounting Guide – Employee Benefit Plans (AAG-EBP 5.13)
2. The audit report was not dated as required by professional standards and was not updated for certification obtained for 2011. (AU 530.01)
Rule 203 – Accounting Principles
The financial statements did not disclose the following:
1. Disclosures related to benefit responsive contracts when Note B of the financial statements states that all investments are benefit responsive (FASB 962-325-50-3);
2. For assets and liabilities measured at fair value on a recurring basis, the disclosures required by ASC 820-10-50;
3. Related party (party-in-interest) transactions (FASB ASC 850-10-50);
4. The amounts and disposition of forfeited non-vested accounts (FASB ASC 962-205-50);
5. Subsequent events disclosures required by FASB ASC 855-10-50.
Rule 501 – Acts Discreditable
As the partner responsible for the firm’s peer review compliance, Mr. Rossello 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
The supplemental schedule of assets held at end of year did not identify parties-in-interest as required by DOL 29 CFR 2520.103-10.
In consideration of the ECA forgoing further investigation of Mr. Rossello’s conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Rossello 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 comply immediately with professional standards applicable to the professional services he performs and to submit evidence of such compliance.
d. To his suspension from the American Institute of Certified Public Accountants (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.
e. To complete 28 hours of continuing professional education (CPE) courses (Upcoming Peer Review: Is Your Firm Ready?; Accounting and Auditing Update for Small Businesses; Engagement Essentials: Preparation, Compilation and Review of Financial Statements) within twelve months of the effective date if this agreement and provide evidence of completion (e.g., attendance sheets, course completion certificates, etc.)
f. To provide an attestation immediately, then every six months for a period of three years that he is no longer performing audit engagements. If he returns to performing such work, he agrees:
- To complete a 12 hour continuing professional education (CPE) course (Auditing Employee Benefit Plans) prior to commencing an employee benefit plan audit engagement and provide evidence of completion (e.g., attendance sheets, course completion certificates, etc.)
- To comply with directive c. above, he agrees 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 audits 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 ECA for approval no later than 30 days after resuming audit engagements.
He agrees to permit the outside party to report quarterly to the ECA on his 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. 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 during the period he is subject to the pre-issuance reviews or if he has not performed any audits. If his practice changes and he is no longer involved with audits, no longer acts in a supervisory capacity on such engagements, or 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 and undergo the pre-issuance reviews.
- To further comply with directive c. above, submit six months after completion of the pre-issuance reviews a list of the highest level engagements (audits, reviews or compilations with note disclosures) that he 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, 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 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 audit, reviews or compilations until a suitable work product is selected for review. If his practice changes and he is no longer involved with audits, reviews or compilations, no longer acts in a supervisory capacity on such engagements, or 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 trial board for a hearing or take such other action as it deems appropriate.
- To submit within 30-days after he has resumed audits of employee benefit plans 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.
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 f. above, if applicable, substantially complies with professional standards. This restriction will be communicated to his peer review oversight agency.
h. 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 submitted to comply with directive f. above substantially complies with professional standards.
i. To be prohibited from teaching continuing professional education courses approved by the AICPA or the state CPA societies in accounting, auditing and employee benefit plans until he 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. This requirement shall remain in effect until the ECA determines that the work product he submitted to comply with directives f. above substantially comply with professional standards.
j. 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.
k. That the ECA shall publish his name, the name of his firm, the charges, and the terms of this settlement agreement.
l. 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.