Seltzer, Stephen of Jericho, NY

As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA, Mr. Seltzer, with the firm of Stephen Seltzer, CPA, entered into a settlement agreement under the Joint Ethics Enforcement Program effective July 31, 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. Seltzer’s performance of professional services on the audit of the financial statements of an employee benefit plan as of and for the year ended December 31, 2011.

The ECA reviewed the findings of the U.S. Department of Labor’s Employee Benefits Security Administration and Mr. Seltzer’s responses to such findings as well as other relevant documents he submitted to support his response.  Based on this information, there appears to be prima facie evidence of violations of the rules of the AICPA’s Code of Professional Conduct as follows:

Rule 202 – Compliance with Standards

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

a. contributions receivable;

b. notes receivable from participants;

c. income tax status; and 

d. subsequent events.

2. 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 of the audit (SAS 103; AU 339):

a. planning, specifically risk assessment, internal controls and analytical procedures;

b. participant data; 

c. investments;

d. benefit payments;

e. parties-in-interest; and

f. commitments and contingencies.

Rule 203 – Accounting Principles

1. The financial statements failed to disclose the amount of plan expenses absorbed by the plan sponsor. (FASB ASC 962-205-50-1)

2. The original financial statements failed to disclose management’s evaluation of subsequent events.  (FASB ASC 855-10-50-2)

Rule 501 – Acts Discreditable 

As the partner responsible for his firm’s peer review, Mr. Seltzer failed to ensure his firm complied with AICPA bylaws to undergo a peer review.

Agreement:

In consideration of the ECA forgoing further investigation of Mr. Seltzer conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Seltzer agreed as follows: 

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

b. To waive his rights to a hearing under AICPA bylaws section 7.4.

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

d. 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. 

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

f. To provide an attestation immediately, then every 6 months for a period of 3 years that he is no longer performing audits, reviews or compilations.  If he returns to performing such work, he agrees: 

• To complete 39 hours of continuing professional education (CPE) courses (Annual Update for Accountants and Auditors; Annual Update for Preparation, Compilation and Review Engagements; Audit Workpapers: Reviewing Field Work Documentation; Applying the Risk Assessment Standards to Ensure a Quality Audit; Upcoming Peer Review: Is Your Firm Ready?) prior to commencing such work and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

• To comply with directive e. 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 three audit and/or review engagements (depending on his practice) 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 accepting an audit or review engagements. Also, no later than 30 days after the acceptance of such an engagement, you must submit a list to the ECA of the audit or review engagements on which you expect to issue reports in the upcoming 12 months from which the audits and/or reviews will be selected. 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, his role and anticipated hours on each engagement, anticipated date the report will be released and whether it is an initial engagement. 

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 the number and composition 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 or reviews.  If his practice changes and he is no longer involved with audits and/or reviews, 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 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 e. above, submit six months after completion of the CPE and/or pre-issuance reviews, a list of the audit, review, and compilation with note disclosures engagements that he performed in the period between the date of completion of the CPE and/or pre-issuance reviews and the end of the six-month period following completion of the CPE and/or 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, review, and compilation with note disclosures engagements 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 has not performed such engagements during the above specified period, he must inform the ECA of this 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.

g. To provide a separate attestation immediately, then every 6 months for a period of 3 years that he is no longer performing employee benefit plan audits.  If he returns to performing such work, he agrees: 

• To complete a 12-hour CPE course, (Auditing Employee Benefit Plans) in addition to that in f. above, prior to commencing such work and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

• To further comply with directive e. 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 employee benefit plan 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 accepting such an engagement. 

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 the number and composition 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 employee benefit plan audits.  If his practice changes and he is no longer involved with employee benefit plan 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 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 e. above, submit six months after completion of the pre-issuance reviews, a list of the employee benefit plan audits 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 employee benefit plan audits until a suitable work product is selected for review. If his practice changes and he is no longer involved with employee benefit plan 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 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 accepted an employee benefit plan audit engagement 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.

h. 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 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 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 products submitted to comply with directives f. and g., if applicable, above substantially comply with professional standards.  

i. To be prohibited from teaching CPE courses approved by the AICPA or the state societies in auditing and accounting 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 products submitted to comply with directives f. and g., if applicable, above substantially comply with professional standards.  

j. 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 products he submitted to comply with directives f. and g., if applicable, above substantially complies with professional standards.  This restriction will be communicated to his peer review oversight agency.

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.