Marabella, Thomas J. of Winchester, MA

Marabella, Thomas J. of Winchester, MA
As a result of an investigation of alleged violations of the Code of Professional Conduct of the Massachusetts Society of CPAs, Mr. Marabella, with the firm of Thomas J. Marabella, P.C., entered into a settlement agreement under the Joint Ethics Enforcement Program, effective April 19, 2018.

Information came to the attention of the Ethics Charging Authority (ECA) (comprised of the Massachusetts Society of CPAs’ Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Marabella’s performance of professional services on the audit of the financial statements of a construction contractor as of and for the year ended December 31, 2014.   

The ECA reviewed certain work papers and financial statements as well as relevant emails and other correspondence Mr. Marabella submitted. Based on this information, there appears to be prima facie evidence of violations of the rules of the Massachusetts Society of CPAs Code of Professional Conduct as follows: 

1.300.001 General Standards Rule .01b Due Professional Care

The subsequent event footnote is dated April 17, 2014 instead of April 17, 2015.

1.310.001 Compliance with Standards Rule

1.    The independent auditor’s report was not in accordance with the clarified standards.  (AU-C 700 and 725) 

2.    The auditor failed to prepare audit documentation that would enable an experienced auditor, having no previous connection to the audit, to understand the procedures performed for substantially all audit areas.  (AU-C 230)

1.320.001 Accounting Principles Rule

The financial statements failed to disclose the basis of accounting and the accounting policy for contract receivables, which is a material line item on the balance sheet.  (FASB ASC 235-10-50)

Agreement:

In consideration of the ECA forgoing further investigation of Mr. Marabella’s conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Marabella 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 the Massachusetts Society of CPAs bylaws Article VII, Section 2.

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

d.    To his suspension from membership in the Massachusetts Society of CPAs for a period of one year from the effective date of this agreement. During the period of suspension, he is prohibited from representing himself as a member of the Massachusetts Society of CPAs.

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 six months for a period of three years that he is no longer performing audits, reviews and compilations.  If he returns to performing such work, he agrees:

·      To complete the following 29 hours of continuing professional education (CPE) courses (Annual Accounting and Auditing Workshop; Applying the Risk Assessment Standards to Ensure a Quality Audit; Audit Workpapers; Documenting and Reviewing Fieldwork) 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 two engagements 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, review or compilation.  Also, no later than 30 days after accepting an audit, review or compilation, he must submit a list to the ECA of the audits, reviews, and compilations on which he expects to issue reports in the upcoming 12 months from which the audits, reviews and compilations subject to review will be selected. 

He agrees to permit the outside party to report to the ECA on his progress in complying with this agreement as stated herein to comply with professional standards. 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, reviews, or compilations.  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 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 highest level (audits, reviews, and compilations with note disclosures) of engagements 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 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, or 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 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 Joint Trial Board for a hearing or take such other action as it deems appropriate.

g.    To be prohibited from serving as a member of any ethics or peer review committee of the AICPA or the Massachusetts Society of CPAs 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 Massachusetts Society of CPAs 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.

h.    To be prohibited from teaching continuing professional education courses approved by the AICPA or the state societies in the areas of auditing and accounting 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 and the Massachusetts Society of CPAs. 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 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 substantially complies with professional standards. This restriction will be communicated to his peer review oversight agency.

j.      That the ECA shall publish his name, the name of his firm, the charges, and the terms of this settlement agreement.

k.     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.