As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and Minnesota Society of CPAs, Mr. Neuman, with the firm of Leo C. Neuman, CPA entered into a settlement agreement under the Joint Ethics Enforcement Program, effective December 21, 2017.
Information came to the attention of the Ethics Charging Authority (“ECA”) (comprised of the AICPA Professional Ethics Executive Committee and Minnesota Society of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Neuman’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. Neuman’s responses to such allegations. Based on this information, the ECA charged Mr. Neuman with violations of the codes of professional conduct of the AICPA and Minnesota Society of CPAs as follows:
Rule 201 – General Standards A. - Professional Competence
The auditor undertook an engagement that he could not complete in accordance with professional standards.
Rule 203 – Accounting Principles
1. The statements of net assets available for benefits incorrectly classified participant loans as an investment. Furthermore, participant loans should have been titled notes receivable from participants. (FASB ASC 962)
2. The accounting policy disclosure for “Investment Valuation and Income Recognition” does not define fair value and does not disclose the income recognition policy for interest, dividends, and gain (loss). (FASB ASC 962-325-50-1, 235-10-50)
3. The financial statements failed to make the disclosures required by FASB ASC 820 for assets and liabilities measured at fair value on a recurring basis.
4. The financial statements failed to disclose the date through which subsequent events were evaluated. (FASB ASC 855-10-50)
5. The financial statements failed to disclose transactions with related parties and parties-in-interest. (FASB ASC 850-10-50)
Rule 501, Interpretation 501-5 – Failure to follow requirements of governmental bodies, commissions, or other regulatory agencies
As the partner responsible for his firm’s peer review compliance, Mr. Neuman failed to ensure the firm complied with the requirements of the AICPA, the Minnesota Board of Accountancy and the Minnesota Society of CPAs to undergo a peer review.
In consideration of the ECA forgoing further investigation of Mr. Neuman’s conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Neuman agreed as follows:
a. To waive his rights to a hearing under AICPA bylaws section 7.4 and the Minnesota Society of CPAs Article XIV.
b. To neither admit nor deny the above specified charges.
c. To his expulsion from membership in the AICPA and the Minnesota Society of CPAs.
d. That the ECA shall publish his name, the name of his firm, the charges, and the terms of this settlement agreement.