As a result of an investigation of alleged violations of the Code of Professional Conduct of the AICPA, Mr. Roorda (retired), formerly with the CPA firm of Roorda, Piquet & Bessee, Inc., entered into a settlement agreement under the Joint Ethics Enforcement Program, effective January 31, 2018.
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. Roorda’s performance of professional services on the audits of the financial statements of two employee benefit plans as of and for the years ended December 31, 2004, 2005, and 2006.
The ECA reviewed the findings of the U.S. Department of Labor’s Employee Benefits Security Administration and Mr. Roorda’s responses to such findings as well as other relevant documents Mr. Roorda submitted to support his responses. Based on this information, there appears to be prima facie evidence of violations of the rules of the AICPA Code of Professional Conduct as follows:
Rule 202 – Compliance with Standards
1. The auditor failed to obtain sufficient appropriate audit evidence to express an opinion on the 2006 financial statements in the area of investments. (SAS 106, Audit and Accounting Guide for Employee Benefit Plans (AAG-EBP) 7.16)
2. The auditor failed to document the nature and extent of procedures performed in the 2006 audit to properly evaluate the work of the valuation specialist. (SAS 103, SAS 73, AAG-EBP 7.60)
3. The auditor failed to obtain sufficient appropriate audit evidence to express an opinion on the 2006 financial statements related to the fair value of the common stock of the plan sponsor. (SAS 106)
Rule 501, Interpretation 501-5 – Failure to follow requirements of governmental bodies, commissions, or other regulatory agencies
The Schedule of Assets (Held at Year End) included in the 2006 financial statements failed to include cost information for each of the investments. (29 CFR 2520.103-11)
In consideration of the ECA forgoing further investigation of Mr. Roorda’s conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Roorda 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, if any.
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 employee benefit plan audit engagements. If he returns to performing such work, he agrees:
• To complete 17.5 hours of continuing professional education (CPE) courses (Fair Value Accounting; Auditing Defined Contribution Plans) 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 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 commencing an employee benefit plan audit.
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 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 of employee benefit plans. If his practice changes and he is no longer involved with audits of employee benefit plans, 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 the 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 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, or 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 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 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 CPA societies in the area of employee benefit plan audits 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 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 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.