As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and New Jersey Society of CPAs, Mr. Barre, with the firm of Barre & Company, entered into a settlement agreement under the Joint Ethics Enforcement Program, effective April 15, 2019.
Information came to the attention of the Ethics Charging Authority (ECA — comprising the AICPA Professional Ethics Executive Committee and the New Jersey Society of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Barre’s performance of professional services on the audit of the financial statements of a not-for-profit organization as of and for the fiscal year ended June 30, 2015.
The ECA reviewed certain working papers and financial statements as well as relevant emails and other correspondence Mr. Barre submitted to support his responses. Based on this information, there appears to be prima facie evidence of violations of the rules of the AICPA and New Jersey Society of CPAs’ codes of professional conduct as follows:
1.310.001 Compliance with Standards Rule
- The auditor’s report fails to indicate the level of assurance expressed on the statement of functional expenses. (AU-C 700)
- The auditor failed to obtain evidence to support the audit opinion in the areas of net assets and related consolidating entries. (AU-C 500)
1.320.001 Accounting Principles Rule
- The financial statements do not adequately disclose the classification of programs and support services. (FASB ASC 958-720-45-2)
- The statement of cash flows uses incorrect labels for financing activities. (FASB ASC 230-10-45)
- The notes to the financial statements fail to disclose the 5-year maturities for long term debt. Also, one loan is incorrectly disclosed as though it was a capital lease. Finally, bond covenants are not presented in sufficient detail to determine compliance. (FASB ASC 958-210-50-2)
In consideration of the ECA forgoing further investigation of Mr. Barre’s conduct as described above, and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Barre 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 and the New Jersey Society of CPAs bylaws Article I, Section 8.
c. To neither admit nor deny the above specified charges.
d. To his admonishment by the AICPA and the New Jersey Society of CPAs from the effective date of this agreement.
e. To comply immediately with professional standards applicable to the professional services he performs and to submit evidence of such compliance.
f. To complete the following continuing professional education (CPE) courses within twelve months of the effective date of this agreement and provide evidence of such completion (for example, attendance sheets, course completion certificates, and so on).
Accounting and Reporting for Not-for-Profit Organizations — 14.5 hours
Case Studies in Not-for-Profit Accounting and Auditing — 8.0 hours
Real-World Business Ethics — 18.0 hours
Total — 40.5 hours
g. To comply with directive e. above, he agreed to hire an outside party, acceptable to the ECA, to perform a pre-issuance review of the reports, financial statements, and working papers on one audit subject to Government Auditing Standards and OMB Circular A-133/Uniform Guidance and on two other audits that were performed by him during the one-year period following 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 of the date he signs this letter. Also, no later than 30 days after the effective date of this agreement, he must submit a list to the ECA of the audits on which he expects to issue reports in the upcoming 12 months from which the audits subject to pre-issuance review will be selected.
He agreed 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. If none of the engagements selected for pre-issuance review were performed during a reporting period, he agreed to inform the ECA of such. He agreed 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 agreed 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 during the period he is subject to the pre-issuance reviews. If his practice changes and he is no longer involved with audits, no longer acts in a supervisory capacity on such engagements or he 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 undergo the required pre-issuance reviews.
h. To further comply with directive e. above, submit, six months after completion of the CPE courses and the pre-issuance reviews, a list of the highest level (audits, reviews, and compilations with note disclosures) of engagements that he performed in the six month period following the date he completed the CPE courses and 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 agreed 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 he 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 AICPA joint trial board for a hearing or take such other action as it deems appropriate.
i. To be prohibited from performing peer reviews in any capacity until the above 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 h. above, substantially complies with professional standards. This prohibition will be communicated to his peer review oversight agency.
j. To be prohibited from serving as a member of any ethics or peer review committee of the AICPA and the New Jersey Society of CPAs until he has completed all directives in this letter. This prohibition will be communicated to those responsible for appointments to such committees. In addition, if he applies to join any other committee of the AICPA, the New Jersey Society of CPAs and the New York State Society of CPAs, he must inform those responsible for such appointments of the results of this ethics investigation. This prohibition shall remain in effect until the ECA determines that the work product he submitted to comply with directive h. above, substantially complies with professional standards.
k. To be prohibited from teaching continuing professional education courses approved by the AICPA or the state CPA societies in Accounting & Auditing and Government Auditing Standards and OMB Circular A-133/Uniform Guidance until he has completed all directives in this letter. This prohibition will be communicated to those responsible for engaging CPE instructors at the AICPA and the New Jersey Society of CPAs. This prohibition shall remain in effect until the ECA determines that the work product he submitted to comply with directive h, above substantially complies with professional standards.
l. 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.
m. That the ECA shall publish his name, the name of his current firm, the charges, and the terms of this settlement agreement.
n. 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.