Chapman, Arthur K. of Watkinsville GA

July 1, 2019

As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and the Georgia Society of CPAs, Mr. Chapman, with the firm of A. Kent Chapman, CPA PC entered into a settlement agreement under the Joint Ethics Enforcement Program, effective May 3, 2019.

Information came to the attention of the Ethics Charging Authority (ECA — comprising the AICPA Professional Ethics Executive Committee and the Georgia Society of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Chapman’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, 2015.

The ECA reviewed the findings of the U.S. Department of Labor’s Employee Benefits Security Administration and Mr. Chapman’s responses to such findings as well as other relevant documents Mr. Chapman 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 the Georgia Society of CPAs’ codes of professional conduct as follows:

1.300.001 General Standards .01a. Professional Competence Rule  

The auditor undertook an engagement he could not complete in accordance with professional standards.

1.310.001 Compliance with Standards Rule

  1. The auditor failed to obtain sufficient appropriate evidence in substantially all audit areas.  (AU-C 500)

  2. The auditor’s report did not conform to clarified standards.  (AU-C 700)

1.320.001 Accounting Principles Rule  

The financial statements failed to make the following disclosures:

  1. Information required for fully benefit-responsive investment contracts (FASB ASC 962-325-50)

  2. Fair value disclosures as required by FASB ASC 820

  3. Federal income tax status of the plan (FASB ASC 962-205-50)

  4. Identification of investments that represent 5 percent or more of the net assets available for benefits as of the end of the year (FASB ASC 962-325-50)

  5. Related party transactions (FASB ASC 850)

  6. The amount and disposition of forfeited nonvested accounts (FASB ASC 962-205-50)

  7. Subsequent events (FASB ASC 855)

  8. Accounting policies related to risks and uncertainties and notes receivable from participants (FASB ASC 235)

1.400.050 Governmental Bodies, Commissions, or Other Regulatory Agencies Rule  

  1. The supplemental schedule of assets (held at end of year) failed to identify parties-in-interest to the plan.  (29 CFR 2520.103-10)

  2. The supplemental schedule of assets (held at end of year) failed to present a general description of terms and interest rates of the participant loans.  (29 CFR 2520.103-10)

  3. As the partner responsible for his firm’s peer review compliance, Mr. Chapman failed to ensure it complied with state board requirements and those of the AICPA to undergo a peer review.

AGREEMENT

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

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

  2. To waive his rights to a hearing under AICPA bylaws section 7.4 and the Georgia Society of CPAs Article XI, Section 4.b.

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

  4. To his suspension from membership in the AICPA and the Georgia Society of CPAs 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 the Georgia Society of CPAs and from using any AICPA credentials or certificates.

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

  6. 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 agreed:

  7. i. To complete the following continuing professional education (CPE) courses prior to commencing such work and provide evidence of such completion (for example, attendance sheets, course completion certificates, and so on):

    Annual Accounting and Auditing Workshop — 17.0 hours
    Auditor Workpapers:  Documenting Field Work — 2.5 hours
    Audit Workpapers: Reviewing Field Work Documentation — 1.5 hours
    Risk Assessment Deep Dive: How to Avoid Common Missteps — 3.5 hours
    Total — 24.5 hours

    ii. 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 all 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 of the date he commences such work.

    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.

    iii. 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 six-month period following the date he completed 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 and 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 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.

    iv. To enroll in the AICPA Peer Review program within 14 days of returning to such work and to provide evidence of his enrollment

  8. To provide an attestation immediately, then every six months for a period of three years that he is no longer performing employee benefit plan audits. If he returns to performing such work, he agreed:

     

  9. i. To complete the following continuing professional education (CPE) courses prior to commencing such work and provide evidence of such completion (for example, attendance sheets, course completion certificates, and so on):

    Documenting Your EBP Audit: What You Need to Know — 10.5 hour
    Auditing Employee Benefit Plans — 15.5 hours
    Total — 26.0 hours

    ii. 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 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 of the date he commences such work.

    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 employee benefit plan audits during the period he is subject to the pre-issuance reviews. 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 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.

    iii. 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 six-month period following the date he completed 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 and 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 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.

    iv. To enroll in the AICPA Peer Review program within 14 days of returning to such work and to provide evidence of his enrollment.

    v. To submit, within 30-days after he has returned to such work, evidence that his firm has submitted an application to join the Employee Benefit Plan Audit Quality Center. Upon membership in that Center, he agreed that his firm will comply with the directives of that Center.

  10. 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 directives f.iii and g.iii, above, if applicable, substantially comply with professional standards. This prohibition will be communicated to his firm’s peer review administering entity.

  11. To be prohibited from serving as a member of any ethics or peer review committee of the AICPA and the Georgia 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 and the Georgia 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 products he submitted to comply with directives f.iii and g.iii., above, if applicable substantially comply with professional standards.

  12. To be prohibited from teaching continuing professional education courses approved by the AICPA or the state CPA societies in accounting, auditing and employee benefit plans 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 Georgia Society of CPAs. This prohibition shall remain in effect until the ECA determines that the work products he submitted to comply with directive f.iii and g.iii, above substantially comply with professional standards.

  13. That the ECA shall provide a copy of this settlement agreement to the AICPA’s Peer Review Division staff, his firm’s peer review administering entity, and his firm’s peer reviewer.

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

  15. 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.