As a result of an investigation of alleged violations of the AICPA Code of Professional Conduct, Mr. Guarnieri, with the firm of Scheer & Associates CPAs, LLP, entered into a settlement agreement under the Joint Ethics Enforcement Program (JEEP), effective September 11, 2019.
Information came to the attention of the ethics charging authority (ECA ― AICPA Professional Ethics Executive Committee) alleging a potential disciplinary matter with respect to Mr. Guarnieri’s role as the engagement partner on the audit 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. Guarnieri’s response to such findings, as well as other relevant documents Mr. Guarnieri submitted to support his response. Based on this information, there appears to be prima facie evidence of violations of the AICPA Code of Professional Conduct as follows:
1.310.001 Compliance with Standards Rule
1. The auditor initially failed to adequately document procedures performed in the following areas (AU-C §230):
a. Internal controls
b. Participant data and accounts
c. Benefit payments
d. Notes receivable from participants
e. Plan tax status
f. Parties-in-interest/prohibited transactions
g. Commitments and contingencies
h. Administrative expenses
i. Subsequent events
2. The auditor failed to document its required communications with those charged with governance. (AU-C §320)
3. The auditor failed to document the timing of when workpapers were completed. (AU-C §230.08)
4. The information referenced in the auditor’s report as to being certified is not complete as investment transactions were not disclosed. (AU-C §705.20)
1.320.001 Accounting Principles Rule
The fair value measurements note in the financial statements failed to adequately disaggregate investments by classification and risk (FASB ASC 820-10-50).
In consideration of the ECA forgoing further investigation of Mr. Guarnieri’s conduct as described above, and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Guarnieri agreed as follows:
a. To waive his rights to further investigation of this matter in accordance with the 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 or certificates.
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 18 months of the effective date of this agreement and provide evidence of such completion (e.g., attendance sheets, course completion certificates).
- Auditing Employee Benefit Plans ― 15.5 hours
- Advanced Auditing for Employee Benefit Plans ― 17.5 hours
- Documenting Your EBP Audit: What You Need to Know ― 10.5 hours
- Upcoming Peer Review: Is Your Firm Ready? ― 4.5 hours
- Risk Assessment Deep Dive: How to Avoid Common Missteps ― 3.5 hours
Total ― 51.5 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 all audits, including employee benefit plan audits, performed by him for one year from the date the reviewer has been approved by the ECA or until completion of the CPE specified in directive (f) above, if later. He must submit the names of the chosen reviewers to the ECA for approval no later than 30 days after the effective date of this agreement.
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 these pre-issuance reviews performed at his expense. The ECA has the right to extend the period of time and number 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, including 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 audits, including 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.
h. 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, 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 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 firm’s peer review administering entity.
j. To be prohibited from serving as a member of any ethics or peer review committee of the AICPA until he has completed all of the above directives. 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, 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 employee benefit plans until he has completed all of the above directives. This prohibition will be communicated to those responsible for engaging CPE instructors at the AICPA. 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 firm’s peer review administering entity, and his firm’s peer reviewer.
m. That the ECA shall publish his name, the name of his former 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.