Harden, Wendy L. of Minneapolis, MN

June 3, 2019

As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and Minnesota Society of CPAs, Ms. Harden, with the firm of Schechter Dokken Kanter, CPAs, entered into a settlement agreement under the Joint Ethics Enforcement Program, effective April 3, 2019. 

Information came to the attention of the Ethics Charging Authority (ECA — comprising the AICPA Professional Ethics Executive Committee and the Minnesota Society of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Ms. Harden’s performance of professional services on the audit of the financial statements of a government entity as of and for the fiscal year ended September 30, 2013.  

The ECA has reviewed the auditor’s report, financial statements, and certain workpapers on the audit and Ms. Harden’s responses to such findings as well as other relevant documents Ms.  Harden submitted to support her response. Based on this information, there appears to be prima facie evidence of violations of the rules of the AICPA and Minnesota Society of CPAs’ codes of professional conduct as follows: 

Rule 202 – Compliance with Standards

The auditor did not sufficiently document procedures performed over the amount of the capital asset impairment recorded. (AU-C 230, Accounting and Auditing Guide for State and Local Governments [AAG-SLV 7.77])

Rule 203 – Accounting Principles

1. Current expenditures are not categorized by function on the Statement of Revenues, Expenditures and Changes in Fund Balance, Governmental Funds. (GASB Cod. Sec. 2200.160, 1800.117)

2. The amounts reported as intradepartmental due to and due from in the Balance Sheet for governmental funds are misstated and inconsistent with amounts reported in the notes to the financial statements. (GASB Cod. Sec. 1800.102-107)

3. The financial statements failed to disclose the types of transactions included in program revenues in the statement of activities. (GASB Cod. Sec. 2300.106a)

4. The financial statements failed to adequately disclose transactions with related parties. (GASB Cod. Sec 2200.102-105)

AGREEMENT

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

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

2. To waive her rights to a hearing under AICPA bylaws section 7.4. and the Minnesota Society of CPAs bylaws section.

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

4. To her admonishment by the AICPA and the Minnesota Society of CPAs.

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

6. To complete the following 26 hours of continuing professional education (CPE) courses within six months of the effective date of this agreement and provide evidence of such completion (for example, attendance sheets, course completion certificates, and so on).

Governmental Accounting and Auditing Update — 8 hours
Government Accounting and Reporting — 14 hours
Audit Workpapers: Documenting Field Work — 4 hours
Total — 26 hours

7. To comply with directive 5. above, she 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 two audits subject to Government Auditing Standards and/or Single Audit performed by her during the one-year period following the date the reviewer has been approved by the ECA.  She must submit the names of the chosen reviewers to the ECA for approval no later than 30 days of the date she signs this letter. Also, no later than 30 days after the effective date of this agreement, she must submit a list to the ECA of the audits subject to Government Auditing Standards and/or Single Audit on which she expects to issue reports in the upcoming 12 months from which the audits subject to pre-issuance review will be selected. 

She agreed to permit the outside party to report quarterly to the ECA on her 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, she agreed to inform the ECA of such. She agreed to have this pre-issuance review performed at her 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.

She agreed to inform the ECA of any changes in the composition of her practice, changes in her role or if she has not performed any audits subject to Government Auditing Standards and/or Single Audit during the period she is subject to the pre-issuance reviews. If her practice changes and she is no longer involved with audits subject to Government Auditing Standards and/or Single Audit, no longer acts in a supervisory capacity on such engagements or she has not performed such engagements during the above specified period, she must inform the ECA of this change and the ECA may require that she attest every six months for three years as to the nature of her practice. If, during the three-year attestation period, she returns to performing such engagements, she must inform the ECA of this change and undergo the required pre-issuance reviews.

8. To further comply with directive 5. above, submit, six months after completion of the CPE courses and pre-issuance reviews, a list of the highest level (audits, reviews, and compilations with note disclosures) of engagements that she performed in the six month period following the date she completed the CPE courses and pre-issuance reviews. 

The ECA will select one of these engagements for review. She will be informed of this selection and will be asked to submit information to include a copy of her 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 her firm would not exempt her from this requirement.

She agreed to inform the ECA of any changes in the composition of her practice, changes in her role or if she has not performed any audits, reviews, and compilations with note disclosures, until a suitable work product is selected for review. If her practice changes and she is no longer involved with audits, reviews, and compilations with note disclosures, no longer acts in a supervisory capacity on such engagements or she has not performed such engagements during the above specified period, she must inform the ECA of this change and the ECA may require that she attest every six months for three years as to the nature of her practice. If, during the three-year attestation period, she returns to performing such engagements, she 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 she has substantially complied with professional standards and close this matter. Or, the ECA may decide that an ethics investigation of the engagement she 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.

9. 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 she submitted to comply with directive 8. above, substantially complies with professional standards. This prohibition will be communicated to her peer review oversight agency.  

10. To be prohibited from serving as a member of any ethics or peer review committee of the AICPA and the Minnesota Society of CPAs until she has completed all directives in this letter. This prohibition will be communicated to those responsible for appointments to such committees. In addition, if she applies to join any other committee of the AICPA and the Minnesota Society of CPAs, she 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 she submitted to comply with directive 8. above, substantially complies with professional standards.  

11. To be prohibited from teaching continuing professional education courses approved by the AICPA or the state CPA societies in areas of government accounting, Government Auditing Standards and Single Audit until she has completed all directives in this letter. This prohibition will be communicated to those responsible for engaging CPE instructors at the AICPA and the Minnesota Society of CPAs. This prohibition shall remain in effect until the ECA determines that the work product she submitted to comply with directive 8. above, substantially complies with professional standards.  

12. Submit written evidence from the partner at her firm responsible for coordinating her firm’s peer review and the firm’s managing partner that she has provided this settlement agreement to them within 30 days of accepting this agreement.

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

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

15. That the ECA shall monitor her compliance with the terms of this settlement agreement and initiate an investigation where the ECA finds there has been noncompliance.