Kubicek, Anthony J. of Southeastern, PA

April 1, 2019

As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and the Pennsylvania Institute of CPAs, Mr. Kubicek with the firm of Anthony J. Kubicek, Certified Public Accountants entered into a settlement agreement under the Joint Ethics Enforcement Program, effective January 28, 2019.

Information came to the attention of the Ethics Charging Authority (ECA, comprising AICPA Professional Ethics Executive Committee and Pennsylvania Institute of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Kubicek’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 Department of Labor’s Employee Benefits Security Administration and Mr. Kubicek’s responses to such findings as well as other relevant documents Mr. Kubicek submitted to support his responses including work papers, financial statements, relevant emails and other correspondence. Based on this information, there appears to be prima facie evidence of violations of the rules of the AICPA and the Pennsylvania Institute 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.

1.300.001 General Standards .01b. Due Professional Care Rule

The auditor’s report does not refer to the correct footnote for the limited-scope certification.

1.310.001 Compliance with Standards Rule

1.    The auditor failed to obtain sufficient and appropriate audit evidence to express an opinion on the financial statements for substantially all audit areas. (AU-C 500)

2.    The auditor initially failed to obtain sufficient and appropriate audit evidence to express an opinion on the financial statements regarding notes receivable from participants. (AU-C 500)

3.    The auditor failed to add an emphasis-of-matter paragraph to the auditor’s opinion regarding the plan termination. (AU-C 706)

4.    The auditor failed to evaluate the plan’s ability to continue as a going concern and to evaluate the applicability of the liquidation basis of accounting. (AU-C 570)

1.320.001 Accounting Principles Rule 

1.    The financial statements failed to make the required fair value and accounting policy disclosures for fully benefit-responsive investment contracts and did not present an adjustment from fair value to contract value on the statement of net assets available for benefits. (ASC 820 and 962)

2.    The financial statements failed to disclose:

  • the net change in each significant type of investment; (FASB ASC 962-205-45-7)
  • the policy for and the disposition of forfeited non-vested accounts; and (FASB ASC 962-205-50)
  • air value in accordance with FASB ASC 820.

1.400.050 Governmental Bodies, Commissions, or Other Regulatory Agencies

The supplemental schedule of assets (held at end of year) was not in the format prescribed by ERISA, failed to identify parties-in-interest, and failed to disclose the term of participant loans.  (29 CFR 2520-103.10)

Agreement

In consideration of the ECA forgoing further investigation of Mr. Kubicek’s conduct as described above, and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Kubicek 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 Pennsylvania Institute of CPAs bylaws ARTICLE XIV, Section 2.(b).

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

d.    To his admonishment by the AICPA and the Pennsylvania Institute of CPAs.

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 six months of the effective date of this agreement and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

Internal Control and Risk Assessment: Key Factors in a Successful Audit — 8.0 hours

Audit Workpapers: Documenting Field Work — 2.5 hours

GAAS: A comprehensive Review for Auditors — 11.5 hours

Audit Workpapers: Reviewing Field Work Documentation — 1.5 hours

Total — 23.5 hours

g.    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 two audit engagements performed by him during the one-year period following 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 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 audit engagements on which he expects to issue reports in the upcoming 12 months from which the audit engagements subject to pre-issuance review will be selected.

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. If none of the engagements selected for pre-issuance review were performed during a reporting period, he agrees to inform the ECA of such. He agrees 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 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 audit engagements during the period he is subject to the pre-issuance reviews. If his practice changes and he is no longer involved with audit engagements, 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 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 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 provide an attestation immediately, then every six months for a period of three years that he is no longer performing employee benefit plan engagements. If he returns to performing such work, he agrees:

·         To complete the following continuing professional education (CPE) courses prior to commencing such work and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.)

Documenting Your EBP Audit: What You Need to Know — 9.0 hours

Audits of 401(k) plans — 12.0 hours

Employee Benefit Plan Audits: Common Misconceptions and How to Address Them — 2.0 hours

Total — 23.0 hours

·         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 employment benefit plan engagements 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 accepts such an engagement.

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. If none of the engagements selected for pre-issuance review were performed during a reporting period, he agrees to inform the ECA of such. He agrees 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 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 employee benefit plan engagements 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 engagements, 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.

·         To further comply with directive e., above, submit, six months after completion of the pre-issuance reviews, a list of the employee benefit plan engagements that he performed in the six month period following the date he completed the pre-issuance reviews. The following information should be included regarding the engagements listed.

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 employee benefit plan engagements, until a suitable work product is selected for review. If his practice changes and he is no longer involved with employee benefit plan engagements, 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.

·         To submit, within 30-days after he has accepted an employee benefit plan engagement, evidence that his firm has submitted an application to join the Employee Benefit Plan Audit Quality Center. Upon membership in that Center, he agrees that his firm will comply with the directives of that Center.

j.      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 products he submitted to comply with directives h. and i., above, substantially comply with professional standards. This prohibition will be communicated to his firm’s peer review administering entity.

k.     To be prohibited from serving as a member of any ethics or peer review committee of the AICPA and the Pennsylvania Institute 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 Pennsylvania Institute 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 h. and i., above, substantially comply with professional standards. 

l.      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 Pennsylvania Institute of CPAs. This prohibition shall remain in effect until the ECA determines that the work products he submitted to comply with directives h. and i., above substantially comply with professional standards.

m.   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.

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

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.