Ross Sr., Norman H. of Atlanta, GA

April 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. Ross, with the firm of Norman Ross, CPA entered into a settlement agreement under the Joint Ethics Enforcement Program, effective February 13, 2019. 

Information came to the attention of the Ethics Charging Authority (ECA, comprising the AICPA Professional Ethics Executive Committee and Georgia Society of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Ross’s performance of professional services on the audit of the 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 Benefit Security Administration and Mr. Ross’ responses to such findings as well as other relevant documents Mr. Ross submitted to support his response, 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 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.

1.300.001 General Standards .01b. Due Professional Care Rule

The revised statement of net assets available for benefits as of December 31, 2015 does not agree to the statement of changes in net assets available for benefits or to the Form 5500.

1.310.001 Compliance with Standards Rule

1.    The auditor failed to dual date or re-date the auditor’s opinion on the revised financial statements. (AU-C 560)

2.    The original auditors’ report is not presented in accordance with the Clarity Standards and failed to include language regarding the supplemental schedule. (AU-C 700)

3.    The revised auditor’s report failed to opine on all periods presented in the financial statements. (AU-C 700)

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

5.    The auditor failed to document changes made to the audit file after the documentation completion date in accordance with AU-C 230.

1.320.001 Accounting Principles Rule

The revised financial statements failed to disclose:

a.    the plan provisions for vesting, allocation of administrative fees, and disposition of forfeitures; and (FASB ASC 962-205-50-1)

b.    the basis of accounting and accounting policies for payment of benefits and administrative fees. (FASB ASC 235-10-50)

1.400.050 Governmental Bodies, Commissions, or Other Regulatory Agencies

1.    The original Form 5500 filing failed to include the plan’s financial statements and related disclosures. (29 CFR 2520.103-1(b)(2))

2.    The original supplemental schedule of assets (held at end of year) was not in the format prescribed by ERISA. (29 CFR 2520.103-10)

3.    The revised financial statements did not include the supplemental schedule of assets (held at end of year). (29 CFR 2520.103-10)

Agreement

In consideration of the ECA forgoing further investigation of Mr. Ross’ conduct as described above, and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Ross 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 Georgia Society of CPAs bylaws Article XI, Section 4.b.

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

d.    To his admonishment by the AICPA and the Georgia Society 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.  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 employee 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 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 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 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 the areas of 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 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 firm, the charges, and the terms of this settlement agreement.

o.    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.