Holzberg, Larry R. of Larchmont, NY

As a result of an investigation of alleged violations of the Code of Professional Conduct of the AICPA, Mr. Holzberg, with the firm of Band, Rosenbaum & Martin, P.C. entered into a settlement agreement under the Joint Ethics Enforcement Program, effective November 4, 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. Holzberg’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, 2011.

The ECA reviewed the findings of the U.S. Department of Labor’s Employee Benefits Security Administration and Mr. Holzberg’s responses to such findings as well as other relevant documents Mr. Holzberg submitted to support his responses. Based on this information, there appears to be prima facie evidence of violations of the rules of the AICPA Code of Professional Conduct as follows:

Rule 201 - General Standards A. Professional Competence

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

Rule 202 - Compliance with Standards

1.       The auditor failed to obtain sufficient appropriate audit evidence to support the opinion on the financial statements in substantially all areas of the audit. (SAS 106; AU 326)

2.       The audit report failed to identify the country of origin for generally accepted auditing standards. (SAS 93; AU 508)

3.       Schedule H of Form 5500 incorrectly discloses that the opinion issued by the auditor was a disclaimer of opinion. (SAS 118; AU 550)

Rule 203 - Accounting Principles

1.       The following errors were identified in the financial statements:

a.     The statement of net assets available for benefits and the notes to the financial statements incorrectly classify notes receivable from participants as investments. In addition, notes receivable from participants is incorrectly titled participant loans. (FASB 962-325-35; FASB 962-310-45-2)

b.     Net appreciation/depreciation is incorrectly presented as one line item instead of being separately disclosed between participant directed and self-directed investments. (FASB ASC 962-205-45-7)

2.       The financial statements failed to make the following disclosures:

a.     valuation methods for plan investments (FASB ASC 962-325-50-1);

b.     disclosures required for assets measured at fair value on a recurring basis (FASB ASC 820-10-50);

c.     subsequent events (FASB ASC 855-10-50);

d.     amount of, and accounting policy for, forfeitures (FASB ASC 962-205-50-1);

e.     all significant related party transactions (FASB ASC 850-10-50); and

f.      the basis of determining participants’ contributions (FASB ASC 962-205-50-1).

Rule 501, Interpretation 501-5 - Failure to follow requirements of governmental bodies, commissions, or other regulatory agencies

1.       The schedule of assets (held at end of year) does not contain all information required by ERISA, parties-in-interest were not identified, and the auditors’ report on supplemental information contains an unacceptable qualification regarding the historical cost of investments. (29 CFR 2520.103-10; 29 CFR 2520.103-8)

2.       The statement of net assets available for benefits was not presented in a comparative format. (29 CFR 2520.103-1)

Agreement

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

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

d.     To his admonishment by the AICPA.

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

f.      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 two (2) audits 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 audits on which he expects to issue reports in the upcoming 12 months from which the audits will be selected. The following information should be included regarding the engagements listed:

  • anticipated number of total hours to be spent on the engagement;
  • level of professional services to be rendered;
  • his role and his anticipated hours on each engagement;
  • type of organization; and
  • whether it will be an initial engagement.

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 act 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.

g.     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 following information should be included regarding the engagements listed:

  • total hours spent on each engagement;
  • his role and hours on each engagement;
  • level of professional services rendered;
  • type of report issued;
  • type of organization; and
  • whether it was an initial engagement.

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.

h.        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:

i.  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.).

Auditing Defined Contribution Plans — 8 hours

Auditing Employee Benefit Plans — 12 hours

Total — 20 hours

ii. To further 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 after accepting such engagement.

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 report should provide the reviewer’s comments in detail for each engagement and should include a description of the nature of the entity reviewed, the entity’s year end and the date of the review. The first report is due 120 days after the reviewer has been approved by the ECA with subsequent reports due every 90 days thereafter. 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 agreed to inform the ECA of any changes in the composition of his practice, changes in his role during the period he is subject to the pre-issuance reviews or if he has not performed any audits of employee benefit plans. If his practice changes and he is no longer involved with audits of employee benefit plans, no longer acts in a supervisory capacity on such engagements, or has not performed such engagements during the above specified period, he must inform the ECA of this 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 and undergo the 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 audits of employee benefit plans that he performed in the period between the date of completion of those pre-issuance review and the end of the six-month period following completion of the pre-issuance reviews. The following information should be included regarding the engagements listed: number of hours spent on the engagement, his role and total hours on each engagement, level of professional services rendered, type of report issued, type of organization, and whether it was an initial engagement. 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 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 of employee benefit plans until a suitable work product is selected for review. If his practice changes and he is no longer involved with audits of employee benefit plans, no longer acts in a supervisory capacity on such engagements, or has not performed such engagements during the above specified period, he must inform the ECA of this 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 trial board for a hearing or take such other action as it deems appropriate.

iv. To submit, within 30-days after accepting an employee benefit plan audit, 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.

i.       To be prohibited from serving as a member of any ethics or peer review committee of the AICPA until he has completed all directives in this letter. This restriction 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 requirement shall remain in effect until the ECA determines that the work products submitted to comply with (g) and (hiii) above, if applicable, substantially comply with professional standards.

j.       To be prohibited from teaching continuing professional education courses approved by the AICPA or the state societies in the areas of accounting, auditing and employee benefit plan audits until he has completed all of the directives included in this letter. This restriction will be communicated to those responsible for engaging CPE instructors at the AICPA. This requirement shall remain in effect until the ECA determines that the work product submitted to comply with directive (g) and (hiii) above, if applicable, substantially comply with professional standards.

k.     To be prohibited from performing peer reviews in any capacity until the 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 directive (g) and (hiii) above, if applicable, substantially comply with professional standards. This restriction will be communicated to his peer review oversight agency.

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

m.   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.