Update newsletter issue 89 for Fall 2019 has 33 disciplinary actions listed. Timeframe of the effective dates is the first half of 2019. My recap of actions by the California Board of Accountancy is listed below. I counted as one action those situations involving a firm and the owner of the firm.
Revocations
| audit fail | other | issue |
| 1 | 3 | felony |
| 1 | 1 | didn’t complete contracted service |
| 1 | audit fail | |
| 1 | audit fail and no peer review | |
| 1 | no peer review & expired license | |
| 2 | probation violations | |
| 1 | some deeper issues, not quite apparent from summary | |
| 4 | 8 | total revocations |
Of the CPAs with felony issues, two were for embezzlement, one also had an audit failure, and another ended up with conviction on 12 counts.
Two of the revocations were for rather extensive violations of a previous disciplinary action.
Revocations stayed
A summary of the CPAs who earned a revocation but the revocation was stayed follows. That means the firms have a permanent record of a revocation but they can continue to practice. If they breach a substantive portion of the conditions of probation, the Board can reimpose the specified sanctions, which means the CPA would then lose the license and get listed in the above section.
| 8 | attestation failures |
| 1 | expired license & noncooperation |
| 1 | probation violations |
| Other agencies/courts: | |
| 3 | felonies |
| 4 | PCAOB sanction |
| 2 | SEC sanction |
| 1 | tax court ban |
| 1 | access non-client state tax information |
| 21 |
Of those, two have a four year suspension instead of the usual three. As additional sanction, two CPAs also earned a suspension that was not stayed, one for 3 months and one for 9 months. That means those two cannot provide any services which require a license for the specified period of time.
One of the CPAs sanctioned by PCAOB had 135 engagements which did not conform to professional standards during 2014, 2015, and 2016.
Yeah, you read that right, 135.
The stayed revocations due to attestation failures can be broken into more detail.
The columns I used to summarize the actions are:
- Audit issue without a ban from performing attestation work
- Audit issue with a ban from performing any attest service for duration of probation and until board grants permission to resume such services
- No peer review when one is required without consequence of attestation ban
- No peer review when required and CPA drew a ban from attestation work
| audit w/o ban | audit w/attest ban | no PR w/o ban | no PR w/attest ban | issue |
| 1 | 1 | 1 | audit fail | |
| 2 | 2 | audit plus more attest issues | ||
| 1 | AUP fail |
Cringe worth belly flops
Reading the summary about four of the CPAs who earned a stayed revocation had situations which induced a cringe. Sort of like watching someone at the swimming pool do a dive off the high board and hitting the water with a full belly flop.
One CPA had an audit failure (could have been some other service but looks like an audit issue). The CPA did not get a peer review and made false statements to the board about his peer review status. Also didn’t reply to some of the Board’s letters and wasn’t truthful in some communication to the Board. The consequences include a four year probation term. Amount for reimbursement of costs? Listed as $22,994.
While working at a bank, the next CPA set up a trust for a friend who wanted to hide assets from a civil judgment. The two people worked together to embezzle client funds which were moved into the trust and used to buy speculative investments, which eventually went bust. Also filed reports with false information and didn’t report a settlement to the Board. This CPA earned a four year stayed revocation with a nine month suspension (which wasn’t stayed). Oh, the CPA will be reimbursing the board $30,000 for their investigative costs. Yeah, thirty grand.
Next situation involved a 401K audit failure, a review failure, and two compilation failures. CPA also didn’t cooperate with the peer review program (meaning didn’t complete the review, got kicked out, withdrew, or did something else on that order of magnitude), gave “false statement” on the next license renewal regarding his peer review, practiced with an expired license, and practiced with an unregistered firm name. CPA earned a three year stayed revocation and will reimburse $9,000 of investigative costs.
Final belly flop of note is a CPA who had multiple audit failures. From the summary in the newsletter, looks like there were three failures, but could have been more. One was a HUD audit, another a Single Audit, and another with no identification of nature of audit. In addition there were some problems in the person’s efforts to buy the firm where the CPA worked, to include “fiscal dishonesty” in dealings with the firm over the possible purchase. This CPA earned a three year stayed revocation. Payments to the board will include $17,110 for reimbursement of investigative costs and a $500 penalty.
I choose not to mention names or even initials of the CPAs involved. If you, or anyone else in the general public, want a name, or want to read the above summary, or want to read the entire complaint and enforcement action, all the information is public record.
Oh yeah, that public information is readily available on the ol’ internet and will be available for decades into the future.