The Fall 2016 Update newsletter from the California Board of Accountancy shows CBA continues to be deadly serious about CPAs avoiding the peer review program.
I previously went into detail on disciplinary actions in one newsletter: If you have been blowing off Peer Review, you really ought to get with the program. This time I will just give an overview.
Revocations of license
Pulling a CPA’s license is the most serious penalty CBA can impose. There were 10 revocations in total described in this newsletter. Of these, 2 revocations were for not getting peer reviews when required. One revocation was for an audit failure without any indication of peer review issues in the narrative. Remainder of revocations are for other reasons.
Other actions
There are 18 other enforcement actions explained in the newsletter. Of these, 8 were for cases which involved peer review issues.
Discipline includes 2 licenses surrendered and 6 licenses revoked with revocation suspended.
Each of the 8 have a dollar penalty ranging from $2,000 to $23,000 $25,180 with total fines and reimbursements of $75,000 for those 8. Yes, the maximum was $23k $25k! Can’t imagine how much of a mess one would have to create to generate that much investigative effort on the part of CBA. (Update: see comments below for a general idea of the mess created by that practitioner.)
For these cases there were 7 without a peer review when needed and 1 with peer review compliance not done timely. Within that group there were 2 audit failures (using a loose yet reasonable definition of the term), 2 review failures, and 2 compilation failures. For 2 situations, there is no mention of an attestation failure.
So in summary, there are 28 disciplinary actions disclosed in this newsletter with 10 of those having peer review issues. Of those 10, there are 2 licenses revoked, 2 surrendered, and 6 revocations stayed.
The painfully obvious lesson is to make sure you get a peer review when providing attestation services. Oh, might want to make sure you do quality work.
Full disclosure: In case it isn’t otherwise obvious, the California Board of Accountancy has regulatory authority over my CPA license.
2 compilation failures!!! How? There are few requirements in a compilation engagement.
Hi Bill:
Yes, but there are still a few requirements. In both situations, the practitioner dug a far deeper hole than just the comp failure. However, the CPAs did in fact mess up a comp.
According to the published comment which I will translate, one person did not update the engagement letter and report to SSARS 21. Also had technical errors in the financials, including reporting on comparative f/s which were actually single year and omitting cash flow disclosures.
The person was also practicing with an expired license for four months before completing the renewal. Then did the same thing on the next renewal cycle, specifically practicing without an license for another four months. Making things worse, the time frame of practicing without a license was from March to July, so most of the tax returns signed during two busy seasons were while practicing without a license. Person also gave false information to CBA during investigation. Also was not enrolled in peer review program. I will make a very wild guess that something went wrong with the comp which got CBA involved, who realized there was failure to enroll in peer review, and closer review of her files showed she was signing returns as a CPA but without a valid license.
Another person performed two comp engagements which “did not comply with professional standards.” No other detail on those two engagements. This practitioner also got in trouble for falsely reporting to IRS, FTB, and EDD certain payments to a person as an independent contractor. Don’t know what that means. My wild guess is the tax reporting problem generated a closer look at the CPA, which in turn showed problems with the comp engagements, which in turn indicated untimely compliance with peer review. Individual also practiced with an unregistered firm name and gave false information to CBA. End result was license revocation stayed with three years probation. CBA assessed a $2,500 fine and $22,680 reimbursement of investigatory costs.
So, yeah, there was a comp failure. Also several other issues making the situation worse.
Thanks for asking!
Jim