It takes thirty-two pages to describe the current round of disciplinary actions from the California Board of Accountancy in the Spring/Summer 2017 edition of the Update newsletter (Issue #84). By my count there are 38 actions, exclude one situation where a firm and the CPA are listed separately.
The overwhelming portion of cases are for CPAs who have an audit or review or compilation failure. Most of those firms also have a peer review problem, either not getting a peer review, failing two consecutive reviews, or getting a very late review.
Just in case you were wondering whether CPAs are regular people with the same, um, foibles as the general population, there were 7 CPAs disciplined for conviction of a crime.
I tallied the results for this edition of Update and came up with these results:
| PR okay | no PR | late PR | 2 PR fails | total | |
| EBP audit fail | 2 | 1 | – | – | 3 |
| A-133 audit fail | – | 1 | – | – | 1 |
| audit fail | 5 | 3 | 2 | 1 | 11 |
| total audit fails | 7 | 5 | 2 | 1 | 15 |
| review fail | – | 1 | – | – | 1 |
| comp fail | – | 2 | – | – | 2 |
| deficient work | 7 | 8 | 2 | 1 | 18 |
| work ok | – | 2 | – | – | 2 |
| total attest & PR | 7 | 10 | 2 | 1 | 20 |
| crime | 7 | ||||
| SEC | 4 | ||||
| other | 7 | ||||
| total | 38 |
Some comments:
- PR okay – means there was no mention of a peer review issue in the comments.
- No PR – means the CPA was not enrolled in the peer review program when it was required, which also means the firm skipped a required review
- Late PR – A peer review was obtained, but for one firm was about 2 years later than it should have been done and 2 1/2 years in the other case.
- 2 PR fails – Firm had 2 consecutive fail reports.
- Fail – That single word used with an attestation service describes engagements which had severe departures from professions standards, typically involving not have enough documented work to support the opinion, severe departures from reporting standards, or unspecified material departures from GAAP and GAAS. After reading the description of issue, most people would categorize that as an audit failure.
- Comp – Yes, two firms had compilation failure.
- Work ok – The comments do not refer to an issue in quality of attestation work.
- SEC – Refers to CPAs who first got in trouble with the SEC and then drew their earned discipline from CBA. I suppose 3 of those could be counted as audit failures.
Of the 38 actions by CBA, there were a few surrenders of license, one revocation, one suspension, with all the rest being stayed revocations with probation.
There is one disciplinary action I don’t recall having seen before. In addition to other steps, one firm has to provide an additional 8 hours of CPE on audit issues for each staff person. The extra hours are required for each year of the 3 year probation. That is on top of the firm owner being required to take 32 hours of specified classed within 6 months, with those hour not counting toward the 80 needed for licensing.
I also recast my comments from the Winter 2017 Update newsletter, #83, which are described in my earlier post: California Board of Accountancy is serious about audit quality and enrollment in peer review.
I won’t go through that edition again to get the same level of detail described above, so here is a condensed summary:
| PR okay | PR issue | total | |
| audit fail | 2 | – | 2 |
| comp fail | 2 | 1 | 3 |
| attestation fail | – | 14 | 14 |
| deficient attestation | 4 | 15 | 19 |
| other | 20 | ||
| total | 39 | ||
Moral of the story? If you are in the attestation world, follow the standards. Do good work.