Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

More disciplinary actions from California Board of Accountancy

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The Update #87 newsletter from California Board of Accountancy for Summer/Fall 2018 lists 38 disciplinary actions, by my count.

You can read my previous posts on CBA actions by clicking on this tag.

Here is my tally of license revocations, surrendered licenses, and revocations with stay (there are no suspensions or stayed suspensions this time around):

primary issue revocation surrender revocation stayed total
PCAOB 1 1 1 3
SEC 1 4 5
audit failure 2 9 11
SSARS failure 2 2
tax failure 3 3
licensing 4 1 2 7
crime 3 3 6
total 10 3 24 37

 

A few observations…

Several CPAs had problems with peer review. This was mentioned for 1 person with revocation, 1 CPA surrendering the license, and 6 CPAs with stayed revocations.  Of those, 4 had audit failures as the main issue, 1 with SSARS failure, and 3 with serious licensing issues.

CPAs with audit failures are usually required to get an additional 24 or 30 hours of CPE, on top of the hours otherwise required for license renewal.

Of 11 disciplinary actions with audit failures, 5 have bans on services.  ‘Ban’ means the service is  prohibited during the three-year probation and after that may only be performed after successfully petitioning the CBA for permission to do so. Of those 5, 1 is banned from EBP audits, 1 from all audits, and 3 from all attestation work.

This is in contrast to last edition of Update. In the previous report, there were 7 firms with PCAOB or SEC sanctions who were also disciplined by CBA. Of those, 3 have no additional practice restriction by CBA, 2 have attestation ban, and 2 have suspension for certain number of days.

Out of 11 licensees who had attestation failures other than getting tangled up with the feds, 9 drew a ban, 1 allowed to resume attestation work after setting up practice monitoring protocol, and only 1 did not get a practice restriction.

Seems obvious to me the change from 10 of 11 getting practice restriction last time to 5 of 11 getting a ban this time is due to a different mix of the level of bad work.

All of the CPAs with a stayed revocation are reimbursing CBA for the investigative costs. CPAs surrendering their license have to reimburse investigative costs if they seek to reinstate their license. Reimbursements range from a low of around $1,500 to a high of just under $10,000. Revocations of licenses don’t draw an additional fine, presumably because the licensees will no longer be under the regulatory authority of CBA, seeing as how their license no longer exists.

Some of the more extreme head-shaking situations…

  • One practitioner has a stayed revocation for issues in compilation and preparation engagements. That is the first disciplinary action I recall which cited prep work as an issue.
  • Another CPA with stayed revocation for SSARS work is required to get an additional 56 hours of CPE. Of this, 22 is required in first year of probation, 16 in year 2, and 16 in year 3.
  • One CPA is facing a revoked license for failure to provide audit preparation work and failure to perform a review after being engaged to do so and being paid in full.  The fee for the review was $1,875. This person also did not get a peer review.
  • One CPA did not get a peer review and also did not have sufficient audit documentation. Pardon me…Make that he/she did not have audit documentation…When instructed by CBA to provide a copy of the work papers for the 6/30/13, 6/30/16, and 6/30/17 audits of a client, the CPA stated he/she “…was unable to provide the work papers…” for those audits. As an aside, I’m picking up on the idea that when CBA starts looking hard at an audit practice, the investigator goes back several years.

I did not prepare a tally of the years in which substandard work was performed or when the licensing issues took place, but there were a number of disciplinary actions based on issues from three or four years ago. The oldest audit issue I recall seeing was from 2010. It would appear to me that CBA is putting a lot of effort into clearing up old issues.

 

CBA social media outreach

If you are licensed in California and you are not paying close attention to the CBA, you might want to tune in. I have noticed over the years that CBA tries really hard to get news out to CPAs and consumers about regulatory matters.

You could check them out at:

Written by Jim Ulvog

November 30, 2018, 7:52 am at 7:52 am

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