The California Board of Accountancy Update newsletter, issue #94 dated Fall 2021, has details of disciplinary actions with effective dates in summer and fall of 2021.
A simple lesson for all CPAs from these situations is just do your job with at least a bare minimum of competence. The firms below didn’t get in trouble because they missed some SASs or were oblivious to some new or big or recent ASU. They didn’t get in trouble because a client lost out on a contested tax position. They didn’t get in trouble because they fell a few hours short on CPE or miscounted A&A hours.
No, they had splendiferous belly-flops from the 50 meter high dive. Examples?
Comments in the newsletters tend to be along the lines of “no documentation to support” things like, oh the opinion, or the numbers in the financial statements. Or not providing documents to the Board. Or lying to the board. Or kinda’, sorta’ forgetting to renewal one’s license and then issuing audit reports. Or not getting *any* A&A hours when performing audits. Or issuing reports when your personal license is expired and your business name is not registered.
I noticed a couple of different patterns in this issue.
First, there were only two individuals who also had a peer review problem in addition to other disciplinary issues. One was for a fairly egregious licensing failure and the other was for an audit failure.
Second item is the fines this time around seem to be higher. The fines for enforcement and prosecution are levied when there is a revocation with suspension. For those cases, the fines in thousands are: $0, $15, $4, $11, $15, $15, $9, $24, $15, $11, and $30. The highest fines are related to audit failures.
One of the more spectacular disasters was a firm who had an audit failure and a tax failure. In addition to serious problems on the tax returns, the firm posted negative comments about the tax client on social media and threatened to have friends and family do the same. Discussion in the Update newsletter indicates the CPA did not have any experience with using the tax client’s goods or services. That obviously resulted in a rather messy investigation, thus generating the $30,000 penalty for investigation and prosecution.
Here is my recap of disciplinary actions reported in this issue:
| revoke | surrender | rev. stay. | total | |
| crime | 2 | 1 | 3 | |
| PCAOB sanction | 1 | 1 | 2 | |
| probation violation | 1 | 1 | ||
| license failure | 2 | 1 | 3 | |
| audit or review fail | 4 | 4 | ||
| audit & tax fail | 1 | 1 | ||
| tax failure | 2 | 2 | ||
| fiduciary duty fail | 1 | 1 | ||
| total | 3 | 3 | 11 | 17 |
Some comments on what the abbreviations mean:
- “revoke” – the CPAs license was revoked, one case surrendered.
- “Surrender” – the CPAs license was surrendered under a negotiated settlement.
- “rev. stay.” – the license was revoked with revocation stayed, not only with a three-year probation