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Enforcement: Connecting the DotsMaria L. Caldwell, Esq. – Moderator
Panelists: Stacey L. Grooms, Esq., Randall A. Ross, CPA, Lisa Snyder, CPA, CGMA
©2015
ENFORCEMENT“Connecting The Dots”
MARI A L . CALDWELL , ESQ. , CHIEF L EGAL OFFICER & D IRECTOR OF COMPLI ANCE S ERVICES
STACEY L . GROOMS, ESQ. , R EGULATORY AFFAIRS MANAGER
R ANDALL ROSS, CPA, EXECUTIVE D IRECTOR, OKLAHOMA ACCOUNTANCY BOARD
L I SA S NYDER, CPA, CGMA, D IRECTOR, A I CPA PROFESS IONAL ETHICS D I V IS ION
Guiding Principlesof
EnforcementSTACEY L. GROOMS, ESQ., REGULATORY AFFAIRS MANAGER
©2015
’s Mission
Enhance the effectiveness and advance the common interests of
the Boards of Accountancy
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Enforcement Resources Committee
Mission StatementPROMOTE EFFECTIVE, EFFICIENT, AND WHERE APPROPRIATE UNIFORM ENFORCEMENT OF PROFESSIONAL STANDARDS BY BOARDS OF ACCOUNTANCY
©2015
Enforcement Tools Created
Enforcement Resources GuideFederal Agencies SeriesInvestigator Training SeriesQuarterly Enforcement ReportsEnforcement NewslettersInvestigator/Expert Witness Portals
©2015
Guiding Principles of Enforcement
A distillation of Enforcement Resources Guide and the data collected by NASBA regarding how boards put enforcement efforts into action
©2015
Referrals & LeverageBoards are receiving more information on disciplinary matters through referrals from other boards, as well as referrals directly from state/federal agenciesRecent coordination efforts with the DOL have increased the referrals that are being sent to boardsDistribution of PTIN listings, EBP audit listing, Federal Clearinghouse listings, and Quarterly Enforcement Reports are notifying boards of actions by other agencies that may require enforcement action by their board“Guiding Principles” which are reflective of the enforcement process of most boards may provide boards with leverage to request more resources to improve their enforcement process
©2015
MobilityBoards should have confidence in the enforcement process across the nationBoards of the home jurisdiction and the mobility jurisdiction need to be equipped to protect their citizensCalifornia’s mobility law specifically requires the CBA to verify that allowing practice privileges to a CPA from a particular jurisdiction does not violate the CBA’s duty to protect the public
©2015
California (Code 5096.21)Verification of enforcement practices of other jurisdictions can be accomplished by:Determination of equivalency with a best practices
guideline created by NASBA; orBy individual evaluation by the CBA
©2015
Guiding Principles of Enforcement
Survey project began in September 2014 to determine what enforcement “looks like” among the boardsGuiding Principles were finalized May 2015 and adopted by the CBA for use in satisfying their mobility lawCommunications continue with boards to confirm that enforcement practices meet the objectives of the Guiding Principles
©2015
Improvement in Disciplinary Data
The California law requires that discipline be available on-line by a “flag” indicatorNASBA will work with boards that do not currently have information available on-line to create a feed for CPAverify/ALDThis step improves the disciplinary information that is available to other boards as well as to citizens in all jurisdictions, improving the consumer protection aspect of mobility
©2015
California’s Equivalency Evaluation Timeline
Jan 2016 – NASBA submits information to CBA on initial determination of SESeptember 2016 – NASBA submits information to CBA on final determinations of SE March 2017 – CBA reviews information to determine if non-SE jurisdictions should be removed from mobility in CAApril 2017 – NASBA continues to work with boards to achieve SE statusJuly 2017 – CBA initiates rulemaking to remove states from no notice, no fee mobility (rulemaking typically requires 12-18 months)
©2015
DOL Audit Quality StudyUpdate
STACEY L . GROOMS, ESQ. , REGULATORY AFFAIRS MANAGER
RANDALL ROSS, CPA, EXECUTIVE DIRECTOR, OKLAHOMA ACCOUNTANCY BOARD
©2015
DOL EBSA Audit Quality Study
• Released 5/28/2015
• Reviewed 400 plan audits from 2011 Form 5500 filings
• Six strata using # of audits per firm
• Random sampled within each strata
• Analyzed licensing and peer review status as part of study
©2015
Key AQS Finding
Compliant or Minor
Findings (61%)
Major GAAS Deficiencies -Reject Form 5500 (39%)
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Trend of AQS Audits with GAAS Deficiencies
23%19%
33%
39%
0%5%
10%15%20%25%30%35%40%45%
1988 1997 2004 2014
Audits with GAAS Deficiencies
©2015
Audits Containing 5+ Major Deficiencies and Clean Peer Reports
Strata (Audits) Deficient Audits w/ 5+ Deficiencies and Clean Peer Review Report
1-2 35% (33)3-5 36% (34)
6-24 37% (35)25-99 22% (14)
100-749 4% (1)750+ 4% (1)
©2015
DOL AQS Recommendations –NASBA / State Board RelatedENFORCEMENT
• Work more closely with NASBA and State Boards
• Peer review◦ Refer audit firms without acceptable peer review to Boards of Accountancy
OUTREACH
• Work with NASBA / State Boards to encourage requirement of specific licensing requirements for EBP auditors
• Communicate results of AQS to all Boards of Accountancy stressing need to ensure only competent CPAs perform EBP audits
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©2015
Where We Have Been…
Since 2005, DOL made 507 routine referrals
481 to the AICPA 89 to BOAs
Over 65% of referrals to AICPA conclude with issuance of confidential RCA Letter
©2015
DOL Audit Quality Referrals…
DOL has made 145 referrals
132 to the AICPA 13 to BOAs
Over 65% of referrals to AICPA conclude with issuance of confidential RCA Letter
©2015
Outcome of Previous Referral Process…DOL is concerned about the current system, but
BOAs need to be involved in ALL cases
The BOAs had no real insight as to the
magnitude of the number of deficient audits
©2015
What Boards Have Done…Actions Taken by Boards of Accountancy
Closed with Discipline (26%) In Progress (23%)No Record of Referral (19%) Closed with No Violation (10%)Closed with No Data Available (10%) Closed Due to Insufficient Evidence (5%)Closed with Compliance (4%) Lack of Jurisdiction (3%)Deceased Respondent (2%)
©2015
CPA Firms
Department of Labor
(DOL)
NASBAAICPA
Accountancy Boards
Collaborative Effort…
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©2015
How to Improve Collaboration and Results…
Improve referral process to ensure the DOL referral information is sent to the appropriate board contact
All DOL referrals to be made to the Boards going forward
Use of Consents to allow sharing of investigative files with Boards and AICPA by DOL
Use of AICPA/BOA Cooperative Enforcement Process
AICPA to consider changes to Automatic Sanctioning Guidelines that are triggered upon Board action
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AICPA/Board Cooperative
Enforcement ProjectLISA SNYDER, CPA, CGMA, DIRECTOR, AICPA PROFESSIONAL ETHICS DIVISION
©2015
Professional Ethics Division staffs the following committees:
Ethics Division Structure
Professional Ethics Executive Committee
IND/BHS Subcommittee TNS Subcommittee
Ethics Division consists of: 20 Technical Staff (1 Director, 4 senior managers); 7 Technical Standards (TNS) and 5 Independence/Behavioral
Standards (IND/BHS) Technical Managers; 3 Case Investigators 5 Support Staff
©2015
Conduct of an Investigation
•Initial review – information reviewed to determine if investigation warranted and respondent is a member
•If investigation warranted:•Opening letter (OL) to each respondent – inform of investigation and request-
• Practice information• In-depth questions, regarding alleged deficiencies and
resolution/remediation • Work papers, financial statements and other evidence• Confirm peer review notifications made and OL, including
complaint/referral, has been provided to firm peer review contact• Other information from respondent/complainant (as needed)• Gather and examine evidence
©2015
Conduct of an InvestigationInformation Considered
•Financial statements reviewed•Working papers reviewed, unless errors are admitted or evident in financial statements•Interrogatories may be posed, interview offered•Current practice information of respondent and firm:
• Practice composition• Experience in relevant area• Relevant CPE• States and status of license • Self remediation and correction of the error
•Results of peer review•Other investigations•Assess threat to public & profession
©2015
Disposition of DOL Investigations
•No further action/no further action with comments
•Failure to cooperate • Refer to Joint Trial Board (with charges of non-cooperation and a
recommendation of expulsion)
•(Apparent) Prima facie evidence of a violation
©2015
Disposition of DOL InvestigationsLetters of Required Corrective Actions (RCA)
Confidential, except:• The complainant is informed• Copy of the RCA goes to AICPA Peer Review Program
Directives may include:• Comply immediately with professional standards• Attest, where applicable• Directed CPE (targeted to violations and to other practice areas if CPE is deficient)• Pre-issuance review• Follow-up work product review• Accelerate peer review • Restricted from performing peer review, teaching & committee service• Join audit quality center• Notify firm’s peer review contact and managing partner
©2015
Disposition of InvestigationsSettlement Agreements
Terms of settlement agreement may include all remedial actions available in RCA, plus:
• Admonishment • Member rights affected
• Suspension (up to two years)• Expulsion
• Publication of the name of the respondent and possibly his/her firm–AICPA website, state society publication, WSJ
• State board is notified of disciplinary action
©2015
AICPA/Board of Accountancy Cooperative Enforcement
•AICPA/NASBA have joined together to promote program to state boards
•Apply to licensees who are AICPA and/or State CPA Society members• Working on approach for non-AICPA/Society members on cost allocation basis
•Focus on DOL & Gov’t audit cases• Areas where audit quality is at greatest risk• Would not extend to commercial & behavioral cases
•Win-win situation for all • Allows AICPA, NASBA and state boards to be proactive and demonstrate
commitment to audit quality issue • Provides efficiency since AICPA already performing investigation and has ample
resources
©2015
AICPA/Board of Accountancy Cooperative Enforcement
•AICPA would not perform investigation “on behalf of” Board• AICPA would share investigative files and conclusions with Board
•Board would defer its investigation until completion of AICPA investigation• If Board were to “open” investigation, licensee has right to defer AICPA investigation• Board would reach its own conclusions and determine sanctions
•State board would request consent letter from licensee◦ Board will defer its investigation due to pending AICPA investigation◦ Upon completion of AICPA investigation, Board will request AICPA provide copies of its
investigative files and conclusions◦ Board will commence its own investigation at that time and may take AICPA’s investigation,
findings and conclusions into consideration◦ Board will reach its own findings/conclusions and may request licensee provide additional info◦ Request licensee provide consent for AICPA to share its investigative files and conclusions with
Board
©2015
AICPA/Board of Accountancy Cooperative Enforcement
Examples of investigation material that would be sent to state board: Letter of required corrective action or settlement agreement Investigation summary with committee findings and conclusions If applicable, summary of interview with respondent, along with
respondent’s comments on the summary. Evidentiary matter considered by committee. Copy of opening letter Copy of letter of inquiry to the firm (if applicable) and copy of response
thereto Copies of financial statements and reports
©2015
QUESTIONS?