CA Bd of Accountancy

Disciplinary actions from California Board of Accountancy for late 2020.

….what you do not want to have happen to your license. Image courtesy of Adobe Stock.

Update #92 newsletter from California Board of Accountancy dated winter 2021 lists 14 disciplinary actions summarized below. This tally excludes one listed action which is ending probation for a CPA and another separately listed case for the corporation owned by an individual who is also disciplined.

All these actions are effective at various times during November and December 2020.

My tally of these cases:

Disciplinary actions from California Board of Accountancy for the middle of 2020.

Image courtesy of Adobe Stock.

Update #91 newsletter from the California Board of Accountancy, dated Fall 2020, lists 33 disciplinary actions. The effective dates run from May 2020 through August 2020. Yeah, I’m just getting around to writing about the newsletter that arrived last November.

A few general observations before diving into a summary of the causes and levels of discipline.

Of the 10 stayed revocations for attestation failures, all but one had an attestation ban. General pattern is an audit failure will lead to a ban on attest services. The summary of the case does not give an indication why one CPA didn’t draw a ban.

Usually these are bans from performing any audits, reviews, compilations, or attestation engagements. Some of them were just bans from audits. Pattern seems to be the ban is for the duration of probation and then after that a firm may request permission to again perform attest work.

Imagine if you will, that attest work is a significant portion of your work and you cannot perform any of those for three years.

One big firm listed in this edition is PriceWaterhouseCoopers, who drew a stayed suspension with 18 months probation because of discipline by the SEC. They also earned a $300,000 fine and up to $26,000 reimbursement of costs for investigation and monitoring. An additional consequence is distributing a copy of the order to every employee who is in the state of California.

Of the seven disciplinary actions because of enforcement actions by federal agencies, six are from the SEC and one from PCAOB.

The attestation failures usually include three or four or more specific violations. For example, the actions may because there was not appropriate documentation, the opinion was not supported by workpapers, and there were violations of GAAS and violations of GAAP.  Those are overlapping issues but a major audit failure will likely cause a violation in all of those areas. Of grim note for two of the attest failures is one of the listed charges includes creating documentation after release of the audit report. You can make your guess as to what an allegation of that nature includes but could have been creating documentation after workpapers had been called in for review.

Here is a tally of the 33 cases:

Disciplinary actions by California Board of Accountancy in first half of 2019.

That view is enough to make you cringe. Sort of like some of the situations recently addressed by the Board of Accountancy. Image courtesy of Adobe Stock.

Update newsletter issue 89 for Fall 2019 has 33 disciplinary actions listed. Timeframe of the effective dates is the first half of 2019.  My recap of actions by the California Board of Accountancy is listed below. I counted as one action those situations involving a firm and the owner of the firm.

Revocations

audit fail other issue
1 3 felony
1 1 didn’t complete contracted service
1 audit fail
1 audit fail and no peer review
1 no peer review & expired license
2 probation violations
1 some deeper issues, not quite apparent from summary
4 8 total revocations

 

Of the CPAs with felony issues, two were for embezzlement, one also had an audit failure, and another ended up with conviction on 12 counts.

Two of the revocations were for rather extensive violations of a previous disciplinary action.

Revocations stayed

Disciplinary actions from California Board of Accountancy through the end of 2018.

Image courtesy of Adobe Stock.

The Update #88 newsletter from California Board of Accountancy for Winter 2019 lists 22 disciplinary actions, by my count. These are the actions taken with effective dates through the end of 2018.

Here is a tally of license revocations, surrendered licenses, and revocations with stay categorized by the underlying issue as I aggregate them:

More disciplinary actions from California Board of Accountancy

Image courtesy of Adobe Stock.

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):

How to get more of the messy details on disciplinary actions by the California Board of Accountancy

Image courtesy of Adobe Stock.

A colleague asked me a question on how to find out more details on the disciplinary actions taken by the CBA. Let me give you the answer too.

To look up details, you can go to the newsletter mentioned. For Winter 2018 that would be here.

Summary of disciplinary actions from California Board of Accountancy, Winter 2018

What you will be doing if you ignore professional standards and then get caught messing up your audits and reviews, although the amount won’t be quite as large. Image courtesy of Adobe Stock.

The new Update newsletter from the California Board of Accountancy goes back to providing details on disciplinary actions. The Winter 2018 edition (#86) takes 20 pages to describe the 24 actions. The previous Update provided far less detail, which generated lots of feedback to the board, so the newsletter will again give the ugly details for the causes for discipline.

Update 11/30/18:  Thanks to CBA for listing the messy details on what CPAs are doing to earn their consequences.

Three things jump out at me from the current list of discipline.

First, every action comes with a substantial financial penalty in the form of reimbursing the CBA for their investigative costs.

Second, just about every CPA that got in trouble for audit or review problems was given a ban from performing attestation work until some time in the future when the firm requests and receives permission from CBA to again perform such work.

Third, several CPAs received a suspension from their CPA practice. This means the individual may not perform any actions which would otherwise require a license. I think that means the firm halts all their attestation work and unless also holding an enrolled agent credential ceases their tax compliance work.

Here is my summary of the causes of discipline for the license surrenders and the stayed revocations:

New CPE requirement in California for CPAs who only perform preparation engagements

Image courtesy of dollarphotoclub before merger with Adobe Stock.

Big news from CBA if the highest level of service you provide clients is a preparation engagement.

First, if you don’t perform compilations, reviews, audits, or other services covered by peer review, you don’t need to get a peer review.

Second, there is a specific CPE requirement:  4 hours in fraud education and 8 hours in prep or A&A.

The following article from the California Board of Accountancy, quoted with permission, provides more detailed explanation.  Since it is quoted verbatim, I won’t put quotes around the entire article.

 

NEW CONTINUING EDUCATION REQUIREMENT FOR PREPARATION ENGAGEMENTS

CPAs who perform preparation engagements as their highest level of service are subject to a new continuing education (CE) requirement.

How to stay away from the most popular ways to get in trouble with the California Board of Accountancy.

Don’t send one of these to CBA unnecessarily. Image courtesy of Adobe Stock.

These must be the preferred ways CPAs pick to get in trouble with the regulators because the board of accountancy says these are the three most common reasons they issue monetary penalties.

What are the three most popular ways to draw a fine from CBA?

  • Don’t get minimum of 20 hours each year of your license term or don’t get 12 of those hours in technical topics.
  • Ignore a formal inquiry from CBA.
  • Don’t submit that Peer Review Reporting Form with your license renewal.

For more detail, check out the following article, quoted with permission, from the California Board of Accountancy.  Since it is quoted verbatim, I won’t put quotes around the entire article.

 

IT’S EASY TO AVOID CBA CITATIONS

To help increase awareness of CBA requirements and prevent licensees from receiving a citation, below are the top three violations that led to a citation in the previous fiscal year. Citations are posted on the CBA website and may include an administrative fine of $100 to $5,000.

Another round of disciplinary actions from California Board of Accountancy

The firms that make up the following list were not traveling on the above highway. Image courtesy of Adobe Stock.

Starting with the newest Update report for Fall 2017 (#85), the California Board of Accountancy has stopped listing the underlying problem leading to disciplinary action. This means it only took 16 pages to list the 44 actions reported currently. It also seems the CBA is listing actions against firms and the practitioner together.

This means the cringe inducing details are not immediately visible, even though the full disciplinary reports are public records and publicly available. I didn’t bother to take the time to research the reports.

I have tallied the current batch of discipline cases. Underlying problem is inferred by me based on the comments in the newsletter. I haven’t looked up any of the cases or looked up the reg sections cited for discipline. So, with those caveats, here are my inferences of the current disciplinary actions:

Lots more disciplinary actions from California Board of Accountancy

Image courtesy of Adobe Stock.

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:

California Board of Accountancy is serious about audit quality and enrollment in peer review.

Image courtesy of Adobe Stock.

The Winter 2017 Update newsletter (#83) from the California Board of Accountancy shows that the board is continuing its active efforts on disciplinary actions.

There are obviously quite a few of our colleagues who are not performing up to standards.

I’ve heard stories from a distance that the Board has hired more enforcement staff. As I have read the last few issues of Update, it sure seems to me that the increased staffing is showing up in an increased pace of closed cases. Maybe my perception is off, but it seems there are more cases closed with more serious consequences in the last year or so.

I count 39 cases documented in this edition of Update. Only 2 of these have discipline level of suspension or less. All the others are surrenders, revocations, or stayed revocations. Just as a guess, I think that means the editor of Update is filtering out most of the suspensions.

I count 19 cases of those 39 with peer review problems or audit, review, or compilation failures or some combination thereof. I’ll break that down further:

If you have been blowing off Peer Review, you really ought to get with the program.

Image courtesy of DollarPhotoClub.com
Image courtesy of DollarPhotoClub.com

Seriously, if you are providing audit, review, or compilation services to your clients, you really need to be in the peer review program. And you really, really need to be doing fairly good work. I doubt any CPAs in California who desperately need to read this post will be doing so, but it is still worth mentioning.

The California Board of Accountancy is coming down hard on CPAs who have avoided the peer review program. Seriously missing the boat on audit quality is getting hammered as well.

Quarterly newsletter

The Spring/Summer 2016 edition of the quarterly Update newsletter from CBA, issue 81, has several reports of firms drawing serious sanctions. There are 21 pages of narrative describing the sanctions through April 24, 2016. Of 28 disciplinary issues, 7 deal with peer review, which are the ones I will highlight.

Misbehavin’ CPAs #7. Sanctions by California Board of Accountancy, part 2

That may be how the vast majority of CPAs perform all the time, but some CPAs miss the target completely. Image courtesy of DollarPhotoClub.com
That may be how the vast majority of CPAs perform all the time, but some CPAs miss the target completely. Image courtesy of DollarPhotoClub.com

Previously mentioned that I looked disciplinary actions reported in the last four newsletters from the California Board of Accountancy (CBA). Want to better understand what happened with firms that got in trouble for audit quality or for not getting a peer review when one was required.

Will continue that discussion by looking at sanctions imposed on smaller firms and then self-imposed trouble generated by some larger firms.

Sanctions

Misbehavin’ CPAs #6. Sanctions by California Board of Accountancy, part 1.

That may be how the vast majority of CPAs perform all the time, but some CPAs miss the target completely. Image courtesy of DollarPhotoClub.com
That may be how the vast majority of CPAs perform every day, but some CPAs miss the target completely. Image courtesy of DollarPhotoClub.com

Three times a year the California Board of Accountancy issues a newsletter. It contains a variety of information useful for CPAs. If you are a CPA, you really ought to be reading the newsletter.

That newsletter is also where the board publicizes disciplinary actions against CPAs.

In the last few newsletters I’ve noticed a number of cases where firms are sanctioned for substandard audits. Have also noticed a number of firms sanctioned for not getting a peer review when it was required or fibbing to the board whether they had complied with the peer review standards.

I wanted to understand better what I’ve noticed in passing so decided to dive into the disciplinary reports to get a better picture of the extent of sanctions for audit quality and peer review issues. I looked at the Fall 2014, Winter 2015, Summer 2015, and Fall 2015 newsletters.

That covers 16 months of reporting for disciplinary actions by CBA.

I focused on sanctions for audit issues excluding anything that was a follow-up to PCOAB or SEC sanctions. That rules out quite a few cases.

Also ignored a long list of social misbehavior such as DUIs (several incidents), fabricating Form E (once – fabricating the experience report? – really??), embezzlements, disbarment (once), and other such human foibles. Also excluded a variety of contingency fee violations, breaches of client trust, and sundry tax fiascos.

For context, the Fall 2015 newsletter had 28 disciplinary actions of which 5 were of interest for this little bitty research project. Of those 5 cases, the public notices refer to 2 firms which had substandard audits, 1 had a substandard compilation, and 4 included failures to get a peer review when required of which 2 fibbed to CBA about compliance with the peer review requirement.

Scope and result of my analysis