Disciplinary Actions 2017

Written on Apr 06, 2018

Daniel Henning – Milford, OH

As a result of an investigation of alleged violations of the codes of professional conduct of The Ohio Society of CPAs and the AICPA, Mr. Henning, with the firm of Kamphaus, Henning & Hood, CPAs, Inc. entered into a settlement agreement under the Joint Ethics Enforcement Program, effective September 11, 2017.

Information came to the attention of the Ethics Charging Authority (ECA) (comprised of The Ohio Society of CPAs’ Professional Ethics Committee and the AICPA Professional Ethics Executive Committee) alleging potential disciplinary matters with respect to Mr. Henning’s performance of professional services on two separate audit engagements. The first on the audit of the financial statements of a housing authority as of and for the year ended December 31, 2012 and the second on a housing authority audit as of and for the fiscal year ended July 31, 2014.

The ECA reviewed information publicly available on the Federal Audit Clearinghouse’s website, the auditors’ reports, financial statements, and working papers, as well as other relevant documents Mr. Henning submitted to support his responses. Based on this information, there appears to be prima facie evidence of violations of the rules of The Ohio Society of CPAs and the AICPA’s and codes of professional conduct as follows:

Rule 202 – Compliance with Standards

With Respect to both Engagements

1.The Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 (“A-133 Report”) indicates that the audit was conducted in accordance with the HUD Consolidated Audit Guide and included verbiage specific to requirements in the Guide, to which the entity was not subject. (AICPA Audit Guide – Government Auditing Standards and Circular A-133 Audits (“AAG-SLA”) par. 13.31, HUD Consolidated Audit Guide 2000.04 REV-2, Chapter 1)

2.The purpose alert paragraph in the A-133 Report failed to state that the scope of the testing of internal control over compliance and the results of that testing were based on the requirements of OMB Circular A-133. (AAG-SLA par. 13.31, AAG-GAS par. 13.26)

3.The Summary of Auditor’s Results utilized outdated verbiage, referencing unqualified rather than unmodified opinions and reportable conditions rather than significant deficiencies. (AAG-SLA par. 13.40, AAG-GAS par. 13.34)

4.The Summary of Auditor’s Results failed to disclose the dollar threshold used to distinguish between Type A and Type B programs and whether the auditee qualified as a low-risk auditee. However, on the Page Tower engagement, the Type A threshold was incorrectly disclosed on the Schedule of Expenditures of Federal Awards as $500,000 rather than $300,000. (AAG-GAS par. 13.34, OMB Circular A-133 §__.505)

With Respect to the December 31, 2012 Engagement

5. The reporting of the federal program identified as having been audited as major was inconsistent; the Schedule of Expenditures of Federal Awards indicated that the Section 202 Demonstration Planning Grant was non-major but the Summary of Auditor’s Results indicated that it was audited as major. Furthermore, the Data Collection Form inaccurately reported that the Demonstration Planning Grant had not been identified and tested as part of CFDA 14.157. (AAG-SLA par. 13.40, 13.52-13.53)

With Respect to the July 31, 2014 Engagement

6. The Schedule of Findings and Questioned Costs indicated that no current year findings were reported under the HUD Consolidated Audit Guide, to which the entity is not subject. (AAG-GAS par. 13.34)

Rule 203 – Accounting Principles

With Respect to both Engagements

1.The components of cash flows from investing activities in the statement of cash flows are inappropriately presented at net amounts rather than gross. (FASB ASC 230-10-45)

With Respect to the December 31, 2012 Engagement

2. The policy for determining which items are treated as cash equivalents for purposes of inclusion in the Statement of Cash Flows is not disclosed in the financial statements. (FASB ASC 230-10-50-1)

3. The components of temporarily restricted net assets were not fully disclosed in the financial statements. (FASB ASC 958-210-45-9)

With Respect to the July 31, 2014 Engagement

4. The entity failed to make required disclosures related to intangible assets. (FASB ASC §350)

Agreement:

In consideration of the ECA forgoing further investigation of Mr. Henning’s conduct as described above and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Henning agreed as follows:

a. To waive his rights to further investigation of this matter in accordance with the Joint Ethics Enforcement Program (JEEP) Manual of Procedures.

b. To waive his rights to a hearing under The Ohio Society of CPAs’ bylaw Article VII section C and the AICPA bylaws section 7.4.

c. To neither admit nor deny the above specified charges.

d. To be admonished by The Ohio Society of CPAs and the AICPA.

e. To comply immediately with professional standards applicable to the professional services he performs and to submit evidence of such compliance.

f. To provide an attestation immediately, then every six months for a period of three years that he is no longer performing audits. If he returns to performing such work, he agrees:

•To complete 33 hours of continuing professional education (CPE) courses (Applying the Uniform Guidance for Federal Awards in Your Single Audit; Advanced Topics in a Single Audit; Annual Update for Accountants and Auditors; Audit Workpapers: Reviewing Field Work Documentation; Audit Workpapers: Documenting Field Work) prior to commencing such work and provide evidence of such completion (e.g., attendance sheets, course completion certificates, etc.).

•To comply with directive e. above, Mr. Henning agrees to hire an outside party, acceptable to the ECA, to perform pre-issuance reviews of the reports, financial statements, and working papers on three engagements performed by him over one year from the date he returns to performing audits to be selected by the ECA. He must submit the names of the chosen reviewers to the ECA for approval no later than 30 days after returning to performing audits. Also, no later than 30 days after returning to performing audits, he must submit a list to the ECA of the audits and reviews he expects to issue reports in the upcoming 12 months. The ECA will select three engagements for pre-issuance review and communicate them to him.

Mr. Henning agrees to permit the outside party to report quarterly to the ECA on his progress in complying with this agreement as stated herein to comply with professional standards. The report should provide the reviewer’s comments in detail for each engagement and should include a description of the nature of the entity reviewed, the entity’s year end and the date of the review. The first report is due 120 days after the reviewer has been approved by the ECA with subsequent reports due every 90 days. He agrees to have this pre-issuance review performed at his expense. The ECA has the right to extend the period of time and number of engagements subject to pre-issuance review if there are deficiencies.

He agrees to inform the ECA of any changes in the composition of his practice, changes in his role during the period he is subject to the pre-issuance reviews or if he has not performed any audits or reviews. If his practice changes and he is no longer involved with audits or reviews, no longer acts in a supervisory capacity on such engagements, or has not performed such engagements during the above specified period, he must inform the ECA of this and the ECA may require that he attest every six months for three years as to the nature of his practice. If, during the three-year attestation period he returns to performing such engagements, he must inform the ECA and undergo the pre-issuance reviews.

•To further comply with directive e. above, Mr. Henning agrees to submit six months after the completion of the pre-issuance reviews, a list of the highest level (audits, reviews, and compilations with note disclosures) of engagements that he performed in the period between the date of completion of those pre-issuance reviews and the end of the six-month period following completion of the pre-issuance reviews. The ECA will select one of these engagements for review. Mr. Henning will be informed of this selection and will be asked to submit information to include a copy of his report, the financial statements, and working papers related to that engagement for review by ECA. The ECA may extend the period to select an engagement to ensure a suitable selection is available. A peer review undergone by his firm would not exempt him from this requirement.

Mr. Henning agrees to inform the ECA of any changes in the composition of his practice, changes in his role or if he has not performed any audits, reviews, or compilations with note disclosures until a suitable work product is selected for review. If his practice changes and he is no longer involved with audits, reviews, or compilations with notes disclosure, no longer acts in a supervisory capacity on such engagements, or has not performed such engagements during the above specified period, he must inform the ECA of this and the ECA may require that he attest every six months for three years as to the nature of his practice. If, during the three-year attestation period he returns to performing such engagements, he must inform the ECA of this change and the ECA will select a suitable work product for review.

After an initial review of such report, financial statements, and working papers, the ECA may decide he has substantially complied with professional standards and close this matter. Or, the ECA may decide that an ethics investigation of the engagement he submitted is warranted. If, at the conclusion of the investigation, the ECA finds that professional standards have in fact been violated, the ECA may refer the matter to the trial board for a hearing or take such other action as it deems appropriate.

g. To be prohibited from serving as a member of any ethics or peer review committee of The Ohio Society of CPAs or the AICPA until he has completed all directives in this letter. This restriction will be communicated to those responsible for appointments to such committees. In addition, if he applies to join any other committee of The Ohio Society of CPAs or the AICPA, he must inform those responsible for such appointments of the results of this ethics investigation. This requirement shall remain in effect until the ECA determines that the work product submitted to comply with directive h. above substantially complies with professional standards.

h. To be prohibited from teaching continuing professional education courses approved by the AICPA or the state societies in the areas of auditing and accounting, Government Auditing Standards and OMB Circular A-133/Uniform Guidance until he has completed all of the directives included in this letter. This restriction will be communicated to those responsible for engaging CPE instructors at The Ohio Society of CPAs and the AICPA. This requirement shall remain in effect until the ECA determines that the work product submitted to comply with directive f. above, if applicable, substantially complies with professional standards.

i. To be prohibited from performing peer reviews in any capacity until the directives in this letter have been completed. This prohibition will remain in effect until the ECA determines that the work product he submitted to comply with directive f. above, if applicable, substantially complies with professional standards. This restriction will be communicated to his peer review oversight agency.

j. That the ECA shall provide a copy of this settlement agreement to the AICPA’s Peer Review Division staff, his peer review administering entities and his firm’s peer reviewer.

k. That the ECA shall publish his name, the name of his firm, the charges, and the terms of this settlement agreement.

l. That the ECA shall monitor his compliance with the terms of this settlement agreement and initiate an investigation where the ECA finds there has been noncompliance.

Carolyn C. Kaufman – Hudson, OH

Under the automatic disciplinary provisions of the OSCPA bylaws, Ms. Kaufman’s membership was terminated effective December 18, 2017, following a conviction of a felony under the laws of any state or of the United States; conviction of any crime, an element of which is dishonesty or fraud under the laws of any state or of the United States.

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