STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF PROFESSIONAL ) REGULATION, BOARD OF )
ACCOUNTANCY, )
)
Petitioner, )
)
vs. ) Case No. 85-3503
) RICHARD A. JANKOWSKI, CPA, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, the above matter was heard before the Division of Administrative Hearings by its duly designated Hearing Officer, Donald R. Alexander, on December 16 and 17, 1985 in Apopka, Florida and on February 3 and 24, 1986 in Orlando, Florida.
APPEARANCES
For Petitioner: Joseph W. Lawrence, II, Esquire
130 North Monroe Street Tallahassee, Florida 32301
For Respondent: Richard A. Jankowski, pro se
1012 Pershing Avenue
Orlando, Florida 32806 BACKGROUND
By amended administrative complaint filed on October 1, 1985, petitioner, Department of Professional Regulation, Board of Accountancy, has charged that respondent, Richard A. Jankowski, a, certified public accountant, had violated various provisions within Chapter 473, Florida Statutes, and rules promulgated there under.1 In a four count complaint, petitioner has generally alleged that respondent (a) failed to practice public accounting with that level of care, skill and treatment required of reasonably prudent similar certified public accountant under similar conditions and circumstances when he prepared financial statements for Apopka Growers Supply, Inc., for the months March through July, 1984 (Count I), (b) failed to practice public
accounting with that level of care, skill and treatment required of a reasonably prudent similar certified public accountant under similar conditions and circumstances in the handling of public accounting services for Apopka Enterprises (Count II), (c) failed to practice public accounting with that level of care, skill and treatment required of a reasonably prudent similar certified public accountant while performing accounting services for Colorado Drilling Partnership (Count III), and (d) failed to conform with the standard of care required of a certified public accountant while handling public accounting services for Land Restoration Corporation (Count IV). By so doing, respondent is charged with violating Rules 21A-21.03, 21A-21.05 and 21A-22.01, Florida Administrative Code, and Sections 473.319 and 473.323(1)(a), (g) and (h), Florida Statutes (1985).
Respondent disputed the above allegations and requested a formal hearing pursuant to Subsection 120.57(1), Florida Statutes (1985). The matter was referred to the Division of Administrative Hearings by petitioner on October 8, 1985, with a request that a hearing officer be assigned to conduct a formal hearing. By notice of hearing dated October 25, 1985, the final hearing was scheduled for December 16 and 17, 1905 in Apopka, Florida. Continued hearings were held on February 3 and 24, 1986 in Orlando, Florida.2
At the outset of the final hearing on December 16, 1985, respondent made an ore tenus request to continue the hearing. This motion was denied.
At final hearing, petitioner presented the testimony of Thomas F. Reilly, Harriett Kay Salmon, David Richard Geiger, Joseph Carlisi, Gary Brill, Jacob M. Schroeder, Jack L. Byrd, Jr., and William L. Schroeder and offered petitioner's exhibits 1-12. All were received in evidence. Respondent testified on his own behalf and presented the testimony of Jerre K. Gonzales and Nilo Gonzales, Jr. He also offered respondent's exhibits 1 and 2 which were received in evidence.
The transcripts of hearing (five volumes) were filed on March 14, 1986. Proposed findings of fact and conclusions of law were filed by petitioner on March 31, 1986.3 A ruling on each proposed finding of fact has been made in the Appendix attached to this Recommended Order.
At issue herein is whether respondent's license as a certified public accountant should be disciplined for the alleged violations set forth in Counts I-IV of the amended administrative complaint.
Based on all the evidence, the following facts are determined:
FINDINGS OF FACT
INTRODUCTION
At all times relevant hereto, respondent, Richard A. Jankowski, held cerrified public accountant license number AC 4189 issued by petitioner, Department of Professional Regulation, Board of Accountancy. Respondent presently practices public accounting at 7 West Main Street, Suite 500, Apopka, Florida.
Respondent is a 1969 graduate of Stetson University with a degree in mathematics and physics. In 1972 he received an accounting degree from the same university and, after successfully completing his certified public accountant (CPA) examination, was issued his CPA license in April, 1974. From 1972 until 1976, Jankowski practiced public accounting with an undisclosed CPA firm. In 1976 he was employed as a comptroller for a commercial enterprise in Apopka, Florida, and remained in that position until May, 1978. Since then he has either practiced public accounting in Apopka as a sole proprietor or as a partner with other practitioners. Since January, 1983, he has been the sole proprietor of Richard A. Jankowski, CPA, PA, in Apopka.
In addition to his public accounting firm, respondent is a 501 shareholder in Apopka Accounting Services, a firm which provides client write-up services on a contractual basis for respondent's public accounting firm. Jankowski in also a co- owner of DSO Systems Corporation which provides business consulting services with an emphasis on computer applications related to cash flow statements. All three entities operate out of the same office complex in Apopka.
Jankowski has been involved in various investment endeavors with other individuals. In return for fees or a percentage of ownership, Jankowski has performed various bookkeeping, accounting and tax services for the partnerships or corporations in which he was a principal. The action herein stems from complaints filed with petitioner by a number of Jankowski's business colleagues complaining of improprieties by Jankowski in his business dealings. The issuance of an administrative complaint, as amended, prompted this controversy.
To support the allegations in the complaint, petitioner presented the testimony of Thomas F. Reilly, a certified public accountant, who was accepted as an expert in public accounting. Reilly conducted an audit and investigation of the complaints, and published his findings in various reports and documentation which were received in evidence as petitioner's exhibits L-10. In addition, testimony was heard from employees of the various
investment entities, as well as the business partners themselves. It should be noted that petitioner's witnesses Carlisi, Brill, William Schroeder and Jacob Schroeder have filed a lawsuit against Jankowski that is currently pending in Orange County circuit court. Those individuals also filed complaints with DPR at about the same time the civil litigation was instituted.
Jankowski testified on his own behalf and presented two witnesses.
COUNT I
In Count I respondent is charged with having "failed to practice public accounting with that level of care, skill and treatment which is required by a reasonably prudent similar certified public accountant under similar conditions and circumstances in his handling of public accounting services for Apopka Growers Supply, Inc." More specifically, it is alleged that Jankowski (a) prepared compiled financial statements for Apopka Growers Supply, Inc. which "failed to comply with generally accepted and prevailing standards of accounting practice and procedure," (b) "prepared financial statements for the months of March-July, 1984 without an adequate basis of valuation for inventory amounts," (c) "failed to fully and properly cause payroll tax and sales tax returns to be filed on a timely basis, resulting in penalties and interest to be placed against Apopka Growers Supply, Inc.," and (d) "departed from generally accepted auditing standards and procedures by issuing accountant's reports on compiled financial statements which were not in accordance with Statements on Standards for Accounting and Review Services No. 5."
Apopka Growers Supply, Inc. (AGS) was established in February, 1983. It purchases finished nursery products, stores the products in two warehouses, and then resells the same to various retail nursery businesses in the state. Its stock- holders were Milo Gonzales, Jr., Arthur Rosacker, Jr. and James Riley, each holding 251 of the outstanding shares.4 Jankowski was initially engaged by AGS to perform its accounting and tax services. In August, 1983 Jankowski entered into an oral agreement with AGS to become its comptroller and to receive 25% of the corporation stock. It is unknown whether the stock was ever issued, but respondent assumed the role of comptroller of AGS in September, 1983.
Between March and July, 1984, respondent prepared and issued monthly balance sheet and income statement compilation reports for AGS. There were no accompanying accountant's reports attached to the financial statements. Such reports would have identified Jankowski's association with and responsibility for
the statements. The balance sheet reports were identified at the top of the page in the following manner:
Apopka Growers Supply, Inc.
Balance Sheet Compilation Report (month, day and year)
Under the current assets portion of the balance sheet was listed the item "Inventories." As an aid to preparing the inventory balances, AGS personnel furnished Jankowski with the following inventory amounts for the months of March through July:
$392,561, $437,137, $420,529, $403,990 and $363,364. These
numbers were derived from a physical inventory count taken by AGS employees. Jankowski did not accept these numbers, but instead issued reports reflecting the following valuations for the same four month period: $433.537, $478.113, $482.022, $477,490.66 and
$401.479.72. For illustrative purposes, a comparison of the two sets of figures is shown below:
Inventory Per Inventory Per
Physical Count Financial Sheets Difference
March | $392,561 | $433,537 | $40,976 |
April | 437,137 | 478,113 | 40,946 |
May | 420,529 | 482,022 | 61,493 |
June | 403,990 | 477,491 | 73,501 |
July | 363,364 | 481,479 | 110,115 |
By increasing the inventory balances, Jankowski reflected net income of $21,342 for the five month period ending July 31, 1984. Had he used the physical count, the corporation would have shown a $96,773 loss. When asked by petitioner's consultant to reconcile the two sets of figures, and to give some basis for rejecting the physical count and using the higher valuation figures, Jankowski admitted there was a "discrepancy," but justified using the higher valuations because he knew the company supplied numbers "weren't right," and had no confidence in their accuracy. He stated the numbers were adjusted upward using "historical percentages" produced from a computer print-out. He conceded that on occasion the numbers used were his "best guess," but contended that all principals in AGS agreed to their use at monthly board of director meetings. He also pointed out that the financial statements were intended for management's use only, and therefore no requirement existed for disclosing the basis of the valuations. However, Jankowski had no work papers to support his valuations or "best guess," and he produced no documentation or corroborating oral testimony at hearing to support the claim that management approved his actions. Generally accepted and prevailing standards of public accounting practice required that Jankowski accept his client's figures, or have some basis to reject them and use other amounts. On the other hand, if Jankowski felt uncomfortable in using the client figures, he
should not have issued the statements. Alternatively, he could have used the client figures, but identified his uncertainty as to their accuracy in the accountant's report. Respondent did not follow any of the above procedures, and by failing to do so, he failed to comply with generally accepted and prevailing standards of public accounting practice and procedure in the preparation of the statements.
As noted above, Jankowski prepared and issued compiled monthly financial statements during the months of February through July, 1984. A compiled statement is one prepared without the benefit of an audit. The statements were to be used for internal management purposes as well as in connection with a bank loan. Jankowski did not attach accountant's reports to the statements. Generally accepted and prevailing standards of public accounting practice require that accountant's reports be attached to the statements to reflect the preparer's association with and responsibility for the statements when the statements are given to third parties. This is true even if the CPA is preparing such statements in his role as an employee (comptroller), and not as an outside independent CPA. Because a third party (the bank) was furnished the statements, Jankowski deviated from accepted and prevailing accounting standards by failing to prepare an accountant's report for each of the foregoing statements.
As CPA and comptroller for AGS, Jankowski had the responsibility of filing federal and state payroll and sales tax returns. These were filed with the Internal Revenue Service (IRS), Florida Department of Revenue (DOR), and Florida Department of Labor and Employment Security (DLES). Documentation consisting of checks, check stubs, correspondence,
and copies of returns were introduced into evidence and reflected that AGS was assessed penalties (and interest in some cases) on the following returns which were not timely filed: IRS Form 941 for the quarters ending 9/30/83, 12/31/83, 3/31/84 and 6/30/84; IRS Form 940 for the year ending December 31, 1983; DLES Form
VCT-6 for the quarter ending 6/30/84; and DOR returns for 10/83, 11/83, 12/03, 4/84 and 6/84. Although Jankowski contended that appropriate extensions of time had been obtained in each case, he offered no written evidence to corroborate this claim. Testimony by a former principal in AGS revealed that AGS frequently suffered severe cash flow problems. However, Jankowski did not show that extensions had been obtained because of a shortage of cash; that he had advised his client of the necessity of filing such returns, or that he was following his client's instructions by not filing the returns. By filing the returns or making said payments in a delinquent fashion, Jankowski failed to practice public accounting with that level of care, skill and treatment which is required by a reasonably prudent similar certified
public accountant under similar conditions and circumstances in his handling of this aspect of public accounting services for AGS.
On March 14, 1983 and August 19, 1993, respondent issued unaudited financial statements for AGS for the periods ending March 11 and August 19, 1983, respectively. Those reports were accompanied by a compilation report which provided certain disclaimers on the part of respondent and advised readers that the statements were unaudited and based upon a compilation of data supplied by the client. The appropriate wording to be used in a compilation report is set forth in the Statements on Standards for Accounting and Review Services (SSARS) promulgated by the American Institute of Certified Public Accountants. They are incorporated by reference in Rule 21A-20.09, Florida Administrative Code, and apply to Florida licensees. Although a copy of the Standards was not introduced into evidence, testimony established that Jankowski deviated from Standard No. 5 in the following respects when he issued the two compilation reports. First, even though Jankowski was a sole practitioner when the two reports were issued, he used the words "we" and "us" instead of "I" throughout the reports. Secondly, he failed to note that the reports were prepared in accordance with the Standards. Finally, thc reports were enclosed in a "jacket" which reflected the name of "Jankowski and Brummer," a firm with whom respondent was no longer associated. These deviations from the Standards constituted a failure to conform with generally accepted and prevailing standards for accountants.
COUNT II
In Count II it is alleged that Jankowski "failed to practice public accounting with that level of care, skill and treatment which is required by a reasonably prudent similar certified public accountant under similar conditions and circumstances in his handling of public accounting services for Apopka Enterprises." Specifically, he is charged with (a) violating "ethical and fiduciary standards recognized by certified public accountants by not complying with various covenants of a partnership agreement of which he was the managing partner and the accountant," (b) failing "to fully and properly maintain adequate accounting records for said partnership," and
(c) overstating "his personal financial statement submitted to a financial institution in connection with a loan for a different entity."
The origin of Apopka Enterprises (AK) lies in Jankowski's desire to establish a small office complex in Apopka. Needing investment capital, Jankowski approached William A. Schroeder, for whom Jankowski had previously performed some
unrelated accounting services. Schroeder and Jankowski agreed to become equal partners in AK, and they executed a partnership agreement to this effect on July 31, 1983. The agreement has been received in evidence as petitioner's exhibit 2. They eventually purchased a ten-unit office complex in Apopka.
Under the terms of the partnership agreement, Jankowski was designated as the managing partner, and among other things, was responsible for keeping and maintaining all books and records, filing necessary reports, paying taxes, and issuing annual unaudited financial statements. In addition, Jankowski was required to prepare "periodic reports not leas than semi- annually of the state of the business and the affairs of the Partnership" and deliver the same to Schroeder. A more complete description of the duties and obligations of both partners is set forth in the agreement itself.
Although the specific covenants allegedly violated by Jankowski were not identified in testimony, the consultant's report (composite exhibit 2) refers to paragraphs 5.3, 5.4; 5.6(B), (C) and (D), and 8.6(D), (E), (F), (G), (J) and (K) of the agreement.
Paragraph 5.3 required Jankowski, as managing partner,
to:
. . .prepare or cause to be prepared all tax returns and statements, if any, which must be filed on behalf of the Partnership regarding this transaction with any taxing authority, and shall submit such returns and statements to all the Partners for their approval prior to filing, and when approved by the Partners, make timely tiling thereof.
In accordance with the above covenant, Schroeder was given a partnership tax return (Form K-1) for calendar year 1983. As of December, 1985, Schroeder had not been given a copy of the 1984 Form K-1 despite having made repeated requests for the same. The return was required in order for Schroeder to prepare his own tax return. Although Jankowski claimed an extension had been obtained to and including October 15, 1985 to file the return, and that the return had been timely filed by that deadline, he offered no proof of this. Therefore, it is found he violated the covenant by failing to "submit such return and statement to all Partners, (and to) make timely filing thereof."
Paragraph 5.4 of the covenants generally required that all income, deductions, losses, credits and gains be allocated to the partners in accordance with their respective distribution
percentage interests. There is no evidence that Jankowski violates this requirement.
Paragraph 5.6(B) required that the Partnership's "books of account" be maintained in accordance with sound accounting principles. Paragraph 5.6(C) permits either partner the right to inspect the books and make copies thereof. Paragraph 5.6(D) required Jankowski, as managing partner, to prepare after the close of each fiscal year an "unaudited statement". . .showing the receipts and disbursements for the Partnership for the preceding fiscal year, the balance in each Partner's capital account, the unpaid balance under all obligations of the Partnership, and all other information reasonably requested by any Partner". In addition, after the close of each fiscal year, Jankowski was required to prepare a balance sheet statement of income or loss for each partner, and certain other financial information on a fiscal year basis. In the case at bar, Jankowski failed to keep any books of account other than a check- book. He also failed to prepare annual unaudited statements. Finally, he failed to prepare the other financial information required on a fiscal year basis. This constituted a violation of covenants 5.6(B) and (D). However, there is no evidence that Jankowski refused access to his records in violation of covenant 5.6(C).
Paragraph 8.6 prescribes the duties of the managing partner (Jankowski). Paragraph 8.6(D) required him to "lease to third parties space in the improvements". Paragraph 8.6(E) required him to "keep all books of account and other records of the Partnership in accordance with this Agreement." Paragraph 8.6(F) required the managing partner to "prepare and deliver each of the Partner's periodic reports not less than semi-annually." Paragraph 8.6(G) imposed the duty of preparing "within 75 days after the end of each fiscal year. . . a report setting forth in sufficient detail all such information and data with respect to business transactions. . . involving the Partnership during such fiscal year. . ., to prepare its state, federal, and local income tax returns," and to furnish reports upon request of the other partner. Paragraph 8.6(J) required Jankowski to "maintain all funds. . . in an account. . . approved by the Partners". Finally, Paragraph 8.6(K) required respondent to "make distributions periodically to the Partners 1n accordance with the provisions of this Agreement." Through credible testimony it was established that Jankowski failed to keep adequate books of accounts and other partnership records, failed to furnish his partner periodic reports concerning their venture despite repeated requests to do so, failed to prepare an annual report of business transactions, and failed to timely file appropriate tax returns. These omissions constituted a violation of covenants 8.6(E), (F), and (G). Since these duties are normally associated
with the practice of public accounting, Jankowski failed to practice accounting with the level of skill, care and treatment required of an accountant under similar conditions and circumstances. There is no evidence that respondent failed to "lease to third parties space in the improvements," maintain funds in an account approved by both partners, or to make all required distributions, as required by paragraphs 8.6(D), (J) and (K).
The complaint also alleges Jankowski "overstated his valuation of his interest in Apopka Enterprises in his personal financial statement submitted to a financial institution in connection with a loan for a different entity." On February 28, 1983, Jankowski filed a handwritten personal financial statement with Southeast Bank in Apopka for the purpose of securing a line of credit. The financial statement was prepared on Jankowski's business stationery and carried his letterhead. However, it was apparent that this was an informal financial statement, and not one prepared in the role of a CPA. Although the financial statement listed $88,000 in assets next to the notation "Apopka Enterprises (deposits)," the actual deposits in AE totaled only
$13,000 as of February 28, or $75,000 less than the amount reflected on the financial statement. Jankowski justified adding the $75,O0O to the deposits on the theory that the partnership intended to acquire ten units in an office complex at a future date, and when those were sold, his share of the profits would be
$75,000. However, this was improper since the partnership did not acquire the assets on which the $75,000 was based until May, 1984, or some fifteen months later.
On December 31, 1983, respondent reflected $15,000 on the partnership books but removed this amount on January 1, 1984. He did so to ensure that the 1983 partnership loss would "flow through (the investors') personal income tax return." There is insufficient evidence to establish that this presentation and use of funds was improper.
COUNT III
In Count III it is alleged that Jankowski "failed to practice public accounting with that level of care, skill and treatment which is required by a reasonably prudent similar certified public accountants under similar conditions and circumstances in his handling of public accounting services for Colorado Drilling Partnership." Specifically, it is charged that respondent (a) "failed to timely release distribution checks,"
failed to "provide the full information reasonably required,"
failed to "timely file the 1984 U.S. Partnership return of income," (d) "wrongfully borrowed funds from the partnership,"
(e) "improperly determined allocation percentages of the
partnership," and (f) "improperly conducted banking transactions on behalf of the clients." It is also charged that Jankowski "violated ethical and fiduciary standards recognized by certified public accountants in his actions on behalf of his clients." Finally, it is alleged that respondent violated Rules 21A-21.03 and 21A-21.05 by receiving a "finder's fee and commission" which were contingent upon certain "findings and results of public accounting services in relation to Eastern American and the Colorado Drilling Partnership."
Colorado Drilling Partnership (CDP) was formed in 1983 by twelve investors, including respondent. There is no written document evidencing the formal agreement between the partners. The entity was formed for the purpose of investing funds in Eastern American Energy Corporation (EAEC), an oil and gas drilling company located in Aurora, Colorado. In all, the twelve investors made an initial investment of $113,000, including
$15,250 invested by Jankowski, which represented a 13.5% interest in the partnership. Jankowski was designated as managing partner. As such, he was to forward funds received from investors to EAEC, receive monthly distribution checks from EAEC, and distribute these monies to all investors according to their percentage of ownership in the partnership. Jankowski also had the duty of preparing and filing the tax return and to provide monthly detail sheets regarding the partnership s activities.
The latter documents were supplied co Jankowski each month by EAEC.
Between January and April, 1985, Jankowski did not issue monthly distribution checks to at least one partner. Respondent asserted he was under the impression the checks had been mailed, and when he discovered they were not, he mailed all four checks by letter dated April 23, 1985. This constituted lack of due care in the performance of his accounting duties.
In order to prepare the 1984 federal partnership return by the April 15, 1985 due date, it was necessary for Jankowski to obtain tax credit information from EAEC. This information was supplied to Jankowski by EAEC by letter dated March 20, 1985. When certain partners inquired thereafter when the 1984 return would be filed, Jankowski told them he was still waiting on the tax credit information. In actuality, he already had that data in hand. As of August, 1985 the tax return had still not been filed although Jankowski had obtained an extension of time to and including October 15, l985 in which to do so. It is unknown whether the return was actually filed by October 15 although Jankowski claimed that it was. No documentation to prove this fact was submitted. By failing to timely file the return, or to justify the obtaining of an extension, Jankowski exhibited a lack of due professional care.
It is charged that Jankowski "wrongfully borrowed funds from the partnership." When respondent received the $113,000 in investment funds, he "loaned" between $30,000 and $40,000 of the funds to Land Restoration Corporation, in which he was a principal. When EAEC had not received the investment funds by the date promised, an inquiry was made with Jankowski who then sent the $113.000 to EAEC by four checks drawn over a 28-day period. Jankowski claims he had authority from other investors to use the funds in this manner; but no other witness corroborated his story. Indeed, at final hearing the two investors who Jankowski suggested gave such approval denied that any authority had been given. Therefore, it is found that respondent had no authority to use the funds in the manner that he did, and that the use of said funds was improper. In Jankowski's defense, it is noted that all funds were promptly repaid, and several of the partners in CDP were also principals in Land Restoration Corporation. It is also charged that respondent improperly used some $1,250 of a $3,173 cash deposit given by a CDP investor (P. Owen) for non-CDP related matters. However, it was shown that this amount ($1,250) represented fees to be retained by Jankowski for unrelated accounting services performed for Owen.
The partners were assigned allocation percentages CDP based upon their amount of investments in relation to the total investment of $113,000. These percentages ranged from 0.88% to 22.12%. After the initial contributions were made, EAEC offered an additional investment opportunity to CDP partners. Only seven elected to invest more funds, including Jankowski, who promised to contribute another $7,100. The other six made contributions ranging from $396.73 to $3,173.96. Jankowski then unilaterally revised the percentage allocations of all partners by reducing the allocations for those who did not make further contributions, keeping the same allocations for the six partners who made contributions to the new program, and increasing his own percentage from 13.5% to 20.8%. He did this without approval of the other partners, and made the reallocation effective some twelve months before he paid his $7,100 contribution. Jankowski claimed that Jacob Schroeder, another investor, had approved the reallocation--but at hearing Schroeder did not confirm this.
Even if this were true, there was no evidence to show that
Schroeder had authority to agree to the reallocation on behalf of the remaining partners. By increasing his allocation before an actual contribution was made, and changing all others without the approval of his partners, Jankowski failed to use reasonable care while performing accounting duties for CDP, and to have sufficient relevant data to support his actions.
The complaint alleges that Jankowski failed to "provide (the investors) the full information reasonably required." This allegation stems from a complaint that respondent failed to provide monthly back-up information to the partners explaining the basis for the check distributions. In this regard, one investor acknowledged he received sufficient data during the first few months, but that it dwindled as time progressed. Other than this complaint, there was no other testimony concerning this issue.
It is charged that Jankowski improperly conducted certain banking transactions on behalf of his clients. However, there is no evidence relating to this charge.
Finally, it is alleged that respondent improperly accepted a commission or fee which was contingent upon certain findings or results of accounting services to be performed for CDP. Jankowski received a check for $2,260 on November 21, 1903 as a commission for finding several other investors in the partnership. Jankowski was simply looking for investors to complete the deal, and nothing more. Because the fee was not based upon findings or results of accounting services to be performed by Jankowski in the future, and was not in connection with the practice of accounting, no deviation from prevailing accounting standards and practice occurred.
COUNT IV
The final count charges respondent with failing "to practice public accounting with that level of care, skill and treatment which is required by a reasonably prudent similar certified public accountant under similar conditions and circumstances in his handling of public accounting services for Land Restoration Corporation." More particularly, it is alleged that Jankowski (a) "violated ethical and fiduciary standards recognized by certified public accountants. . . in handling of monies and investments in the corporation," (b) "failed to fully and properly maintain adequate accounting records," (c) "failed to file payroll tax returns and make deposits in a timely manner," and (d) "prepared compiled accountant's reports and financial statements which failed to comply with generally accepted and prevailing standards of accounting practice and procedure."
Land Restoration Corporation (LRC) was formally incorporated on November 9, 1983. Its headquarters were initially in Apopka, but were later moved to Winter Haven, Florida. Its principal business purpose was to haul sludge from municipal and county waste disposal sites to agriculture fields
where it was used as a fertilizer. Among LRC's stockholders were Jankowski (25%), Jacob M. Schroeder (2%), William Schroeder (21%), Gary A. Brill (15%), Joseph J. Carlisi (10%), and several other unnamed individuals. The business began operating on March 1, 1983 even though its articles of incorporation were not filed with the Department of State until November 9, 1933. The events herein came to light after several stockholders filed complaints with petitioner concerning Jankowski's alleged improprieties with the firm. The same complainants also have pending a circuit court action against respondent.
When LRC was formed, Jankowski was given a 25% share in the company in return for a $50,000 contribution. Whether such contribution was given is not known. In any event, Jankowaki was hired to perform all accounting and tax functions for LRC. Among other things, respondent was to prepare periodic financial statements, maintain payroll records and file payroll tax returns, prepare and file federal and state income tax returns, and perform other accounting or tax services when required. For these services, Jankowski was to receive $3,000 per month plus
$650 for an automobile allowance.
Jankowski initially opened up an LRC corporate checking account requiring only his signature. This was consistent with the articles of incorporation. When the other stock-holders grew uncomfortable with this arrangement, they instructed Jankowski in November, 1983 that no corporate checks be issued without at least two signatures. Jankowski adhered to this new procedure until LRC moved its corporate headquarters from Apopka to Winter Haven in August, 1984. Without advising the other stockholders, or obtaining their consent, in September, 1984, Jankowski opened up a new LRC checking account at a local Apopka bank which required only his signature. At about the same time, three LRC customers mailed checks to the old Apopka address since they were unaware of LRC's move to Winter Haven. Jankowski deposited these checks in the new corporate account. After being told by LRC official. that the checks were sent to the wrong address, two customers placed stop payment orders on their checks. However, the third check in the amount of $22,544 cleared before payment could be stopped. After depositing these checks, Jankowski wrote ten checks on the corporate account, including six to himself or his bookkeeping service. Because two deposits were voided by the customers, several of the checks bounced, leaving the corporate account $8,000 overdrawn.
Jankowski contended the above actions were .authorized by Article X of the articles of incorporation. That article provides in part as follows:
It is a specific provision of these Articles that Richard A. Jankowski shall have the sole authority to issue any checks from any bank account of the corporation . This specific provision cannot be changed by a vote of the board of directors.
But this article only authorizes Jankowski to write checks, not to open corporate bank accounts. Since he had no authority to open the new bank account in September, 1984, he violated generally accepted and prevailing ethical and fiduciary standards for public accountants.
Jankowski failed to timely file LRC's federal tax returns for the quarters ending September 30, 1983, December 31, 1983 and March 31, 1984, and to timely file federal form 940 on December 31, 1983. Because of this, LRC was assessed penalties and interest of S3,553.54 and $366.41, respectively. Jankowski attributed the delay to a severe cash flow problem on the part of LRC, and "trouble with the mail." He also stated he reported the matter to the Internal Revenue Service in an effort to force his client to pay its taxes. However, none of his actions were documented or corroborated by independent oral testimony. By failing to timely file said returns, or to show that appropriate extensions were obtained for justifiable reasons, Jankowski failed to conform with accepted and prevailing standards for public accountants.
Jankowski enrolled his ex-wife in the LRC group insurance program in 1984 even though she was not an LRC employee and was ineligible for enrollment. He did so since she needed medical coverage at that time and wee apparently unable to enroll in any other program. According to Jankowski, this had been done for other ineligible persons in the past. After her coverage was discovered by another stockholder, Jankowski dropped her from the plan and repaid the company for her insurance premiums. By knowingly placing an ineligible person on the group policy, Janowski exhibited a lack of due professional care.
It was claimed that Jankowski used envelopes with postage meter dates several weeks old so that late filed tax returns could be blamed on slow mail service. Although it was shown that he had a number of such envelopes in his possession, there was no evidence to show that he actually used the envelopes in violation of the law.
Jankowski prepared and issued financial statements for LRC as of July 31, 1983. Although he attached the required compilation report to the statements, the report failed to disclose that he lacked independence by virtue of his being a
stockholder in the corporation. He also used improper wording in his report in several minor respects. First, even though he was a sole practitioner, he used the word "we" instead of "I".
Secondly, he used the words "statement of income" and "income statement" instead of the proper term "statement of income and expense." Third, he failed to include certain information required by SSARS No. 1., paragraph 43, and he copied other language from SSARS No. 1, which had been superceded by SSARS No.
5 effective January 1, 1983. Fourth, he referred to the entity as a corporation even though its articles of incorporation had not yet been filed with the Department of State. Finally, his financial statements contained no footnote disclosure, and included several "unorthodox" items. For example, he reflected both management fee income and research project income on the statements even though no amounts for either item had been collected that reporting period. He showed preferred stock on the balance sheet even though none had been issued at that time. He also reflected sludge inventory in varying amounts on the statements without adequate documentation to support that entry. All such matters constituted a failure by Jankowski to comply with generally accepted and prevailing standards of accounting practice and procedure.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction of the subject matter and the parties thereto pursuant to Subsection 120.57(1), Florida Statutes (1985).
Before addressing the issues in this case, it is appropriate to briefly comment on respondent's claim that he was not allowed to fully cross-examine certain witnesses or call witnesses on his own behalf. Respondent appeared pro se, and did not avail himself of the services of an attorney. Respondent did not participate in discovery or request subpoenas prior to hearing to ensure attendance of witnesses. At final hearing he was given considerable latitude in examining witnesses because he was not a lawyer. He was allowed to cross examine all witnesses as to matters raised on direct examination and matters affecting the credibility of the witnesses in accordance with Subsection 90.612(2), Florida Statutes (1985). Further, respondent made no effort to seek the attendance of witnesses by subpoena until after the hearing began, and his belated effort to serve a subpoena on the evening of the first day of the hearing was quashed at the witness' request because of ineffective service of process. However, he did call two witnesses who voluntarily appeared without the benefit of a subpoena. Moreover, four former business partners who had filed complaints with DPR were present, testified under oath, and were liberally cross-examined
by respondent. Therefore, respondent has been accorded ample opportunity to present his defense.
The amended administrative complaint contains four counts, and basically charges that respondent failed to practice public accounting with that level of skill and care required of a reasonably prudent CPA in his dealings with Apopka Growers Supply, Inc., Apopka Enterprises, Colorado Drilling Partnership and Land Restoration Corporation. In conjunction with his accounting activities for the above entities, Jankowski is also charged with accepting a contingent fee, and with violating various rules of the Board of Accountancy. Each of the counts will be discussed separately.
Initially, it is noted that in each of the foregoing counts Jankowski has been charged with failing "to practice public accounting with that level of care, skill and treatment which is required by a reasonably prudent similar certified public accountant under similar conditions and circumstances." A review of Chapter 473, Florida Statute. (1985), and Chapters
21A-21 and 21A-22, Florida Administrative Code, which contain the statutes and rules allegedly violated by respondent, do not contain the above language cited in the complaint. Moreover, there was no testimony to establish that a failure to conform with this standard equates to misconduct, incompetency or negligence within the meaning of Subsection 473.323(1)(g), Florida Statutes (1985). However, Rule 21A-22.01(1)(b), Florida Administrative Code, requires that an accountant use "due professional care" in his accounting activities, and the agency's expert often referred to a lack of due professional care when responding to his counsel's questions regarding Jankowski's level of accounting "care, skill and treatment." Therefore, whenever it has been shown that Jankowski did not conform with the level of care, skill and treatment practiced by other CPA's under similar conditions and circumstances, the undersigned has equated this conduct with a lack of due professional care under Rule 21A- 22.01(1)(b), Florida Administrative Code.
Count I -- Relevant to this count are Rule 21A-22.01, Florida Administrative Code, and Subsections 473.323(1)(a), (g) and (h), Florida Statutes (1985) They read as follows:
21A-22.01 Competence (General Standards).
A licensee shall comply with the following general standards and must justify any departures therefrom:
Professional competence. A licensee shall undertake only those engagements which
he or his firm can reasonably expect to complete with professional competence.
Due professional care. A licensee shall exercise due professional care in the performance of an engagement.
Planning and supervision. A licensee shall adequately plan and supervise an engagement.
Sufficient relevant data. A licensee shall obtain sufficient relevant data to afford a reasonable basis for conclusions or recommendations in relation to an engagement.
473.323 Disciplinary proceedings.
The following acts constitute grounds for which the disciplinary actions in subsection (3) may be taken:
Violation of any provision of s. 473.317, s. 455.227(1), or any other provision of this act;
* * *
Upon proof that the licensee is guilty of fraud or deceit; o~ of negligence, incompetency, or misconduct, in the practice of public accounting;
Violation of any rule adopted pursuant to this act or chapter 455;
Count I involves Jankowski's dealings with AGS in 1983 and 1984 and alleges he made improper inventory valuations in March-July 1984; filed inappropriate compiled financial statements for the same months, did not file payroll and sales tax returns on a timely basis, and prepared unaudited statements on two occasions in an improper manner. The evidence reveals Jankowski failed to exercise due professional care and obtain sufficient relevant data within the meaning of Rule 21A-22.01(b) and (d) when he utilized his own (rather than management's) inventory valuations for the months March through July, 1984. The evidence also reveals that Jankowski late-filed several payroll and sales tax returns which caused penalties and interest to be incurred by his client. By doing so, he exhibited a lack of due professional care as proscribed by Rule 21A-22.01(1)(b), Florida
Administrative Code. Jankowski also demonstrated a lack of due care (Rule 21A-22.01(1)(b), F.A.C.) by failing to attach accountant's reports to the monthly financial statements compiled for the months of February through July, 1984. This was required since the statements were given to a third party (a bank) and Jankowski's association with such statements (and lack of independence) should have been disclosed. Finally, Jankowski did not exercise due professional care when he issued unaudited financial statements on March 14 and August 19, 1983 without strictly adhering to the Statements and Standards for Accounting and Review Services as adopted by Rule 21A-20.09, Florida Administrative Code.5 By doing so, he again violated Rule 21A-
O1(l)(b), Florida Administrative Code. The four rule violations in turn constitute a violation of Subsection 473.323(1)(h), Florida Statutes (1985), which makes it unlawful to violate any Board rule, and Subsection 473.i23(1)(a), Florida Statutes (1985), which makes it unlawful to violate any provision within Chapter 473.
Count II -- Respondent is charged with violating the same rule and statutes while performing accounting activities for AE in 1983 and 1984. The complaint charges Jankowski with violating certain covenants in a partnership agreement, failing to maintain adequate accounting records for the partnership, and submitting a personal financial statement with overvalued assets to a bank to secure a line of credit.
The evidence reflects that Jankowski violated covenants 5.3, 5.6(B) and (D), and 8.6(E), (F) and (G) of the partnership agreement executed by Jankowski and William Schroeder. Conversely, there is insufficient evidence to prove that the remaining covenants cited in petitioner's exhibit 2 were violated. The agency alleges that by violating the partnership covenants respondent has also violated "ethical and fiduciary standards recognized by certified public accountants." If this is true, it must turn on a violation of some agency rule or statute. The complaint relies upon Rule 21A-22.01 and Subsections 473.323(l)(a), (g) and (h), but none of these provisions make clear that they pertain to violations of ethical and fiduciary standards. Because penal statutes must be strictly construed, Bach v. Florida State Board of Dentistry, 378 So. 2d
34 (Fla. 1st DCA 1980), and there is no record foundation to
support an interpretation favorable to petitioner, these allegations must fail. Finally, the evidence reveals that Jankowski overstated one asset on a personal, handwritten financial statement given to an Apopka bank in connection with a loan. The agency contends the statement was made as a CPA and must accordingly comply with all relevant standards for preparing
financial statements. However, it is clear that Jankowski gave the statement in an informacontext, and not as a CPA, and accordingly he did not have adhere to relevant standards and reporting requirements. Therefore, the contention that Jankowski failed to practice public accounting in accordance with generally accepted and prevailing standards when submitting a personal financial statement must fail.
Count III -- The third count alleges that, in relation to accounting activities that he performed for CDP, Jankowski failed to timely release distribution checks to investors, provide "full information reasonably required," and timely file the 1984 partnership tax return. It is also charged he wrongfully borrowed funds from the partnership, improperly determined partnership allocations, and conducted improper "banking transactions" on behalf of his clients. Finally, he is charged with accepting a commission and/or contingent fees based upon the results and findings of public accounting services to be rendered.
The evidence establishes that Jankowski did not mail distribution checks to at least one of twelve investors for a four month period in early 1985. He attributed this to an oversight since he believed the checks had already been mailed. Nonetheless, this constituted a lack of "due professional care" within the meaning of Rule 21A-22.01(1)(b); Florida Administrative Code. The evidence also establishes that Jankowski violate the same rule by failing to file the 1984 partnership tax return on a timely basis even though he had all necessary information to do so.
Next, the record demonstrates that Jankowski had no authority to temporarily borrow some $30,000 to $40,000 from investment funds in CDP in the summer of 1984.
Although the funds were promptly repaid, and no misuse occurred; this constituted misconduct within the meaning of Subsection 473.323(1)(g), Florida Statutes (1985). The charge that respondent improperly used
$1,250 of investor's funds is not substantiated by the record, and must fail. The record also establishes that Jankowski improperly recalculated ownership percentages in the partnership without approval of the other partners, and before he made a contribution upon which the reallocation was partially based. By doing so, Jankowski exhibited a lack of due care, and did not obtain sufficient relevant data to afford a reasonable basis for his action (Rule 21A-22.01(1),(b) and (1), F.A.C.). This in turn constituted a violation of
Subsection 473.323(1)(h), which makes it unlawful to violate a Board rule, and Subsection 473.323(1)(a), which makes it unlawful to violate any provision within Chapter 473. The charge that Jankowski failed to provide the "full information reasonably required" to his partners is unsubstantiated, particularly since only one investor complained that his monthly information had "dwindled." Next, the improper "banking transactions" were not identified or explained in petitioner's case-in-chief, and must accordingly fail. Finally, the agency has alleged that Jankowski violated Rules 21A-21.03 and 21A-21.05, Florida Administrative Code, and Section 473.319, Florida Statutes, (1985), which read as follows:
21A-21.03 Commission. A certified public accountant shall not pay a commission to obtain a client, nor shall he accept a commission for a referral to a client of products or services to others in connection with the practice of public accounting. This rule shall not prohibit:
payments for the purchase of an account- ing practice, or
retirement payments to individuals formerly engaged in the practice of public accounting or payments to their heirs or estates, or
payment of fees to a referring certified public accountant for public accounting services to either the successor licensee or the client in connection with an engagement.
21A-21.05 Contingent Fees. Public accounting services shall not be offered or rendered for a fee contingent upon the findings or results of such service. This rule does not apply to services involving federal, state, or other taxes in which the findings are those of the tax authorities and not those of the licensee. Fees to be fixed by courts or other public authorities, which are of an indeterminate amount at the time a public accounting service is undertaken, shall not be regarded as contingent fees for the purposes of this rule. However, a licensee's
fees may vary depending, for example, on the complexity of the service rendered.
473.319 Contingent fee.--Public accounting services shall not be offered or rendered for a fee contingent upon the findings or results of such service. This section does not apply to services involving federal, state or other taxes in which the findings are those of the tax authorities and not those of the licensee. Fees to be fixed by courts or other public authorities, which are of an indeterminate amount at the time a public accounting service is undertaken, shall not be regarded as contingent fees for purposes of this section.
Jankowski accepted a finder's fee of $2,260 for obtaining additional investment capital for CDP. It was not accepted "contingent upon the findings or results of such service," and therefore Rule 21A-21.05 and Section 473.319 have no application to this case. Rule 21A-21.03 makes it unlawful to "accept a commission for a referral to a client of . . . services to others in connection with the practice of public accounting." Since Jankowski did not accept a commission (finder's fee) to refer clients to others in connection with the practice of public accounting, this allegation must also fail.6
Count IV -- The final count charges that in conjunction with performing activities for LRS, Jankowski failed to (a) handle the monies and investments of LRC in accordance with required ethical and fiduciary standards, (b) maintain adequate accounting records, (c) file payroll tax returns and make deposits in a timely manner, (d) prepare compiled accountant's reports and financial statements in accordance with generally accepted and prevailing accounting procedures and standards, and
"provide public accounting in accordance with generally accepted and prevailing standards of public accounting practice."
The evidence reveals that Jankowski opened up a new bank account for LRC in September, 1984 without authority to do so in violation of recognized ethical and fiduciary standards. But a violation of such standard has not been shown to be violative of either Rule 21A-22.01 or Subsections 473.323(1)(a), (g), and (h), which are cited in the complaint. Therefore, this portion of the complaint must fail.7 Next, the evidence establishes that Jankowski did not file payroll tax returns on a timely basis. This constituted a lack of due professional care within the meaning of Rule 21A-22.01(1)(b), Florida Administrative Code, and violated Subsections 473.323(1)(a) and
(h), Florida Statutes (1985). The evidence fails to prove that Jankowski did not "fully and properly maintain adequate accounting records for (LRC)." Indeed, there is no proof as to what those "records" were, much less a showing that they were not maintained. Therefore, this part of the complaint should be dismissed. The evidence establishes that respondent failed to attach a proper compilation report to financial statements prepared for LRC as of July 31, 1983, and that certain minor deviations from Statement on Standards for Accounting and Review Services No. 5 occurred in his report. Further, there were several questionable items in the statements which appeared to have little support, such as preferred stock, management fee and research project income, and sludge inventory. By preparing the report in such a fashion Jankowski exhibited a lack of due professional care and failed to obtain sufficient relevant data to support his conclusions as required by Rule 21A-22.01(1)(b) and (d), Florida Administrative Code, and violated Subsections 473.323(1)(a) and (h),Florida Statutes (1985).
Respondent's motion for a directed verdict (dismissal of charges) is DENIED.
Agency counsel suggests that the record warrants revocation of Jankowski's license. In assessing the record to determine an appropriate penalty, reference to Section 473.301, Florida Statutes (1985), is ,helpful for it provides the threefold purpose in regulating public accountants. In that section the Legislature stated that such regulation is necessary:
to assure the minimum competence of practitioners and the accuracy of audit statements upon which the public relies and to protect the public from dishonest practitioners.
Jankowski is not charged with incompetency. Indeed, he appears to be an intelligent person with degrees in physics, mathematics and accounting. Although the accuracy of certain audit statements was seriously questioned, it is noted that these were prepared primarily for internal use by small management group.
of which Jankowski was a member. Finally, it may be too harsh to characterize Jankowski as a "dishonest practitioner." Nonetheless, he appears to the undersigned to be careless and disorganized in his accounting work, and insensitive to his client's demands. Given the number and nature of the violations, outright revocation of his license seems too severe. Instead, the undersigned concludes a suspension of his license for one year is appropriate, with probation thereafter for two years.
The Board should also impose such continuing education requirements during that period of time as it deems appropriate.
Based on the foregoing findings of fact and conclusions of law, it is
RECOMMENDED that respondent be found guilty of violating Chapter 473 and rules promulgated thereunder as set forth in the Conclusions of Law portion of this Order. His license should be suspended for one year with probation thereafter for a period of two years. He should also be required to take such additional continuing education courses as the Board deems appropriate.
DONE and ORDERED this 15th day of April, 1986, in Tallahassee, Florida.
DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 15th day of April, 1986.
ENDNOTES
1/ The original administrative complaint was filed on September 5, 1985.
2/ The hearing on February 24 was conducted after Jankowski claimed he did not receive notice of the hearing on February 3, 1986.
3/ Proposed findings of fact and conclusions of law were originally due on March 24, 1986. Respondent ore tenus requested and was authorized leave to file his proposed findings of fact and conclusions of law on or before March 31, 1986. None were timely filed.
4/ A fourth investor, Thomas DuPont, was never issued the remaining 25% of stock in the corporation.
5/ These violations were technical in nature, and can be classified as minor.
6/ Jankowski was looking for investors, and nothing more, in order to complete the investment group. It had nothing to do with the practice of public accounting.
7/ The reasoning in paragraph 6 of the conclusions of law portion of this order also applies to this alleged violation.
COPIES FURNISHED:
Joseph W. Lawrence, II, Esquire
130 N. Monroe Street Tallahassee, Florida 32301
Richard A. Jankowski 1012 Pershing Avenue
Orlando, Florida 32806
APPENDIX PETITIONER'S FINDINGS OF FACT:
Covered in finding of fact 1.
Covered in findings of fact 1 and 7.
Covered in findings of fact 9 and 11.
Covered in finding of fact 10.
Covered in finding of fact 8.
Rejected as being cumulative in nature.
Covered in findings of fact 13 and 14.
Covered in finding of fact 18.
Substantially covered in finding of fact 21. That part which concludes a violation of Chapter 473 and agency rules has occurred, has been rejected.
Covered in finding of fact 16.
Substantially covered in finding of fact 22. That part which concludes the conduct was improper has been rejected.
Covered in finding of fact 18.
Substantially covered in finding of fact 31. That part which concludes a violation of the "contingent fee" rule occurred has been rejected.
Covered in finding of fact 27.
Covered in finding of fact 28.
Covered in finding of fact 26.
Covered in findings of fact 33 and 35.
Covered in finding of fact 37.
Covered in finding of fact 38.
Covered in finding of fact 40.
================================================================= AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF PROFESSIONAL REGULATION
BOARD OF ACCOUNTANCY
DEPARTMENT OF PROFESSIONAL REGULATION,
Petitioner,
vs. Case No. 85-3503
RICHARD A. JANKOWSKI, CPA,
Respondent.
/
FINAL ORDER
THIS CAUSE came on to be heard before the Florida State Board of Accountancy at a regularly scheduled meeting held in Tampa, Florida on May 22, 1986.
APPEARANCES
For Petitioner: Joseph Lawrence, II
Senior Attorney
Department of Professional Regulation
130 North Monroe Street Tallahassee, Florida 32301
For Respondent: Richard A. Jankowski, CPA
P. O. Box 1106
Apopka, Florida 32703
This cause came before the Board of Accountancy subsequent to the entry of a Recommended Order by Hearing Officer Donald R. Alexander rendered on April 15, 1986. Exceptions to the Recommended Order were filed by Petitioner on April 29, 1986. No exceptions have been filed by Respondent.
After a complete review of the transcript, evidence and the recommended order of the Hearing Officer, the Board of Accountancy hereby determines to accept the findings of fact of the Hearing Officer in his Order of April 15, 1986, with the following exceptions. The Board on its own motion determined that the Hearing Officer's finding at paragraph 21 of the findings of fact of his recommended order (contained on page 13 of the Recommended Order) that the informal financial statement in question was not prepared by Respondent in the roll of a CPA is, in fact, a conclusion of law inappropriately labeled as a finding of fact. The Board makes this determination insofar as there is no factual issue as to the purpose or format of the personal financial statement filed by Respondent and which is discussed in paragraph 21 of the Hearing Officer's findings of fact, and therefore the determination, as to whether or not the financial statement falls within the definition of the practice of public accounting as defined in Chapter 473, is a matter of law and not a issue of fact. The Board further determined that the finding of fact contained in paragraph 31 of the Hearing Officer's findings of fact (set forth at page 18 of the Recommended Order) is also a conclusion of law, insofar as it determines that the finders fee accepted by Respondent "was not in connection with the practice of accounting". Once again, the facts involving the acceptance by Respondent of a commission are not in dispute, and the determination as to whether or not the acceptance of such commission was in connection with the practice of accounting involves an interpretation of rules and statutes defining said practice. Thus, the determination of the Hearing Officer was improperly labeled as a finding of fact, when in fact, such a determination was a conclusion of law. With the above-mentioned exceptions the Board of Accountancy finds that the Hearing Officer's findings of fact as supported by competent
and substantial evidence and are hereby accepted as the findings of fact of the Board of Accountancy.
With regard to the conclusion of law of the Hearing Officer, the Board determined to accept said conclusions with the following exceptions:
The Board determines that the Hearing Officer's findings in paragraph 4 of his conclusions of law at page 23, that a CPA is not guilty of negligence when such a CPA fails to practice public accounting with that level of care, skill and treatment which is required by a reasonably prudent similar certified public accountant under similar conditions and circumstances is erroneous. It is the Board's position that the provisions of Rule 21A-22.01 set forth general standards of conduct in the practice of public accountancy. Failure to adhere to said standards would constitute negligent conduct on the part of the CPA. As such, therefore, the Hearing officer's determination that a violation of F.S. 473.323(1) (9) relating to negligence in the practice of public accountancy had not been established in this cause is erroneous, since the Hearing Officer specifically found that Respondent failed to practice public accounting with that level of care, skill and treatment which is required by a reasonably prudent similar certified public accountant under similar conditions and circumstances. A failure to conform with acceptable standards of due care resulting in harm to third parties is a classic definition of negligence, and thus, the Hearing Officer, as a matter of law, erred in failing to find Respondent negligent in the practice of public accounting for the same acts which in the Hearing Officer's opinion resulted in a violation of Rule 21A-22.01 relating to competence. While the Board is aware that the practical effect of this modification of the Hearing Officer's conclusion of law as it relates to the violations found by the Hearing Officer under the provisions of Rule.21A-22.01, has no impact upon any penalty to be imposed by the Board, the Board feels it is necessary to explicate its position that failure to adhere to general standards of competence as set forth in Rule 21A-22.01 through 21A-22.04 would constitute negligence in the practice of public accountancy as that term is used in F.S. 473.323(1)(9).
The Board likewise rejects the Hearing Officer's conclusions of law as they relates to his determination that the hand written financial statement given to a bank in connection with a personal loan was not made in Respondent's capacity as a certified public accountant and thus did not need to comply with all relevant standards in the preparation of financial statements. In the instant cause the evidence is undisputed that the statement sent to the bank by Respondent went to a third party on his 1etterhead which held him out as a certified public
accountant. It is further clear that the statement was intended to be used by a third party in connection with the loan to be made to Respondent. As such therefore, under the provisions of
F.S. 473.302 and 473.322, Respondent held himself out as a CPA and prepared a financial statement which would be used by a third party who would be entitled to legitimately rely upon the appropriate use of accounting skills by the CPA submitting the financial statement. The Board's interpretation of F.S. 473.302 includes all activities involving the use of accounting skills on behalf of third parties or upon which third parties may rely to their benefit or detriment, except as exempted by Rule 21A-20.11 F.A.C.
Based upon the foregoing, the Hearing Officer's subsequent determination that the financial statement in question need not adhere to relevant standards and reporting requirements was in error, and thus, based the undisputed testimony and findings of
:fact, it is clear that Respondent failed to adhere to reporting requirements of Rule 21A-22.01 through 21A-22.04 and F.S. 47- 3.323-1l)(a),(g),(h) and the violation of said rules and statutes was proven by Petitioner.
The Board also finds that the exception made by Petitioner to the Hearing Officer's conclusions of law at paragraph 7 pages 28-29 is appropriate, insofar as the undisputed facts show that a violation of Rule 21A-21.03 relating to the acceptance of a commission in connection with the practice of public accounting was proven by the evidence as set forth in the findings of fact of the Hearing Officer. It is the Board's position that Rule 21A-21.03 clearly prohibits a CPA from receiving a commission or finders fee for referring 'e client of his-CPA firm to another as a result of which the client entered into an agreement to purchase or otherwise obtain products or services from such others. The undisputed facts in the instant cause show that Respondent clearly referred clients of his CPA firm to the partnership in question. As a result of such a referral he received a 10% finders fee from the funds that the clients brought into the partnership. Such a referral fee is clearly a commission received in connection with Respondent's practice of public accounting. The prohibition against commissions in Rule 21A-21.03 exists precisely to stop certified public accountant from receiving commissions for referring clients of their CPA practices to others and thereby clearly impairing their independence, objectivity and integrity and creating a conflict of interest with their practice of public accounting.
The Board of Accountancy determines that statements contained in paragraph 9 of the Hearing Officer's conclusions of law are appropriately a portion of his recommendation and this
paragraph is struck from the conclusions of law and is considered as a part of the rationale for the Hearing Officer's recommendation of penalty in this cause.
Based upon the foregoing it is hereby determined that the violations found by the Hearing Officer are accepted by the Board with the addition that Respondent is found to have been negligent in the practice of public accounting, as set forth in paragraph
(1) above. Respondent is further found to have violated Rule 21A-22.01 through 21A-22.04 F.A.C. through his negligent
preparation of a financial statement submitted to the bank in his attempt to obtain a loan from said bank. Finally, Respondent is found also to be in violation of Rule 21A-21.03, insofar as he accepted a finders fee or commission for a referral of a client to others in connection with his practice of public accounting.
In light of the foregoing, the Board determines after a review of the record including all exhibits and transcripts that
-the recommendation of penalty by the Hearing Officer was not appropriate. This determination is made in light of Respondent's consistent failure to adhere to acceptable standards of practice and to realize the duties of integrity and competence which he owed to his clients and to third parties who could reasonably expect to rely upon his professional conduct. In light of the pervasive showing of negligence and lack of due care on the part of Respondent, as well as his violations of rules prohibiting to the taking of commissions in connection with his accounting practice and his failure to adhere to technical standards, it is hereby determined that Respondents certificate and license to practice public accountancy in the State of Florida should be and the same is hereby REVOKED. It is to be noted for the benefit of third parties reading this order, that the Hearing Officer's recommendation of a one year suspension would, consistent with the definition of the practice of public accountancy in F.S.
473.302, prohibit Respondent from using his accounting skills in
any capacity for the public during the period of such a suspension. Revocation of the license of a certified public accountant prohibits him only from holding himself-out as a CPA and of performing the attest function. All other forms of financial counseling, tax preparation and the like are within the purview of a non-CPA and thus, are permitted more than the CPA whose license has been revoked. It is further to be noted that Respondent may at his own discretion re-apply for reinstatement under the provisions of Rule 21A-37.01.
DONE AND ORDERED this 18 day of June, 1986.
Ray Markham, Chairman
Board of Accountancy
COPIES FURNISHED:
Charles Tunnicliff Donald R. Alexander
Richard A. Jankowski, CPA Joseph Lawrence, Esquire
1 The original administrative complaint was filed on September 5, 1985.
2 The hearing on February 24 was conducted after Jankowski claimed he did not receive notice of the hearing on February 3, 1986.
3 Proposed findings of fact and conclusions of law were originally due on March 24, 1986. Respondent ore tenus requested and was authorized leave to file his proposed findings of fact and conclusions of law on or before March 31, 1986. None were timely filed.
4 A fourth investor, Thomas DuPont, was never issued the remaining 25% of stock in the corporation.
5 These violations were technical in nature, and can be classified as minor.
6 Jankowski was looking for investors, and nothing more, in order to complete the investment group. It had nothing to do with the practice of public accounting.
7 The reasoning in paragraph 6 of the conclusions of law portion of this order also applies to this alleged violation.
| Issue Date | Proceedings |
|---|---|
| Apr. 15, 1986 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Jun. 18, 1986 | Agency Final Order | |
| Apr. 15, 1986 | Recommended Order | Certified Public Accountant was disciplined for numerous violations of the law. |
