STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF PROFESSIONAL REGULATION, ) BOARD OF ACCOUNTANCY, )
)
Petitioner, )
)
vs. ) CASE NO. 84-1813
)
ANTHONY LEE MILLER, CPA, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a public hearing in this case on November 27, 1984. The parties were afforded leave to submit post- hearing memoranda supportive of their respective positions. Petitioner's counsel has submitted a proposed recommended order which was considered by me in preparation of this Recommended Order. 1/
APPEARANCES
For Petitioner: Joseph W. Lawrence, II
Chief Attorney
Department of Professional Regulation
130 North Monroe Street Tallahassee, Florida 32301
For Respondent: Costell Walton, Jr., Esquire
4620 North State Road 7
Fort Lauderdale, Florida 33319 ISSUE
The issue presented for decision herein is whether or not the Respondent's license, as a certified public accountant, should be disciplined for reasons set forth hereinafter, as alleged in the Administrative Complaint filed herein signed January 30, 1984.
INTRODUCTION AND BACKGROUND
By its Administrative Complaint filed herein signed January 30, 1984, Petitioner alleges that the Respondent, while engaged as a fee accountant with the Dania Housing Authority, became associated with an audit report covering the audit of the Housing Authority of the City of Dania for the period of October 1, 1979 through September 30, 1981. It was further alleged that Ronald Demon, CPA, an inactive licensee, signed the report but Respondent and his agents, performed all the field work and prepared the audit report and the accompanying financial statements. It is alleged that because of Respondent's engagement as an accountant for the Housing Authority and specific rules and contracts of the
Department of Housing and Urban Development (HUD), Respondent was precluded from becoming associated with the report and its audit. Petitioner further alleges that said audited financial statements did not comply with applicable generally accepted auditing standards (GAAS) and the financial statements were not presented in conformity with generally accepted accounting principles (GAAP).
As such, it was alleged that Respondent had violated Sections 475.315, 473.323(1)(a), (g) (negligence, incompetence, misconduct), (h) (violation of a rule of the Board of Accountancy), (k) (performance of a fraudulent act), Florida Statutes, and Rules 21A-22.01; .02 and .03, Florida Administrative Code, which rules require competency in the performance of public accounting services and which must be adhered to by practitioners in the performance of audits.
In support of the administrative complaint, Petitioner presented the deposition testimony of Respondent and Ronald Demon, together with the live testimony of George Lye, Ronald Demon and Marlyn Felsing, CPA, and six other exhibits. Respondent testified on his own behalf.
FINDINGS OF FACT
Based upon my observation of the witnesses and their demeanor while testifying, documentary evidence received and the entire record compiled herein, I hereby make the following factual findings.
Respondent, at times material hereto, was actively licensed to practice public accounting in the State of Florida, such license issued by the Petitioner, Board of Accountancy, Department of Professional Regulation. (Petitioner's Exhibit 1)
Respondent has been issued license number AC 5470.
After becoming licensed as a certified public accountant, Respondent met Ronald Demon, another CPA, while both were employed with a national "Big 8" public accounting firm in Miami--Pete, Marwick and Mitchell. Thereafter, they became social friends and worked for each other at various times performing per diem work for each other. (TR 165, 167)
Respondent's first contact with the Housing Authority for the City of Dania was in 1981 when he performed the two-year audit for the Authority on behalf of the Department of Housing and Urban Development (HUD), thereafter becoming the fee accountant for that Authority on a monthly retainer. For the succeeding two years as fee accountant, Respondent provided the Authority's monthly accounting information, posting to the general ledger, cash disbursements, bank reconciliations and filing the required reports to HUD. Respondent had limited involvement with classifying bank checks for purposes of posting to the general ledger.
In 1983, another two-year audit of the Dania Housing Authority was required to be performed and Respondent submitted a proposal to the Housing Authority to perform same. That proposal was rejected by HUD on the basis of contract and rule provisions that the contracting CPA not have provided accounting or bookkeeping services for the Housing Authority during the period covered by the audit. (Petitioner's Exhibit 1, pages 8, 10)
Upon HUD' s rejection of his engagement proposal on behalf of the Housing Authority, Respondent contacted another CPA, Bernard Koon, seeking his submission of an engagement proposal to HUD. Koon's proposal was rejected by HUD based upon the high price quoted for his audit services. (Petitioner's
Exhibit 1, pages 8-11) Koon and Respondent had agreed to an arrangement whereby Koon would sign the accountant's report and financial statements of the audit in question, after performance of the work by Respondent and his staff for an agreed fee of $1000. (TR 60; Petitioner's Exhibit 2, pages 11-12)
When Koon's engagement proposal was rejected, Respondent contacted Ronald Demon concerning the audit engagement for the Dania Housing Authority. Ronald Demon was then working as a full-time accountant with the City of Miami. At the time, Demon was performing 4 other audit engagements other than his full- time position with the City of Miami, a practice which appears to be fairly common among accountants. Demon was asked by Respondent to contact the Executive Director of the Housing Authority, Frank W. Peterman. Respondent also related to Demon his availability to assist him (Demon) in performing the audit engagement, if Demon needed, which offer was based upon the fact that Respondent knew that Demon was working in a full-time employment relationship. Respondent told Demon that the contract amount would be approximately $4500 which was $500 less than the amount Respondent had proposed, and which proposal had been rejected by HUD. (Petitioner's Exhibit 1, pages 7, 10-15) Respondent advised Demon that to earn a stated portion of that fee, $500 of the $4500, he would merely have to sign the audit report. Respondent would be in charge of conducting all field work, preparation of the audit report and all other related work with Demon having no day to day involvement concerning preparation of the accountant's report and related financial statements.
After Demon contacted the Authority's Executive Director, Respondent prepared for his (Demon's) signature, the engagement proposal which was signed in the parking lot of a Denny's Restaurant at 36th Street and Biscayne Boulevard in North Miami and Respondent later either mailed or hand-delivered the engagement proposal to the Housing Authority offices.
Respondent admits that he informed the Executive Director of the Authority of Demon's availability, the fact that he was a CPA and that he was black.
Unknown to Respondent, Demon was an inactive licensee at that time.
Shortly after Demon's contract proposal was submitted to the Authority, it was awarded to him and, at that time, Demon and Respondent had reached an agreement wherein, as stated earlier, the field work in preparation of the audit report and related finances would be prepared by Respondent and his staff for subsequent signature by Demon. Respondent characterized their agreement as one whereby he was the "orchestrator" of the engagement for financial review and approval of the reports by Demon. (TR 170; Petitioner's Exhibit 1, pages 22-24)
Respondent's accounting firm employed two accountants, who were not CPAs, to perform the field work for the subject audit report. Respondent's involvement consisted initially of planning the audit with the staffers and providing them a copy of HUD's Audit Guide. These employees of Respondent were not known by Demon nor did he (Demon) engage in any of the initial planning of the field work; provided no written instructions, audit programming or scheduling of the work plans for completion of the field work. Respondent's supervision of his staff for the subject audit was limited, consisting primarily of being available to answer specific questions they had, a visit to the job site and performed the initial review of work papers that were generated by the staff.
After his initial review of the work papers, Respondent submitted the work papers and a draft of the financial statements and accountant report to Demon for his approval and signature. After at least a two-week period, Respondent contacted Demon to ask if there were any problems with his submittal to him whereupon Demon signed and returned the papers to Miller with only grammatical changes in the management letter which accompanied the report and finances, and the submittal was typed in final form on Demon's letterhead by Respondent's office staff. Respondent was unaware that Demon did not review the accountant's report or related financial statements. Demon considered that his agreement for the fee with Miller did not entail that duty and he relied upon Respondent's prior knowledge and experience, supervision and review of the work performed to correct any problems with the report.
Upon submission of the audit report to HUD, a check was sent payable to Ronald Demon for $2250 or half of the $4500 engagement fee, with the remainder of the fee to be remitted when the audit report was approved by the client. That fee was first obtained by Miller who called Demon and arranged to meet him at Respondent's bank for negotiation of the check. Respondent had already stamped the check payable to Demon with his deposit stamp and Demon signed above the stamp and Respondent thereafter deposited that check into his (Respondent's) account. Respondent then gave Demon a check for $250 which represented half of the agreed fee. (Deposition testimony of Ronald Demon)
HUD rejected the audit report signed by Demon and engaged the services of a public accounting firm--Deloitte, Haskins and Sells to perform another audit. Upon rejection of the audit report, but prior to the employment of Deloitte, Haskins and Sells, Respondent, Demon and Executive Director Peterman met to confer on the matter to seek a resolution of the situation. Neither Respondent nor Demon corrected the deficiency cited in the HUD report requiring HUD to employ another public accounting firm to complete the audit. Respondent did not return to HUD the monies received by him. Demon remitted to HUD all the monies paid to either him or Respondent. (TR 49, 51)
Marlyn Felsing, CPA, was received as an expert in these proceedings in the areas of public accounting with specific emphasis on audited financial statements and related accountant's reports and work papers. Felsing has had extensive experience in auditing and has been engaged on behalf of the Petitioner and others in numerous peer reviews of accounting firms.
Without regard to the arrangement between Respondent and Demon, both individuals, as certified public accountants, are responsible for practicing public accounting in accordance with generally accepted and prevailing standards of accounting. Respondent was required to comply with generally accepted accounting principles and generally accepted accounting standards in preparation of the audit report for Dania Housing Authority. Rules 21A-20.07; 20.08 and
21A-21.02 and 21A-21.03, Florida Administrative Code. (TR 88, 92, and 94)
As an assistant to the auditor (Demon), Respondent, as required by the standards on auditing services, was responsible for the work performed. Respondent acknowledged his accountability under published standards and generally accepted and prevailing standards of accounting practice. (TR 204- 206)
Felsing completed an investigative report and analysis of the field audit conducted by Respondent's staff and noted specific departures from generally accepted accounting principles and auditing standards and generally accepted and prevailing standards of accounting practice within the questioned audit report. They are, in summary, as follows:
Violation of the "independence" requirements;
Failure to exercise professional care respecting his review of staff work;
Failure to adequately plan and assist staff in completion of field work and the supervision thereof;
Failure to maintain safety of the work papers (the work papers have disappeared);
Failure to refer to prior years' audit reports demonstrating a lack of consistency; and
Failure to delineate footnote disclosures, improper labeling of financial statements, failure to disclose conflicts between the re- quirements of the HUD Audit Guide and generally accepted and prevailing standards of account- ing practice including the published generally accepted accounting principles and auditing standards.
Felsing found it especially troublesome and a violation of the HUD requirements on independence based on Respondent's conduct based on his engagement with Demon in performing the auditing services in violation of generally accepted and prevailing standards of accounting and auditing practice. Rule 21A-22.01, Florida Administrative Code.
Finally, Felsing noted that the deficiencies and departures from generally accepted and prevailing standards were not simply matters of professional judgment but were deficiencies which were objective and clear-cut in nature. (TR 143, 147, 148, 154, 156, and 158)
Respondent's major contention was that his level of responsibility was limited inasmuch as Demon, as signatory of the audit report, owed a greater duty and responsibility for the statements and the report in question. As found herein, and as pointed out by Mr. Felsing, as licensees sharing in the performance of the accounting engagement, both were liable for the deficiencies found in the statement and the audit report for the Dania Housing Authority.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. Section 120.57(1), Florida Statutes.
The parties were duly noticed pursuant to the notice provisions of Chapter 120, Florida Statutes.
The authority of the Petitioner is derived from Chapter 473 and Rule Chapters 21, Florida Administrative Code.
Respondent, by engaging in the scheme with Ronald Demon, CPA, 2/ amounted to a violation of the technical standards on independence in violation of Section 473.315(1) and (2), Florida Statutes.
Respondent, by engaging in the performance of the audit with Ronald Demon for the Dania Housing Authority, while engaged as a fee accountant for that authority, amounted to a failure to exercise due professional care and his subsequent work involved in connection with that audit represented a lack of adequate planning and supervision in performance of the audit engagement and demonstrates a lack of compliance with generally accepted and prevailing standards of auditing and accounting principles in violation of Section 473.323(1)(h), Florida Statutes, and Rules 21A-22.01, .02 and .03, Florida Administrative Code.
By and through Respondent's actions as found above, Respondent engaged in acts of negligence incompetence and misconduct in the practice of public accounting in violation of Section 473.323(1)(g), Florida Statutes. Such conduct also amounts to fraudulent conduct while holding a license to practice public accounting in violation of Sections 473.323(1)(g) and (k), Florida Statutes.
Based on the foregoing findings of fact and conclusions of law, it is hereby recommended that the Respondent's licensure as a certified public accountant be suspended for a period of six (6) months, with reinstatement under such probationary terms and conditions as shall be established by the Board of Accountancy, including continuing professional education in the areas of accounting and auditing in monitoring of his professional practice under such terms and conditions as shall be established by the Board.
RECOMMENDED this 17th day of July, 1985, in Tallahassee, Florida.
JAMES E. BRADWELL
Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32301
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 17th day of July, 1985.
ENDNOTES
1/ The petitioner has submitted post-hearing proposed findings of fact pursuant to Section 120.57(1)(b)4, Florida Statutes. A ruling on each proposed finding of fact has been made either directly or indirectly in this Recommended Order, except where such proposed findings of fact have been rejected as subordinate,
cumulative, immaterial or unnecessary. Additionally, the parties waived the requirement that the undersigned Hearing Officer issue a Recommended Order within thirty days following the close of the hearing or receipt of the transcript.
2/ Ronald Demon has had his license suspended by the Board of Accountancy for a period of one year with additional penalties and the imposition of an administrative fine based on this and other conduct.
COPIES FURNISHED:
Joseph Lawrence, II Chief Attorney
Department of Professional Regulation
130 North Monroe Street Tallahassee, Florida 32301
Costell Walton, Jr. 4620 North State Road 7
Fort Lauderdale, Florida 33319
Martha Willis Executive Director Board of Accountancy
130 North Monroe Street Tallahassee, Florida 32301
Salvatore Carpino General Counsel
Department of Professional Regulation
130 North Monroe Street Tallahassee, Florida 32301
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AGENCY FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF PROFESSIONAL REGULATION
BOARD OF ACCOUNTANCY
DEPARTMENT OF PROFESSIONAL REGULATION, BOARD OF ACCOUNTANCY,
Petitioner,
vs. DOAH CASE NO. 84-1813
DPR CASE NO. 38784
ANTHONY LEE. MILLER,
Respondent.
/
FINAL ORDER
THIS CAUSE came on to be heard before the Florida State Board of Accountancy at a regularly scheduled meeting held on Tampa, Florida on September 18, 1985.
Appearance for Petitioner: Joseplh W. Larcnce, II
Chief Attorney
Department of Professional Regulation
130 North Monroe Street Tallahassee, Florida 32301
Appearance for Respondent: Costell Walton, Jr., Esquire
4620 North State Road 7
Fort Lauderdale, Florida 33319
On July 17, 1985 Hearing Officer James E. Bradwell rendered his Recommended Order in the abovestyled cause. Exceptions to such Recommended Order were filed by Respondent through his counsel.
After a complete review of the record, including the exhibits , the Board of Accountancy hereby do determines that Exception 1A to the Hearing Officer's Findings of Fact is well taken and that the Findings of Fact of the Hearing Officer should reflect at paragraph 2 on page 4 of the Recommended Order, instead of the statement that it "an agreement had occurred between another CPA and Respondent" that Respondent told Petitioner's witness, Demon that such an agreement had occurred. Thus, the testimony as clearly set forth in the record does not support a finding that an agreement in fact existed, but simply that Respondent told Petitioner's witness Demon that such an agreement had occurred.
As to Exception 1B, it is hereby determined that to an extent said Exception was appropriate in light of the testimony in the record and that the sentence contained in second paragraph on page 4 of the Hearing Officer's Recommended Order will be revised to state that Respondent advised Demon, that to earn a stated portion of that fee, ($500 of the $4,500) he (Demon) would primarily have to review the management letter and sign the audit report. The remaining Exceptions to the Findings of Fact are rejected in that the testimony not only of Petitioner's witness, Demon, but also of Respondent himself, especially at Pages 200 to 208 of the record clearly support the findings of the Hearing Officer.
Likewise, the Exceptions set forth as to the Conclusions of Law are hereby specifically rejected in that the testimony of Petitioner's witness, Demon and corroborated by Respondent's own testimony warrant's the determination of the Hearing Officer that a violation of Chapter 473 and the Rules promulgated thereto was shown in the instant cause.
Based upon the foregoing, the Findings of Fact, as amended, and the Conclusions of Law of the Hearing Officer are hereby ACCEPTED by the Board of Accountancy.
The Board determines that the recommended penalty as set forth by the Hearing Officer is in appropriate, especially in light of the material errors of Respondent in following the independence provisions of Rule 21A-21.01 and the technical standards set forth in Rule 21A-22, Florida Administrative Code. The Board, however, does not determine that the suspension of Respondent should be the same as that meted out to Mr. Demon in a previous stipulation insofar as Respondent is engaged in the practice of public accounting, whereas Demon has now entered private industry and is not intending, to engage in said practice.
The Board determines that a more appropriate penalty for Respondent would include a shorter suspension with Monitoring of his practice during a probationary period subsequent to said suspension.
Wherefore, based upon the foregoing, it is hereby Ordered and Adjudged that Respondent's certificate and license to practice public accountancy in the State of Florida, shall be Suspended for a period of three months, however, said suspension shall continue indefinitely unless and until Respondent reimburses the Board of Accountancy and the Department of Professional Regulation for the cost incurred in preparing for the Hearing, presenting the case to the Division of Administrative Hearings, and finally, to the Board for final disposition.
The amount of said cost should be computed by the Department of Professional Regulation and forwarded to Respondent for payment to the Board of Accountancy. On payment of said costs, subject to the three months suspension which shall remain in force regardless of the date of payment, Respondent shall end his status as a suspended certificate holder. Further, Respondent shall be placed on Probation for a period of two years, subsequent to tie determination of the suspension, the conditions of said probation being that a review of Respondent's activities at the end of his suspension shall be undertaken by the Department of Professional Regulation through an interview by an investigator designated by the Department, to determine that Respondent in fact did not practice public accounting or used his accounting skills on behalf of the public during the period of suspension. Further, at the first year of probation, again at the cost of Respondent, the Department of Professional Regulation shall undertake a review of Respondent's practice using a CPA consultant retained by the Department and that said review shall consist of at least three audited or complied financial reports selected randomly from those prepared by Respondent during the previous year of probation. Should there be deficiencies in the
report submitted to the Board at the determination of the first year's probation, the Board may, at its discretion, extend the probationary period and impose such terms and conditions as it then deems necessary. At the end of Respondent's two year probationary period, if there are no further violations, Respondent shall at the Board's discretion, make aid appearance at a Board meeting prior to the termination of his probation. At all times during the period the probation Respondent shall comport himself in concert with tie Rules and Statutes governing the practice of public accounting in the State of Florida and violation of any or all of said Rules shall be cause for revocation and/or additional suspension of Respondent's license.
DONE AND ORDERED this 14th day of October, 1985.
Mr. Jerome A. Schine, Chairman Board of Accountancy
COPIES FURNISHED:
Costell Walton, Jr, Esquire
Joesph W. Lawrence II, Chief Attorney
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AGENCY AMENDED FINAL ORDER
=================================================================
STATE OF FLORIDA DEPARTMENT OF PROFESSIONAL REGULATION
BOARD OF ACCOUNTANCY
DEPARTMENT OF PROFESSIONAL REGULATION, BOARD OF ACCOUNTANCY,
Petitioner,
vs. DOAH CASE NO. 84-1813
DPR CASE NO. 33784
ANTHONY LEE. Miller,
Respondent.
/
AMENDED FINAL ORDER
THIS CAUSE came on to be heard by the Florida Board of Accountancy of the Department of Professional Regulation at a regularly scheduled meeting held on October 23, 1985, in Tallahassee, Florida, upon Respondent's petition for an amendment to the Final Order entered in this cause on October 21, 1985.
Pursuant to Respondent's request, Respondent is permitted to complete three
(3) previously engaged audits to whit: Family Health Center, Florida Memorial College, Coconut Crove Family Clinic, which were in the process of being performed before the entry of the Final Order.
As a condition of the amendment to the final order, respondent's suspension, now in effect, will be extended for a period of three (3) months beginning December 20, 1985. Further, Respondent shall complete the three (3) audits by December 20, 1985 insofar as Respondent will be required to cease his practice of public accounting completely subsequent to that date. Finally, the three (3) abovemented audits shall be reviewed prior to issuance for compliance with Rules governing the practice of public accounting in the State of Florida. Said preissuance review shall be undertaken by a CPA consultant appointed by the Board of Accountancy and the Department of Professional Regulation and shall be at Respondent's expense. All other terms of the original final order remain in force and effect.
DONE AND ORDERED this 8th day of November 1985, by the Florida Board of Accountancy.
Mr. Jerome A. Schine, Chairman Board of Accountancy
COPIES FURNISHED:
Joseph Lawrence, II
Costell Walton Jr., Esquire
| Issue Date | Proceedings |
|---|---|
| Jul. 17, 1985 | Recommended Order (hearing held , 2013). CASE CLOSED. |
| Issue Date | Document | Summary |
|---|---|---|
| Oct. 14, 1985 | Agency Final Order | |
| Jul. 17, 1985 | Recommended Order | Certified Public Accountant (CPA) should be suspended for six months under probationary terms for performing audit of an authority that he was simultaneously a fee accountant for. |
