The Issue The issue in these consolidated cases is whether disciplinary action should be taken against Respondent's license to practice as a certified public accountant in the state of Florida based upon the alleged violations of Chapter 473, Florida Statutes, set forth in the Amended Administrative Complaints filed by Petitioner.
Findings Of Fact Based upon the oral and documentary evidence adduced at the final hearing and the entire record in this proceeding, the following findings of fact are made: At all times pertinent to these proceedings, Respondent was licensed to practice as a certified public accountant ("CPA") in the state of Florida, having been issued license number AC0001638. Respondent's most recent business address was 224 North Federal Highway, Suite #4, Fort Lauderdale, Florida 33301. Petitioner has presented evidence of a number of Final Orders entered by the Florida Board of Accountancy (the "Board") against Respondent as a result of prior disciplinary action initiated by Petitioner. While the records presented are somewhat confusing and bear several different case numbers, it appears that, as a result of the various cases, Respondent has been on probation for approximately the last 12 years. According to the records presented, the first action taken against Respondent's license is reflected in a Final Order dated December 31, 1981 and filed on February 8, 1982 in DPR Case Number 0000499. That Final Order indicates that a stipulation executed by Respondent "as to facts, law and discipline" was accepted by the Board "with no changes." The stipulation referenced in that Final Order was not included with the exhibits entered into evidence in this proceeding. Thus, the "facts, law and discipline" are not of record in this case. Next, the Board entered a Final Order dated May 11, 1982 and filed on May 17, 1982 in DPR Case Numbers 16369, 16370 and 15399 imposing a $1,000 fine against Respondent and suspending his license for eighteen (18) months. An Amended Final Order dated September 3, 1982 was filed in DPR Case Numbers 16369, 16370 and 15399 on September 15, 1982. That Amended Final Order accepted a signed stipulation dated July 30, 1982 and modified the Final Order entered on May 11, 1982. In lieu of the fine and suspension imposed in the May 11 Final Order, the Amended Final Order placed Respondent on probation for five years with a requirement for a review of Respondent's practice at the end of each year by a CPA selected by the Department at Respondent's expense. The independent certified public accountant was supposed to submit written and oral reports to the Board and the Department regarding Respondent's compliance with the applicable statutes and rules governing the accounting profession. The Stipulation which was incorporated into the Amended Final Order specifically required Respondent to comply "with all provisions of Chapter 455 and 473, Florida Statutes, and the rules promulgated pursuant thereto." The Stipulation provided in part as follows: The Board shall determine at a public hearing whether [Respondent] has complied with Chapters 455 and 473, F.S. and the rules promulgated thereto. The Board may restrict or prohibit [Respondent's] practice of public accountancy during his period of probation as it deems necessary to protect the public safety and welfare. It is clearly understood and agreed that, in the event the DEPARTMENT, the BOARD or the BOARD'S Probable Cause Panel find sufficient evidence to believe reasonable cause exists that [Respondent] has violated any of the conditions of probation as outlined above, a notice of said violation shall be sent to [Respondent], by certified mail, setting forth the nature of the alleged violation and an emergency hearing will be held by the BOARD or the BOARD'S Probable Cause Panel, and upon a find [sic] of probable cause, [Respondent's] probation may be vacated and his license to practice accountancy in the State of Florida, subject to automatic suspension, with further disciplinary proceedings, pursuant to Chapters 455 and 473, F.S. If Respondent has not complied with all the terms and conditions of this joint stipulation and final order of the BOARD, the BOARD shall enter an Order imposing such further terms and conditions of probation pursuant to the statutory powers set forth in 473.323(1)(3), F.S., and shall further cause said matter to be referred to the BOARD'S Probable Cause Panel or such other jurisdictional authority as may be established for purposes of determining probable cause and initiating further administrative and/or judicial action against the Respondent. * * * [Respondent] expressly waives all further procedural steps and expressly waives all rights to seek judicial review of, or to otherwise challenge or contest the validity of a joint stipulation of facts, conclusions of law and imposition of discipline, and the final order of the BOARD incorporating said stipulation. At a meeting on January 21, 1985, the Florida Board of Accountancy reviewed a report from the consultant hired to conduct the inspection and review of Respondent's public accountancy practice in accordance with the terms of the Amended Final Order entered on September 15, 1982. Based upon its review of the consultant's report, the Board imposed an additional condition of probation that all audits, reviews and compilations prepared by Respondent were to be reviewed prior to their issuance by a CPA selected by Respondent at Respondent's expense. This additional aspect of Respondent's probation was incorporated in a Final Order dated February 15, 1985 and entered on February 28, 1985 in DPR Case Number 0016369. In an Administrative Complaint dated December 4, 1985, Petitioner charged Respondent with violating the terms of his probation by issuing compilations without prior review by another CPA. This Administrative Complaint was assigned DPR Case Number 0063064. As reflected in a Final Order dated February 23, 1987 and filed on March 10, 1987 in DPR Case Number 0063064, Respondent's probation was extended until September 1988 based upon a signed Stipulation dated November 16, 1986 which was accepted by the Board during its meeting on January 30, 1987. As a result of the March 10, 1987 Final Order extending Respondent's probation, Respondent was required to continue to obtain review and approval by an independent CPA prior to issuance of any audited financial statements, reviewed financial statements and compiled financial statements and related accountant's reports. In an Administrative Complaint dated December 7, 1989 in DPR Case Number 0063064, Petitioner charged Respondent with violating Section 473.323(1)(g), Florida Statutes, as a result of his issuance of financial statements without prior review by a CPA as required by the previous Final Orders entered against Respondent. The Complaint did not specify any date(s) or specific financial statements involved. At a meeting on February 22, 1990, the Board accepted a Counter- Settlement Stipulation signed by Respondent on March 26, 1990 in Case Number 0063064. The Board entered a Final Order dated April 4, 1990 and filed on April 10, 1990 confirming its acceptance of the Counter-Stipulation. 2/ The Counter- Settlement Stipulation incorporated in the April 1990 Final Order extended Respondent's probation "until the terms of probation have been met." The terms of probation were stated to be: That the Respondent shall not violate the provisions of Chapters 455 or 473, Florida Statutes or the rules promulgated pursuant thereto or the terms and conditions of this joint stipulation. A Department of Professional Regulation Certified Public Accountant consultant shall interview the Respondent's clients to determine the type of work product they are receiving from the Respondent. A Department of Professional Regulation Certified Public Accountant Consultant shall conduct a review of the Respondent's tax practice along with work papers at the Respondent's expense. The Counter-Stipulation further provided that: Respondent and the Department fully understand that this Stipulation, and the subsequent Final Order incorporating same, will not in any way preclude additional proceedings by the Board and/or Department against the Respondent for acts or omissions not specifically detailed in the investigative findings of the Department upon which a finding of probable cause was made. Respondent and the Department expressly waive all further procedural steps, and expressively waives [sic] all rights to seek judicial review of or to otherwise challenge or contest the validity of the joint stipulation and the Final Order of the Board, if said stipulation is accepted by the Board and incorporated in the Final Order.... In early 1991, Marlyn Felsing, a CPA retained as a consultant to conduct a review of Respondent's work pursuant to the terms of his probation, met with Respondent and reviewed financial statements, work papers and various tax returns prepared by Respondent for his clients. Felsing reviewed the financial statements and/or business tax returns for approximately four of Respondent's business clients and reviewed the personal income tax returns for approximately three of Respondent's clients who were business owners. He also reviewed all of the related work papers and discussed his review with Respondent. Felsing prepared a report dated April 23, 1991 detailing several problems and deficiencies he found during his review. A copy of Felsing's report was offered into evidence in this case and he testified at the hearing regarding many of those findings. This evidence was offered in support of the charges in the First DOAH Complaint (DOAH Case Number 92-3421) as amended. Neither Felsing's report nor any of his findings are specifically alleged in the First DOAH Complaint. That Complaint referenced a probation report which "revealed deficiencies which were brought before the Probable Cause Panel, and it was determined that Respondent had violated the terms of the Final Order." As noted in the Preliminary Statement above, the First DOAH Complaint was filed on January 23, 1992. As reflected in a Final Order dated June 19, 1991, and filed on July 1, 1991 in DPR Case Number 0063064, the Board reviewed a probation report during its meeting on May 21, 1991 and approved a settlement stipulation extending the probation imposed by the April 4, 1990 Final Order for a period of one (1) year. The settlement stipulation referenced in this July 1, 1991 Order has not been offered into evidence in this proceeding. As best can be determined from the evidence presented in this case, the Final Order entered in DPR Case Number 0063064 on July 1, 1991, was entered after review of the probation report prepared by Marlyn Felsing on April 23, 1991. Thus, it appears that the Board has already taken final action with respect to the deficiencies found in Felsing's report. During the Board Meeting on May 21, 1991, the Board also considered whether disciplinary action should be taken against Respondent with respect to another Administrative Complaint filed against Respondent on January 7, 1991. That new Administrative Complaint was assigned DPR Case Number 95979 and contained allegations that Respondent "was associated with personal financial statements for Michael Raybeck which did not meet the appropriate standards." As reflected in a Final Order dated June 19, 1991 and filed on July 1, 1991 in DPR Case Number 95979, the Board during its May 21, 1991 meeting accepted a settlement stipulation signed by Respondent on April 15, 1991. In that settlement stipulation, Respondent admitted the allegations in the Administrative Complaint in DPR Case Number 95979. The Settlement Stipulation provided as follows: * * * Stipulated Disposition 2. Respondent's license to practice public accounting is currently on probation in case number 63064. Probation in this case shall run concurrently with the probation in case number 63064. The same CPA consultant who is assigned to review the Respondent's practice in Case Number 63064 shall also review the personal financial statements the Respondent's office prepares. The consultant shall also review the Respondent's records to determine whether he is accepting commissions. These additional terms shall also be paid for by the Respondent. * * * 5. Respondent and the Department fully under- stand that this Stipulation, and the subsequent Final Order incorporating same, will not in any way preclude additional proceedings by the Board and/or Department against the Respondent for acts or omissions not specifically detained [sic] in the investigative findings of the Department upon which a finding of probable cause was made. * * * 8. This Settlement Stipulation is [sic] an admission of any liability on behalf of the Respondent and is being entered into merely to resolve a dispute. It shall not be admissible in any court of law or any subsequent adminis- trative proceeding for any purpose. As reflected in an Order dated September 29, 1992 and filed on September 30, 1992 in DPR Case Number 90-95979, the Board reviewed a probation report during its September 24, 1992 meeting and determined "that the probation imposed upon Respondent by the Final Order dated July 1, 1991, shall be extended and/or modified as follows: extend probation and defer action until Case Number 90-13254 is resolved." Case Number 90-13254 is the Second DOAH Complaint, which was filed on July 6, 1992 (DOAH Case Number 92-5696). The Second DOAH Complaint includes specific allegations against Respondent based upon his purported preparation of misleading financial statements for American British Enterprises, Inc. and Federal Restaurants, Inc. The Second DOAH Complaint The evidence presented in this case established that Respondent provided a number of accounting services to American British Enterprises, Inc. and Federal Restaurants, Inc. The exact nature and scope of the services provided by Respondent are not entirely clear. Respondent's records of his engagement include a balance sheet of Federal Restaurants as of August 17, 1987; Consolidated Financial Statements of American British Enterprises, Inc. as of August 25, 1987; Interim Compiled Financial Statements, American British Enterprises, March 31, 1988; Financial Statements of American British Enterprises, Inc. November 30, 1988; and Financial Statements of American British Enterprises, Inc., December 31, 1988. The Second DOAH Complaint, as amended, alleges that the financial statements referenced in paragraph 19 above were included in due diligence packages for American British Enterprises and were distributed to broker- dealers. No persuasive evidence was presented regarding any such distribution. The Second DOAH Complaint also alleges that "Respondent distributed misleading financial statements to brokers with the purpose of driving up the price of the stock so they could sell shares they controlled at a profit." No evidence was presented to support this allegation. Respondent's counsel suggested that all of the financial statements in question were simply drafts and were not intended to be issued. The evidence established that Respondent executed a letter in connection with the August 17, 1987 Balance Sheet of Federal Restaurants which provided as follows: I have examined the accompanying Balance Sheet of Federal Restaurants, Inc., as of August 17, 1987 whose sole Assets are Cash and [sic] Purchase Deposit. My examination was made in accordance with standards established by the American Institute of Certified Public Accountants and accordingly, included such procedures as I considered necessary in the circumstances. In my opinion the enclosed Balance Sheet represents the financial position of Federal Restaurants, Inc., as of August 17, 1987 in accordance with generally accepted accounting principals. Similarly, Respondent's records include a signed letter to the Board of Directors of American British Enterprises in connection with the August 28, 1987 Consolidated Balance Sheet. That letter provides that Respondent conducted an examination "in accordance with generally accepted auditing standards and accordingly, included such tests of the accounting records and such other auditing procedures as I considered necessary in the circumstances." The letter further opines that the financial statements "present fairly the Consolidated Financial Position...[of the companies] in conformity with generally accepted accounting principals." Respondent's records also include a signed letter regarding both the November, 1988 and December, 1988 Financial Statements for American British Enterprises indicating that Respondent had conducted an audit in accordance with generally accepted auditing standards and that, in his opinion, the financial statements "present fairly, in all material respects, the financial position" of the company as of the stated date. There is no indication on any of these financial statements that they were drafts that were not to be issued. Aside from the letters noted in paragraph 22, the only evidence presented that any of the financial statements listed in paragraph 19 above were issued was the testimony of one of Petitioner's experts who suggested that the statements had to have been issued since they were found in the SEC's files. However, no direct evidence was presented to establish that any investors or potential investors received the financial statements. Moreover, no evidence was presented that any such investors suffered a loss as a result of their reliance upon the financial statements. Certified public accountants are required to utilize specific guidelines in the performance of accounting services. Those guidelines are codified in the Statements on Standards for Accounting and Review Services ("SSARS"). The failure to abide by the SSARS guidelines constitutes performance below acceptable accounting standards. Petitioner has presented testimony from two experts regarding the deficiencies in the various financial statements referenced in paragraph 19 above. Many of the problems cited by Petitioner's experts relate to alleged deficiencies in Respondent's work papers. Respondent's expert has challenged some of those alleged deficiencies. Because the work papers have not been offered into evidence, it is impossible to resolve some of the conflicts in the experts' opinions. Nonetheless, the evidence was sufficient to clearly and convincingly demonstrate that Respondent's work was not in accordance with generally accepted accounting principals in several respects and the financial reports identified in paragraph 19 failed to comply with the SSARS in several ways. The August 17, 1987 balance sheet of Federal Restaurants indicates that the only assets of the company were cash and a purchase deposit on a contract to acquire a restaurant. The balance sheet of Federal Restaurants as of August 17, 1987 has no notes to it. Accounting Principals Board ("APB") Opinion 22 provides that a description of all significant accounting policies of the reporting entities should be included as an integral part of the financial statements. In this particular instance, the omission of accounting policies is of minor importance since the balance sheet only reflects two assets: cash being held in escrow and a deposit on a contract to purchase a restaurant (the "Purchase Contract"). As discussed below, none of the financial statements prepared by Respondent disclosed the terms of the Purchase Contract. Furthermore, it appears from other documents in Respondent's records that the corporation is wholly owned by American British Enterprises and/or is jointly controlled, but there is no disclosure of that relationship in the financial statements. These omissions are significant deficiencies which have not been explained. Statement of Auditing Standards ("SAS") 41 requires work papers to support the conclusions of an audit. According to SAS 41, the work papers constitute the principal record of the work that the auditor has done and the conclusions that he has reached concerning significant matters. Respondent's records do not include work papers for the August 17, 1987 audit. SAS 22 provides guidance to an independent auditor making an examination in accordance with generally accepted auditing standards on the considerations and procedures applicable to planning and supervision, including preparing an audit program, obtaining knowledge of the entity's business, and dealing with differences of opinion among firm personnel. While there is conflicting evidence as to what was included in Respondent's work papers, the evidence was clear that Respondent's records for the August 17, 1987 audit do not comply with the requirements of SAS 22, because there was no clearly identified planning memos or audit programs. In fact, there is not even an engagement letter. SAS 19 requires an independent auditor to obtain certain written representations from management as part of an examination made in accordance with generally accepted auditing standards and provides guidance concerning the representations to be obtained. Petitioner's experts contend that Respondent's work papers do not include an appropriate representation letter from management for any of the Financial Statements. Respondent's expert contends there was such a letter with respect to the August 27, 1987 Consolidated Financial Statements. While it is not clear what is contained in the records, it is clear that the records do not clarify conflicting documentation in Respondent's work papers regarding the relationship between Federal Restaurants and American British Enterprises. Furthermore, Respondent's records do not include a clear statement from management regarding the terms of the Purchase Contract and the apparent contingencies involved with that Contract. Consequently, Respondent has failed to comply with SAS 19 and SAS 45 (which addresses related-party disclosures). The August 27, 1987 Consolidated Financial Statements are not properly consolidated in accordance with Accounting Research Bulletin ("ARB") 51. In addition, the consolidated Financial Statements do not include the disclosures required by Accounting Principals Board Opinion 22. Respondent's expert contends that the statements were mistakenly entitled and they should have been captioned as "combined" rather than consolidated financial statements. Even if this after the fact justification is accepted, the statements do not adequately disclose the relationship between the companies. Respondent's expert suggests that the August 25 Consolidated Financial Statement for American British Enterprises and Federal Restaurants reflects a voidable acquisition of Federal Restaurants by American British Enterprises. If this interpretation is accepted, the August 17, 1987 Balance Sheet for Federal Restaurants was not necessarily misleading for failure to disclose its relationship with American British Enterprises. However, the August 25, 1987 Consolidated Financial Statements are incomplete since the transaction is not fully explained. Moreover, there is no disclosure that the companies were apparently under common control or ownership. With respect to the November, 1988 balance sheet of American British Enterprises, the evidence established that there was a discrepancy between the amount reflected in the financial statement for a note receivable which was the major asset of the corporation and the confirmation in the work papers regarding that asset. While this discrepancy may have been due to a discount and/or accrued interest, no explanation is provided. The discrepancy constitutes a violation of SAS 1, Section 331, which addresses the appropriate background information for receivables, and SAS 1, Section 530 which addresses the dating of the auditor's report. If the discrepancy is due to a discount, Respondent failed to comply with APB Opinion 6, paragraph 14 which requires unearned discounts to be shown as a deduction from the related receivable and/or APB Opinion 21, paragraph 16 which provides for the discount or premium to be reported on the balance sheet as a direct deduction from or addition to the face amount of the note. The work papers for the November audit do not include a reconciliation between the 1982 financial statements of the predecessor corporation and the 1987 statements. There is no documentation of efforts to communicate with the prior auditor nor is there any discussion of the consistency of application of accounting principals between the two statements. As a consequence, the statements do not conform with SAS 7 which addresses communications with a prior auditor. The work papers fail to reflect any audit work being performed on the appraisal for the equipment collateralizing the note. In addition, the work papers include a confirmation from the stock transfer agent that doesn't agree with the number of shares reflected on the financial statement. There is no explanation for this discrepancy nor is there any clear indication of the audit work performed. The financial statements also include a footnote referencing a joint venture agreement. Respondent's records do not include any evidence of audit work performed with respect to this venture agreement. The deficiencies noted in paragraph 33 also appear in the December 31, 1988 financial statements for American British Enterprises. Furthermore, Respondent's records do not contain an audit file for this December statement. The November 30, 1988 and the December 31, 1988 audits of American British Enterprises do not contain a segregation between current and noncurrent assets. This deficiency is relatively insignificant since the company was essentially just a holding company. However, it does constitute a violation of ARB 43. Similarly, the cash flows in the financial statements were not presented in the appropriate format or style required by Statement of Financial Accounting Standards 95. However, it appears that all of the necessary information was present. The deficiencies found in the financial statements prepared for Federal Restaurants and American British Enterprises constitute negligence on the Respondent's part and establish a failure to exercise professional competence and due professional care in the performance of accounting services. On or about June 14, 1990, the Securities and Exchange Commission ("SEC") filed a civil lawsuit against Respondent and three other defendants alleging the preparation of false and misleading financial statements for American British Enterprises, Inc. On August 5, 1991, Respondent executed a Consent of Edwin Tunick to the Entry of a Final Judgement of Permanent Injunction in the civil action initiated by the SEC. On September 2, 1991, a Final Judgement of Permanent Injunction as to Edwin Tunick was entered by the United States District Court for the Southern District of Florida (Fort Lauderdale Division) in Case Number 90-6483CIV-ZLOCH. That Final Judgment "permanently restrained and enjoined" Respondent from violating Section 17(a) of the Securities Act, 15 U.S.C. 77q(a) and Section 10(b) of the Exchange Act, 15 U.S.C 78 (j)b and Rule 10b-5 promulgated thereunder. The Final Judgment did not include any specific findings of any violations of the federal securities laws.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Board of Accountancy enter a Final Order dismissing the Administrative Complaint filed in DOAH Case Number 92-3421 (DPR Case Number 91-09729); finding Respondent guilty of violating Sections 473.323(1)(a), (g) and (h), Florida Statutes, and Rules 21A-22.0001, 21A-22.0002, and 21A-22.003, Florida Administrative Code, as alleged in the Administrative Complaint filed in DOAH Case Number 92-5696 (DPR Case Number 90-13254) and dismissing the other charges in that Complaint. As penalty for the violations, Respondent should be fined $1,000, and his license should be suspended for three years. Before resuming practice, Respondent should be required to complete such mandatory continuing education courses as may be mandated by the Board and he should be placed on probation for three (3) years. DONE and ENTERED this 14th day of November, 1994, at Tallahassee, Florida. J. STEPHEN MENTON Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of November, 1994.
Findings Of Fact Petitioner is seeking licensure as a certified public accountant in Florida. Petitioner is licensed as a certified public accountant in the State of Pennsylvania. He is seeking licensure in Florida by endorsement based upon his Pennsylvania licensure without the necessity for taking an examination. Petitioner was initially licensed in Pennsylvania in 1961. The Board of Accountancy reviewed Petitioner's application and determined that he met all Florida requirements for education and experience, and that he was administered the same examination in Pennsylvania in 1961 that was administered in Florida in 1961. In a non-final order, however, the Board determined that Petitioner did not receive grades on the examination administered in Pennsylvania that would have constituted passing grades in Florida, and denied his application. The non-final order is the subject of a formal administrative proceeding before the Division of Administrative Hearings in Case No. 80-2332. The Board's rules require that an applicant for licensure as a certified public accountant receive a grade of 75 or above on all parts of an examination administered by the American Institute of Certified Public Accountants. Rule 21A-28.05(2), (3), Florida Administrative Code. Rules in effect in 1961 also required that a grade of 75 or above would be required in all four subjects of the examination. Rules of the State Board of Accountancy Relative to Examinations and the Issuance and Revocation of Certificates, Rule 1(f).
Findings Of Fact The Respondent, Leo Y. Lewis, from 1969 to date had been employed by the State of Florida as Internal Audit Coordinator for the Department of Health and Rehabilitative Services. Respondent applied for and was issued a reciprocal certificate by the State Board of Accountancy on January 28, 1972. The reciprocal certificate was issued under the provisions of Florida Statutes, Section 473.201. 473.201 Certificates granted to holders from other states Upon application, the board shall issue a reciprocal certificate to the holder of a valid, unrevoked certificate issued by, or under the authority of, another state or political subdivision of the United States only if: The original certificate was secured as the result of a written examination which in the judgment of the board was the equivalent of the examination given by the board at the time the applicant passed such written examination; provided, however, that if such written exami- nation did not include the subject of ethics the application shall not be denied for that reason. In any event, the board shall require all applicants to take and pass the same current open book examination in ethics given to applicants for the written examination in the state before issuance of a reciprocal certificate; The applicant meets all the requirements in effect, at the time of the application, for applicants to take the Florida examination; The applicant is a resident of and domiciled in the state; The applicant intends to enter into the full-time, year-round practice of public accounting in the state; and The board is otherwise fully satisifed as to the moral and technical fitness of applicant." The Board now seeks to revoke the reciprocal certificate issued to Respondent for failure to comply with Section 473.201(2), Florida Statutes, "(2) Failure of the holder of a certificate issued under this section to be domiciled in and practice public accounting on a substantially full-time basis in the state for a continuous period of three years immediately after issuance of much certificate shall be prima facie evidence of the lack of the requisite intent and sufficient grounds for revocation of the reciprocal certificate issued by the board.", contending that Respondent has not been practicing public accounting for the three years immediately subsequent to the issuance of his certificate. There was no contention by the Board in its original revocation procedures that the Respondent has failed to meet all of the requirements of Section 473.201(1) and (2), Florida Statute, with the exception of the contention that Respondent has not practiced "public accountancy". At the hearing and in the Memorandum of Law there is an argument by the Petitioner that the Respondent did not actually intend to practice public accounting at the time that he received a reciprocal certificate. There is no showing that any fraud was involved and the grounds upon which the motion for revocation of Respondent's license is on the ground that Mr. Lewis did not engage in the practice of public accounting on substantially full-time basis for a period of three years after issuance of his reciprocal certificate. His intent at the time he received his reciprocal certificate is not necessary to the determination of the issue at hand. Petitioner contends: That Respondent is not in the practice of public accounting; That Section 473.08(2)(c) applies only to the Auditor General and tlie Chief Auditor of the Public Service Commission and that Section 473.08(2)(c), infra, is an exception to the general requirement that persons who have taken and passed an examination and become CPA's must have one year of public accounting experience or equivalent education in order to obtain their CPA certificates; and That the exception is not a recognition that either the Auditor General or the Chief Auditor of the Public Service Cotmission is engaged in the practice of public accounting. Respondent contends: That he is in fact a Florida practitioner engaged in the practice of public accounting; That the legislature and the Board have recognized that works similar to that which the Respondent performs constitutes the practice of public accounting. Said statute as passed by the legislature is Section 473.08, Florida Statutes. "473.08 Qualifications of applicant for examination; certificates to successful examinees; standards A person who qualifies to take such examination pursuant to provisions of subsection (1) and who takes and passes such examination shall receive a certificate as a certified public accountant issued by the board and shall be permitted to practice public accounting in this state if he:... Shall have completed one year of employment in the office of a Florida practitioner or an out-of-state practitioner or shall have successfully completed an additional one year accounting course at an accredited college or university. However: Any person employed as an accountant in the accounting department of the Florida public service commission who is qualified to take an examination for the purpose of determining whether or not such person shall be permitted to practice in this state as a certified public accountant, and who takes and passes such examination, shall be entitled to receive a certificate under the provisions of authorizing practice in this state as a certified public accountant upon completion of one year of accounting work for said commission under the supervision and direction of a certified public accountant serving as director of commission's accounting department. Any person employed as an accountant or post auditor on the staff of the auditor general who is qualified to take an examination for the purpose of determining whether or not such person shall be permitted to practice in this state as a certified public accountant, and who takes and passes such examination, shall be entitled to receive a certificate, under the provisions of this authorizing such person to practice in this state as a certified public accountant upon the completion of one year of experience as an accountant or post auditor under the supervision and direction of a certified public accountant serving as auditor general. Proof of compliance with the provisions of this introductory paragraph of this subsection shall be established in such form as is prescribed by the board;. The Florida Statutes do not clearly define the term "public accounting", but the definitions in Section 473.011 are helpful. "473.011 Definitions of terms used in chapter whenever the terms `certified public or public accountant are used in this chapter, except as used in subsection (3), they shall be deemed and construed to mean a person holding a certificate to practice as such, issued by the state under this chapter, or any law of the state heretofore in force and effect. [(3) not applicable] whenever the term `Florida practitioner' is used in this chapter it shall be deemed and construed to mean a certified public accountant or public accountant, as defined in subsection (1), engaged in the practice of public accounting in Florida, whether as an individual, a partner or employee of a partner- ship, or a stockholder, officer, or employee of a professional corporation. It shall also be deemed and construed to mean a partnership or professional corporation of Florida practitioners. (5) Thenever the term `public accounting is used in this chapter, it shall be deemed and construed to mean: All services offered to or performed for the public by a Florida practitioner or an out of state practitioner involving the use of accounting skills, specifically including, but not limited to, management services, and All services offered to or performed for the public by any other person, acting as an individual, as a partner or employee of a partnership, as a stockholder, officer or employee of a professional corporation, or as an officer or employee of any other corporation, involving the use of accounting skills, except as follows: (not applicable) Under the definition section of Rule 21A-1.10 of the Florida Administrative Code, practice of or practicing public accounting is defined as: "Practice of, or practicing public accounting. 'Practice of, or practicing public accounting' shall be deemed and construed to mean offering to perform, performing, or holding oneself out as being qualified to perform, those services described in Section 473.011(5), F.S." [supra] as: Rule 21A-1.11 of the Florida Administrative Code defines practitioner "'Practitioner' shall be defined as either a Florida practitioner (as defined in Section 473.011(2), F.S.), or an out of-state practitioner (as defined in Section 473.011(3), F.S.), engaged in the practice of public accounting in Florida under a special permit." Black's Law Dictionary, Revised Fourth Edition, defines public as: "PUBLIC, adj. Pertaining to a state, nation, or community; proceeding from, relating to, or affecting the whole body of people or an entire community. Open to all; notorious. Common to all or many; general; open to common use. Morgan v. Cree, 46 Vt. 786, 14 Am.Rep. 640; Crane v. Waters, C.C.Mass., 10 F. 621. Belonging to the people at large; relating to or affecting the whole people of a state, nation, or community; not limited or restricted to any particular class of the community. People v. Powell, 280 Mich. 699, 274 N.W. 372, 373, 111 A.L.R. 721." Black's Law Dictionary, Revised Fourth Edition, defines accounting as: "ACCOUNTING. An act or system of making up or settling accounts; a statement of account, or a debit and credit in financial transactions. Kansas City v. Burns, 137 Kan. 905, 22 P.2d 444." The Hearing Officer finds: That the work the Respondent does in his position as Internal Audit Coordinator for the Department of Health and Rehabilitative Services involves the use of accounting skills and includes management services and that he is a Florida practitioner as defined in Chapter 473, Florida Statutes, and in Chapter 21A-I, Florida Administrative Code. Petitioner contends that the Respondent is a state employee and therefore cannot be independent of his client However, the evidence shows that much of the work performed by Respondent and his staff are for agencies and organizations outside the Department of Health and Rehabilitative Services which employs Respondent. There is no employee-employer relationship between Respondent and these organizations. Further, no showing has been made that the employer, the Department of Health and Rehabilitative Services, attempts to or has ever directed the work of Respondent or in any way exercised control over the audits of Respondent. Respondent is in the practice of public accounting in his capacity as Internal Audit Coordinator.
Recommendation Dismiss the petition of the State Board of Accountancy. DONE and ORDERED this 24th day of May, 1976. DELPHENE C. STRICKLAND Hearing Officer Division of Administrative Hearings The Carlton Building, Room 530 Tallahassee, Florida 32304 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 24th day of May, 1976.
Findings Of Fact At all times material to this proceeding, Respondent Favret held public accounting license number 0001424 with the State of Florida. Respondent's license to practice public accounting reverted to inactive status by operation of law on January 1, 1980, due to his failure to demonstrate to the Department of Professional Regulation and the Board of Accountancy compliance with the continuing education requirements imposed on licensed public accountants pursuant to Section 473.312, Florida Statutes, and Chapter 21A-33, Florida Administrative Code. The Respondent was aware that his license reverted to inactive status on January 1, 1980, due to his failure to meet professional continuing education requirements. Respondent chose not to comply with the continuing education requirements because he did not wish to maintain an active license and did not feel that formal continuing education was of benefit to him. Between January 1, 1980, and August, 1981, Respondent continued to perform tax advisory services for approximately twenty-five (25 ) clients. His services included the preparation of personal federal income tax returns and all necessary supporting tax schedules. Respondent explained the tax services he provided as including the accumulation of raw data brought in by a client in categories, summarizing the information and then preparing the necessary tax forms. Although the Respondent signed all the tax forms as the preparer, he ceased using the professional designation, "C.P.A." when he received formal notice of the inactive status of his license. To prepare the income tax returns for his clients, knowledge of the present tax laws and regulations, tax accounting and arithmetic were utilized by the Respondent in the tax advisory and preparation services for which he received compensation. The preparation of personal income tax returns involves the use of accounting skills which includes the ability to make a determination of what items need to be recognized and included7 the reasonableness of the items, the proper categorization of the items and whether to apply certain accounting functions such as allocation to the items. 1/
The Issue Whether Petitioner, Bans N. Persaud, should be awarded a passing grade on the "Financial Accounting" part of the Certified Public Accounting examination given on May 7-8, 1997.
Findings Of Fact Petitioner, Bans N. Persaud, took the Certified Public Accountant Exam in May of 1997. The Department of Business and Professional Regulation's Bureau of Testing notified Petitioner by Examination Grade Report dated August 4, 1997, that he had earned a score of 75.00 which was a passing grade on three parts of the exam: Audit, Accounting & Reporting, and Law Exam. The report informed him that, "CREDIT ON PASSED PARTS HAS BEEN GRANTED." The report also informed Mr. Persaud that he had failed the Financial Accounting Part of the exam. On that part, he received a score of 62.00 when a minimum passing score was 75. Petitioner, "very certain that [he] passed this examination," filed a letter of appeal with the Department, treated by the Department as request for a formal administrative hearing. During the course of pre-hearing procedures, Mr. Persaud requested that he be allowed to audit the grading of the examination. The Department responded by pointing to Section 455.217(2), Florida Statutes, which states in pertinent part, The board . . . shall make available an examination review procedure for applicants . . . . Unless prohibited or limited by rules implementing security or access guidelines of national examinations, the applicant is entitled to review his examination questions, answers, papers, grades, and grading key . . . and the following language of Rule 61-11.012(6), Florida Administrative Code: In order to preserve the security and integrity of the examination, such candidate shall be permitted to review only the questions and answers missed on the examination. Furthermore, the Department pointed to the following excerpt of Section 119.07(3)(a), a provision of the public records law, Examination questions and answer sheets of examinations administered by a governmental agency for the purpose of licensure, certification, or employment are exempt from the provisions of subsection (1) and s.24(a), Art. I of the State Constitution [provisions which require disclosure of public record]. In light of the response, the ruling was made at hearing that the Department was not required to allow Petitioner to conduct the requested audit. In fact, it was determined that the requested audit was a prohibited act under the force of law through the operation of Rule 61-11.012(6), Florida Administrative Code. Mr. Persaud claimed that without an audit, he would not be able to prove that he had, in fact, passed the examination. The examination was developed by the American Institute of Certified Public Accountants, a national organization of certified public accountants whose function it is to develop, prepare and grade the "in-force CPA exam." (Tr. 74). As such, the exam is considered a "national examination," id., developed by a national organization. About such exams, the following is stated in the rules of the Department of Business and Professional Regulation, Bureau of Testing: If the examination being challenged is an examination developed by or for a national board, council, association or society, (hereinafter referred to as national organization) the Department shall accept the development and grading of such examination without modification. Rule 61-11.012(1), Florida Administrative Code. The examination consisted of six questions, two of which (Questions five and six) were essays. Mr. Persaud received 36 points out of the 60 points available for question one, 2.15 out of five points available for question two, 4.38 out of five available for question three, 3.68 out of five for question four, 8.5 out of ten for question five, and 5.5 out of ten for question six, for a total of 62 points. Mr. Persaud pointed to his background as a person of Indian descent (that is, from the subcontinent of India) who immigrated from Georgetown, Guyana, to the United States where, in 1984, he received U.S. citizenship. Mr. Persaud felt that lack of points on the essay for English composition, grammar and expression were due to prejudice and incorrect because of the excellent state of his English. During the hearing, it was obvious that Mr. Persaud's spoken English, although at times difficult to understand because of pronunciation, is otherwise of high quality. Whatever the state of his written English, however, had he received all points available for the essay questions he still would have failed the Finance and Accounting part of the exam with a score of 68 when a passing score of 75 was necessary. It was therefore incumbent on Mr. Persaud to show more than just that improper grading of English (which he did not show) in the essay portion of the exam led to the failing grade. Mr. Persaud made no attempt to do so. To the contrary, Mr. Persaud did not show that the examination was faulty, or that it was arbitrarily worded, or that the answers to challenged questions were capriciously graded or that he was arbitrarily denied credit through a grading process of the challenged questions devoid of logic or reason. In fact, Mr. Persaud does not appear to have ever identified the questions among those that he missed that were under challenge. He simply insisted that he had passed the exam. Rather than challenge specific questions for which he was not given credit or the grading of the answers to those questions, Mr. Persaud took a different tack. He testified that immediately after passing parts 3 and 4 of the CMA in 1996, he was suddenly bombarded on a daily basis by the noise of planes from the international Airport who were assisted in some way by a Village Inn not far from his house. When he complained to the authorities, they stated that they did not fly anywhere near his house. He complained of other noises and pressures to which he was subject while trying to study and identified them as "[p]lanes at four o'clock," (Tr. 48) and a "12 part air conditioner." Id. He also complained that his computer had been sabotaged and produced documents he had composed where the word "and" appeared in a sentence when his choice, and the more appropriate word, would have been "but." (Tr. 55). After this line of the challenge to the exam had been exhausted at hearing, Mr. Persaud was asked to identify the questions among those he missed that he now challenges as well as any of their answers. Aside from testimony about written English on the Essay questions, Mr. Persaud made no reference to individual questions. He chose to maintain his position that he had passed the test.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is recommended that a final order be entered denying Petitioner's challenge to the grade he received on the Financial Accounting part of the CPA Exam administered in May of 1997. DONE AND ORDERED this 16th day of September, 1998, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 16th day of September, 1998. COPIES FURNISHED: R. Beth Atchison, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-1007 Bans N. Persaud 310 Ninety-Second Avenue North St. Petersburg, Florida 33702 Lynda L. Goodgame, General Counsel Office of the General Counsel Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Martha Willis, Executive Director Division of Certified Public Accounting Department of Business and Professional Regulation 4001 Northwest 43rd Street, Suite 16 Gainesville, Florida 32606
The Issue The issue for consideration is whether the Respondent has violated the sections cited in the Administrative Complaint as alleged. Both parties submitted posthearing findings of fact, which were read and considered. Those findings not incorporated herein are found to be subordinate, cumulative, immaterial, unnecessary, or not supported by the evidence.
Findings Of Fact The Respondent, Paul R. Ashe, is a certified public accountant who was issued a license number 1968 by the Board of Accountants. (See Respondent's admissions.) The Respondent was found guilty in the United States District Court, Las Vegas, Nevada, of fraud by wire and of the interstate transportation of false and forged securities. The Respondent is currently under a pending sentence of three years in prison on each count, to run concurrently, and a fine of $10,000. (See Respondent's admissions). The licensure file of the Respondent maintained by the Board of Accountants (Petitioner's Exhibit 2) reveals that the Respondent was licensed as a certified public accountant in the State of Florida on December 3, 1965. The file further reveals that the Respondent's licensure to practice public accounting was placed in an inoperative (inactive) status at the request of the Respondent on or about February 28, 1977. While in an inoperative status, a certified public accountant may not practice and is not issued a license. However, the accountant is not required to keep up his continuing professional education credits or to pay annual license fees. An accountant in an inoperative status may reactive his license upon paying all back annual licensure fees and demonstrating that he has completed all required continuing professional education course hours. On September 26, 1982, the Respondent requested and received conditional reactivation of his license to practice public accounting in the State of Florida, which was made permanent on February 8, 1983. In this proceeding, the Respondent testified in his own behalf. His testimony was credible and uncontroverted. The Respondent received his certified public accountant certificate on December 3, 1965. He worked for the Internal Revenue Service for three years and subsequently practiced public accounting while working with a life insurance company and attending law school. After obtaining a law degree and admission to the Bar, Respondent practiced tax law and maintained his active license as a certified public accountant. In 1977, because the continuing professional education requirements for both professions were becoming burdensome, the Respondent placed his certified public accountant license in an inoperative status. Since he was a child, the Respondent has suffered from pathologic compulsive gambling. It was this compulsion which gave rise to his conviction on the federal charges referenced above. The Respondent now has this disorder under control after receiving professional counseling and is a member of Gamblers' Anonymous. As an attorney practicing tax law and providing investment counseling services, the Respondent maintained large trust accounts during the entire period he was actively gambling. Audits of his personal trust accounts reveal no shortage of any client's account. The Respondent stated, and his testimony was uncontroverted, that he had never violated any client's trust account or any trust relationship. The charges on which the Respondent was convicted arose out of a series of events which began in 1974 on a gambling trip to Las Vegas, Nevada. At that time, the Respondent became deeply indebted to various casinos in Las Vegas. Some of those casinos relieved the Respondent of his indebtedness upon his promise not to gamble further in their casinos. (Tr. 136, 173.) The Respondent paid his gambling debts at other casinos to maintain his right to continue to gamble there. In 1975, the Respondent returned to Las Vegas with his step-father. At that time, a line of credit was established in the step-father's name, and the Respondent and his step-father gambled on the step-father's line of credit. Respondent's step-father was worried about the Respondent's gambling problems and, at the conclusion of this gambling junket, took several checks from his checkbook, signed them in blank, and gave them to the Respondent with instructions that should the Respondent get into trouble the Respondent should use them. Upon returning home from this gambling junket, the Respondent's step- father died. On the weekend of July 4, 1976, the Respondent went to Las Vegas on a gambling junket. Prior to arriving there, he had established a line of credit of $54,000. Near the conclusion of his junket, he had lost the $54,000 and, in seeking to win back his losses, used the checks given to him by his step-father. The Respondent issued three checks totaling $55,000 to three different casinos to pay off the gambling debts he had incurred and to reestablish his line of credit. It was the uttering of these checks on his deceased step-father's checking account which gave rise to the federal charges of interstate transport of a forged or false security, and the casinos' subsequent use of the telephone to check the Respondent's credit which gave rise to the federal charges of fraud by wire. The Respondent believed that the account upon which the checks were drawn contained sufficient funds to cover the checks and that the account was active. However, several weeks or months before, the Respondent's mother had closed the account without his knowledge. In 1977, the Suma Corporation (Hughes' hotels) initiated charges through the U.S. Attorney on one of the checks in the amount of $11,250. When the Respondent made this check good, Suma Corporation withdrew its complaint against him and made him persona non grata at the Hughes' hotels. By this time, the Respondent's family had become quite concerned about his gambling, and he had been divorced from his wife and lost custody of his children. The Respondent sought to conceal his further gambling from his family. In November 1977, the Respondent was overcome by the urge to gamble. Having settled a substantial case, he opened a bank account under the assumed name of Paul Allen and went to Las Vegas. The Respondent used this assumed name because he did not want his family to find out he was gambling in Las Vegas. While at the MGM Hotel, his real identify was discovered, and he was compelled to pay the MGM Hotel all the monies which he owed it. This event initiated a reinvestigation of the previous 1976 check-passing incident, which resulted in his indictment in 1979-1980 and his subsequent conviction. Lawrence Dale Scheaffer was a client of Respondent from 1976 until the present. The Respondent provided Scheaffer with information and professional advice concerning Scheaffer's retirement plan, both as an attorney and later as a certified public accountant. Scheaffer and others testified concerning the Respondent's reputation in the community, where the Respondent is reputed to be honest and of good character.
Recommendation Having found that the Respondent did not violate the statutes as alleged in Counts I, II or III of the Administrative Complaint, the Hearing Officer recommends that the charges against the Respondent be dismissed. DONE AND RECOMMENDED this 22nd day of February 1984 in Tallahassee, Leon County, Florida. STEPHEN F. DEAN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of February 1984. COPIES FURNISHED: Charles F. Tunnicliff, Esquire Joseph W. Lawrence, II, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Jeffrey J. Fitos, Esquire One East Silver Springs Boulevard Ocala, Florida 32670 Frederick Roche, Secretary Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Martha Willis, Executive Director Board of Accountancy 4001 NW 43rd Street, Suite 16 Gainesville, Florida 32306 =================================================================
Findings Of Fact Tooze holds certificate number R-0434 as a Certified Public Accountant practicing in the State of Florida and held such certificate in good standing on January 1, 1974. At that time, Tooze was subject to professional certification requirements set forth in Chapter 473, Florida Statutes. The records of the Board reflect that Tooze provided no evidence of the completion of any courses or studies that would give him credits toward the reestablishment of his professional competency in the period between January 1, 1974, and April 2, 1977. On October 15, 1976, Tooze sat for an examination which was approved by the Board and given to practicing Certified Public Accountants pursuant to applicable law requiring re- establishment of professional competency. Tooze received a score of 64 out of a possible score of 100. The established passing grade for the examination is 75. Tooze received nine credit hours for the examination he took. On May 13, 1977, the Board suspended Tooze's certificate R-0434 as a Certified Public Accountant for failing to comply with requirements for the reestablishment of his professional knowledge and competency to practice public accounting. The questions to be answered in the uniform written professional examination administered to Tooze on October 15, 1976, were based upon "Current Authoritative Literature" which included Accounting Principles Board's Opinions, Accounting Research Bulletins, Statements and Interpretations of the Financial Accounting standards Board, Statements on Auditing standards, and the Laws and Rules of the Florida State Board of Accountancy. Tooze challenges sixteen of these one hundred questions on the grounds that the approved answers are incorrect and that the answer selected by Tooze is the proper choice. The questions attacked by Tooze are numbers 13, IS, 18, 51, 56, 61, 63, 67, 72, 74, 78, 80, 82, 95, 96 and 99. The title of the uniform written professional examination is "Examination of Current Authoritative Accounting and Auditing Literature and Rules of the Florida State Board of Accountancy. The approved answer to each of the questions on the examination is that which is mandated by the "Current Authoritative Literature." The examination does not purport to seek answers outside of the requirements of the Current Authoritative Literature. Each of the approved answers in the sixteen questions listed above are consistent with the demands of the Current Authoritative Literature. Each of Tooze's answers is contrary to the provisions of the Current Authoritative Literature. Accordingly, the answers selected by Tooze are not the best answers and were properly graded incorrect on his examination answer sheet.
The Issue The issue in this case is whether Respondent, David McQuay, Jr., committed the violations alleged in a four-count Amended Administrative Complaint issued by Petitioner, Department of Business and Professional Regulation, Board of Accountancy, on February 6, 2008, and, if so, what penalty should be imposed.
Findings Of Fact Petitioner, the Department of Business and Professional Regulation, Board of Accountancy (hereinafter referred to as the "Department"), is the state agency charged with the duty to regulate the practice of certified public accountants in Florida and to prosecute administrative complaints pursuant to Section 20.165, and Chapters 120, 455, and 473, Florida Statutes. At all times relevant to the allegations of the Complaint, Respondent David McQuay, Jr., has been licensed in Florida as a certified public accountant. Mr. McQuay's license number is R 1736, and his address of record is 110 North Lincoln Avenue, Tampa, Florida 33609-2908. Thomas Reilly, an expert in public accounting and auditing, reviewed an audit that Mr. McQuay performed for the Mid-Florida Center, a non-profit organization, for the financial year ending September 30, 2002. The audit was completed on July 18, 2003. Mr. Reilly prepared a report of his findings, dated September 5, 2005. He filed a subsequent report dated June 25, 2007, to include copies of various accounting standards and reference materials that were cited in the original report. In preparing his original report, Mr. Reilly met with Mr. McQuay and reviewed Mr. McQuay's complete set of working papers. Mr. Reilly testified that he billed the Department $3,444.00 for his services. No billing statements, invoices, or other documents were entered into evidence to support the amount of Mr. Reilly's fee. No expert testimony was offered to establish the reasonableness of the fee. As indicated in the Preliminary Statement above, Mr. Reilly identified four issues relating to the financial statements. First, Mr. Reilly found that the audit did not include certain statements that are required by government auditing standards. The "Yellow Book" contains the authoritative auditing standards issued by the federal Governmental Accountability Office ("GAO"). Amendment No. 2 to the auditing standards, adopted in July 1999, requires that certain language be included in the auditor's report on the financial statement. In particular, Section 5.16.1 of Amendment No. 2 provides: When auditors report separately (including separate reports bound in the same document) on compliance with laws and regulations and internal control over financial reporting, the report on the financial statements should also state that they are issuing those additional reports. The report on the financial statements should also state that the reports on compliance with laws and regulations and internal control over financial reporting are an integral part of a GAGAS [Generally Accepted Government Accounting Principles] audit, and, in considering the results of the audit, these reports should be read along with the auditor's report on the financial statements. Mr. McQuay's report on the financial statements did not contain a statement calling the reader's attention to the fact that a separate report on internal control and compliance is included elsewhere in the audit report. Mr. Reilly stated that the quoted language from the Yellow Book is mandatory, and that the GAO felt that the issue was important enough to call for the issuance of Amendment No. 2 to emphasize the revised mandate. In response, Mr. McQuay pointed to his reliance on a commercially produced practice guide that did not include the revised language of Amendment No. 2. While conceding the error, Mr. McQuay continued to contend that the practice guide's position was reasonable: that the statement is required only when the reports on compliance with laws and regulations and internal control over financial reporting are issued separately from the report on financial statements. In Mr. McQuay's case, the reports were issued under a single cover. Given that the express language of Amendment No. 2 references "separate reports bound in the same document," Mr. McQuay's response to the charge is insufficient. The Department has demonstrated that Mr. McQuay's audit report deviated from professional standards as to its failure to include the mandatory Yellow Book language. The deviation is ameliorated by the fact that all of the reports referenced in Amendment No. 2 were in fact contained in Mr. McQuay's audit report. There was no indication that Mr. McQuay's failure to include the mandatory statement was intended to mislead a reader of the audit report, or that his failure to comply with the strict language of Amendment No. 2 had any practical effect on the soundness of the audit report. The second allegation as to the financial statements is that necessary disclosures were missing in the notes to the financial statements. Mr. Reilly stated that the notes to the financial statements did not disclose the entity's capitalization policy for capital assets. The American Institute of Certified Public Accountants ("AICPA") Audit and Accounting Guide for Not-for-Profit Organizations requires disclosure of the entity's capitalization policy. Mr. Reilly testified that it is important for a reader of the audit to understand the dollar threshold at which the entity has decided to capitalize fixed assets, and that the professional standards require the disclosure in the audit report. In response, Mr. McQuay contended that the audit report did disclose the capitalization policy, citing to the following paragraph: Property donated to the Center is stated at its estimated fair market value. Depreciation expense is computed by use of the straight-line method of the estimated economic life of the respective assets. Maintenance and repairs are expensed as incurred. Extraordinary repairs that significantly extend the useful lives of the related assets are capitalized and depreciated over the assets' remaining economic useful life. This response is insufficient because the quoted language does not address the dollar threshold for capitalizing fixed assets, which is required under the standards for audits of nonprofit organizations. Mr. Reilly stated that the notes also failed to include a required statement as to lease commitments. Where the entity has operating leases that commit the entity for more than one year, professional standards require disclosure of the amount of the future commitments for each of the first five years subsequent to the date of the statement of financial position. Mr. McQuay's audit notes indicate that Mid-Florida Center had leases ranging as far as three years into the future, but do not disclose the amount of those lease commitments. Mr. McQuay responded that audit standards provide that immaterial items need not be disclosed, and that it was his professional judgment that the leases in question were not material. Mr. Reilly replied that the audit report gives the reader no basis for making an independent judgment as to the materiality of the leases. Mr. Reilly's view is more consistent with the specific standard regarding lease disclosure, though Mr. McQuay's exercise of independent professional judgment in this instance was not so unreasonable as to constitute a violation of professional standards. Mr. Reilly stated that the notes to the financial statements also omitted a statement of cash flows. However, Mr. McQuay's audit report properly identified this omission as a departure from generally accepted accounting principles ("GAAP"), rendering irrelevant any further discussion of the definition of cash equivalents. In summary, as to the second allegation, the evidence proved that Mr. McQuay violated the standards by failing to address the dollar threshold for capitalizing fixed assets, but did not prove any other violations of the disclosure requirements. The third allegation as to the financial statements was that the Statement of Activities and Statement of Functional Expenses should not contain captions of "Memorandum Only" for their "total" columns. Mr. Reilly contended that the "Memorandum Only" caption was inaccurate and misleading. Historically, the term "memorandum only" was used frequently on local government financial statements, where the auditor must give an opinion on different types of columns. Some of the columns were on a modified accrual basis and others on an accrual basis. Because these are two different bases of accounting, the "total" column was irrelevant. Mr. Reilly pointed out that the only time an auditor would use the "memorandum only" terminology as to a nonprofit organization's audit would be in presenting comparative financial statements, or where the prior year's audit included a summary total that was not in accordance with GAAP. In those situations, an auditor would use the "memorandum only" caption, as well as other disclosures, in the notice of the financial statements and the auditor's report. However, the Mid-Florida Center audit involved a single year's financial statement. Mr. Reilly opined that the total column on these financial statements was extremely significant, and that the "memorandum only" caption was extremely misleading. Mr. McQuay responded that the decision was made to use the "memorandum only" caption because this was the initial audit for Mid-Florida Center, and that the caption does not materially change any substantive aspect of the financial statement and is therefore not misleading. Mr. Reilly's position that the inclusion of the "memorandum only" caption was misleading and a violation of the standards cited in his report was correct, and Mr. McQuay's response was insufficient. The fourth allegation as to the financial statements was that donations of long-lived depreciable assets should not be reported as "Permanently Restricted Net Assets." Mr. Reilly conceded that this was a very complicated issue for which Mr. McQuay had "quite a bit of support." Mid-Florida Center purchased land and some equipment from the Highlands County School Board. The fair value of the property exceeded the price paid by Mid-Florida Center. Under GAAP, the difference between the price paid and the value would be recorded as a donated asset. The dollar amount recorded in the financial statement was $330,000, but there was no documentation showing how that number was arrived at, and no documentation showing the breakout between the land and the equipment. Mr. Reilly testified that when he looked at the fixed assets, he found a $280,000 item for land but could not be certain whether the item was part of this land or another piece of property referenced elsewhere in the notes. However, $330,000 was shown in a column called "permanently restricted." Mr. Reilly did not take issue with placing the land in that column. However, he thought that the equipment, i.e., the depreciable portion of that asset, should not be placed in the "permanently restricted" column. Mr. Reilly testified that an item such as an endowment fund is the only thing that should be placed in a "permanently restricted" column. Once an asset is placed in service and begins depreciating, it must be placed in the "unrestricted" column. In his response, Mr. McQuay referenced a reversionary clause in the purchase agreement, whereby if Mid-Florida Center gave up its 501(c)(3) nonprofit status, the property would revert to the School Board. Mr. Reilly testified that this is a standard clause in government contracts, and is not a reason to classify the item as permanently or temporarily restricted. While his report took issue with the placement of depreciable assets in the "permanently restricted" column, Mr. Reilly conceded that the relevant Statement of Financial Accounting Standards is not crystal clear and that he used non- authoritative practice guides to arrive at his conclusion. Mr. Reilly believed that it was misleading to label equipment in operation as "permanently restricted," but also conceded that the notes to the financial statement fully disclosed the issue. Mr. McQuay insisted that his audit did distinguish between the land and equipment in the fixed assets and depreciation schedules. While his treatment of the item was subject to dispute, Mr. McQuay cannot be found to have violated professional standards as to this issue. As indicated in the Preliminary Statement above, Mr. Reilly identified six issues relating to the working papers. The first allegation is that there was no evidence of a reporting and disclosure checklist for not-for-profit organizations. Mr. Reilly opined that it is common practice to include such a checklist, and that Mr. McQuay should have used one on this audit because nonprofits have unique disclosure requirements and Mid-Florida Center was the only nonprofit organization that Mr. McQuay was auditing at the time. Mr. Reilly noted that failure to use a checklist does not violate a particular auditing standard, but could be held to violate the more general professional standard of due care. Mr. Reilly believed that due professional care mandates that a CPA use a checklist when auditing a nonprofit organization, and that a CPA "would be a fool" not to use one. A typical checklist is 70 pages long, and an accountant needs the list to jog his memory as to the many unique requirements of nonprofits. Mr. Reilly thought that Mr. McQuay might have avoided some of the cited deficiencies if he had used a checklist. Mr. McQuay responded that professional standards do not require the use of a checklist. Moreover, he asserted that his auditing software contains the functional equivalent of a disclosure checklist. While conceding that this was the only nonprofit he audited during the year in question, Mr. McQuay testified that he has been auditing nonprofit organizations for over 36 years and that his previous firm conducted 35 to 40 such audits annually. A checklist would be of no assistance out in the field, where the auditor is examining the client's working papers. Mr. McQuay stated that he does use a checklist when he is reviewing the work of a staff auditor, but that he did not need a checklist here because he was performing the audit himself. Even after hearing Mr. McQuay's response, Mr. Reilly continued to hold that it was foolish not to complete a disclosure checklist. The fact that Mr. McQuay was the only person working on the audit provided all the more reason for the use of a checklist. Accepting Mr. McQuay's testimony that his auditing software contained the equivalent of a checklist, it is found that his failure to use a paper checklist was not a violation of auditing standards or of due professional care. The second allegation relating to the working papers was a lack of audit evidence for fraud risk factors or planning materiality. Statement on Auditing Standards No. 82 states that the auditor "should specifically assess the risk of material misstatement of the financial statements due to fraud and should consider that assessment in designing the audit procedures to be performed." The auditor should consider fraud risk factors relating to misstatements arising from fraudulent financial reporting and from misappropriation of assets. Statement on Auditing Standards No. 47 provides that the auditor should consider audit risk and materiality in planning the audit and designing auditing procedures and in evaluating whether the financial statements "taken as a whole are presented fairly, in all material respects, in conformity with generally accepted accounting principles." Mr. Reilly found nothing in Mr. McQuay's working papers documenting that an assessment in conformance with Statement on Auditing Standards No. 82 was made, or that an audit risk and materiality assessment was made in accordance with Statement on Auditing Standards No. 47. Mr. McQuay responded that a separate section in his work papers dealt with fraud risk factors and materiality. He testified that his firm is careful in selecting clients and looks carefully at management capabilities and the risks involved in the representation. Mr. Reilly reviewed Mr. McQuay's response and concluded that it did not come close to meeting professional standards. As to this issue, it is found that Mr. McQuay did violate professional standards as to documentation, though he may well have performed the assessments in question. The third allegation relating to the working papers was that the management representation letter omitted the specific representations relative to the single audit and the referenced schedule of uncorrected misstatements in the management representation letter. The "single audit" is an Office of Management and Budget ("OMB") A-133 audit of an entity that has received $500,000 or more of Federal assistance for its operations. Mr. Reilly found the omissions in the management representation letter constituted a violation of professional standards. Mr. Reilly testified that the standards require that on every audit, the auditor obtain a management representation letter signed by the appropriate levels of management. Statement on Auditing Standards No. 85 contains the basic requirements for management representations. Mr. McQuay obtained a management representation letter from Mid-Florida Center in compliance with this basic requirement. However, because this was a single audit, additional representations were required in the management representation letter over and above those found in a generic audit. AICPA's Statement of Position 98-3, "Audits of States, Local Governments, and Not-for-Profit Organizations Receiving Federal Awards," paragraph 6.68 requires the auditor conducting an OMB A-133 audit to obtain written representations from management about matters related to federal awards. Paragraph 6.69 of the same document lists 22 items for which the auditor should consider obtaining written representations in a single audit. Mr. Reilly testified that most of these items were applicable in this case, but that none of them were included in the Mid-Florida Center's management representation letter. In response, Mr. McQuay pointed to his engagement letter with the client. The engagement letter states that this would be an OMB A-133 audit, and that Mr. McQuay has explained to the client and the client has understood that management is responsible for compliance with the OMB A-133 audit requirements. Mr. McQuay did not think he needed to include the detailed representations of paragraph 6.69 when he already had an extensive engagement letter that covered these areas of management responsibility. Mr. Reilly replied that the engagement letter and the management representation letter are two entirely different things. The engagement letter spells out the scope of representation to the client at the outset of the engagement; completely different standards require the auditor to obtain written representations from management regarding elements spelled out in the standards, at the conclusion of the engagement. The engagement letter is irrelevant for purposes of the single audit's requirement that representations be obtained from management about matters related to federal awards. None of the specific statements referenced by Mr. McQuay in his engagement letter dealt with the specifics of federal awards. As to this issue, it is found that Mr. McQuay violated professional standards. The fourth allegation relating to the working papers was that no documentation was evident regarding a consideration of a going concern with the entity's financial position. Mr. Reilly testified that it was apparent from a glance at the financial statements that the entity had severe financial problems. It had an adverse current ratio, with assets of $33,000 and liabilities of $138,000, not considering the issue of liability for back pay owed to the executive director. Under Statement on Auditing Standards No. 59, an auditor has the responsibility to evaluate and document any causes for doubt about the continuing viability of the entity, and further to evaluate and document management's plans to turn around the entity. Mr. Reilly saw nothing that came close to meeting this standard. The only items of substance he found were a statement that the Mid-Florida Center was creating a new charter school and that fundraising activities were "ongoing." There were no specifics as to the charter school or the fundraising. Mr. Reilly found these statements "grossly inadequate" to comply with professional standards. Statement on Auditing Standards No. 59 includes specific items that an auditor should evaluate, such as management's specific plans to curb expenditures and increase revenue. Mr. McQuay supplied a document titled "Going Concern Evaluation," but the document provided no specifics as to the evaluation that was performed. Mr. McQuay responded that any startup organization such as the Mid-Florida Center will have poor current ratios. However, the entity had the management wherewithal to raise money and a committed, competent board of directors. The proposed charter school had already received funding for building renovation for the 2003-2004 school year. Mr. McQuay believed that his field work and evaluation of the management plans was sufficient to satisfy the standard. As to this issue, it is found that Mr. McQuay violated professional standards, at least insofar as he failed adequately to document his consideration of a going concern with the entity's financial position in accordance with Statement on Auditing Standards No. 59. The fifth allegation relating to the working papers was that the management representation letter addressed the $158,429 liability owed to the executive director, which was reversed off the books, but failed to justify the removal of the liability from the financial statements by specifically finalizing the matter. Mr. Reilly explained that, as of the balance sheet date, Mid-Florida Center owed several years' salary to its executive director, Dr. Arthur Cox, a significant liability that would make Mid-Florida's poor current ratio even worse. Mid-Florida removed the liability for Dr. Cox' salary from its books. Mr. Reilly did not have a problem with removing the salary, in the amount of $158,429 from the books, provided Mid-Florida had secured a separate, standalone confirmation from Dr. Cox that he was totally relinquishing any rights to those funds. However, the relinquishment issue was addressed in a management representation letter by way of what Mr. Reilly termed "squirrely wording." Rather than completely extinguish any rights Mr. Cox had to the salary, the Mid-Florida Center's board voted to change the liability from deferred compensation to amounts owed for future salary increases. Essentially, the board took the liability off the books at the present time, but left open the possibility of reinstating it when Mid-Florida Center's finances permitted it to pay Dr. Cox the amount he was owed. Mr. McQuay responded that the Form 990 for the year in question had been completed by another CPA and filed prior to his retention. Form 990 is the tax return for organizations exempt from income tax. The working trial balance prepared by the other CPA indicated that the liability for the back pay had been removed, and the Form 990 had been filed with the Internal Revenue Service without including the liability. In reconciling the Form 990 with the working trial balance for purposes of his audit, Mr. McQuay obtained the management representation letter referenced by Mr. Reilly. Mr. McQuay testified that he viewed the letter as firming up the matter that the previous CPA had dropped in his lap. Selvin McGahee, a member of the Mid-Florida Center's board of directors, testified that Dr. Cox founded the Mid- Florida Center, writing the initial grants that got the entity started. Dr. Cox' focus on providing services led him to forego some of the salary that was budgeted for his position, in order to spend the funds on other positions. Mr. McGahee testified that this situation persisted for a couple of years, with Dr. Cox supplementing the organization's revenues by not paying himself. The board ultimately decided to remove the back pay from its books, but had the intention of paying Dr. Cox his back salary if and when the organization generated sufficient unrestricted revenue to do so. As to this issue, it is found that that Mr. McQuay violated professional standards and departed from generally accepted accounting principles. Removing the liability for back salary payments to the executive director should have been accompanied by an unequivocal renunciation of those funds by the executive director. As matters were allowed to stand by Mr. McQuay, Mid-Florida Center's balance sheet was significantly improved in a manner that did not finalize the issue of the possible reinstatement of the back pay liability in the future. The sixth allegation as to the working papers was that, relative to compliance testing, the working papers contained evidence of testing only one monthly invoice/progress report. Mr. Reilly testified that the problem here was a lack of documentation. Though the auditor's judgment is paramount as to compliance testing, there are stated requirements that the auditor must meet. Because this was a single audit, OMB Circular A-133 Compliance Supplement was used. This Circular lists fourteen specific items of testing, each of which should be addressed by the auditor at least to the point of indicating that the auditor has determined the item to be inapplicable to the audit at hand. Mr. Reilly testified that one of the specific issues he was called to investigate involved the lack of documentation regarding a grant that the Mid-Florida Center had obtained from the City of Bartow. The grant required the submission of a monthly invoice/progress report. Mr. Reilly could find evidence that Mr. McQuay had tested only one such invoice. Mr. Reilly conceded that it was "tough to say" what professional judgment demanded in this situation because he was not there when the audit was conducted. Mr. Reilly stated that he would probably have tested more than one invoice, but he could not say how many. The usual practice is to expand the testing if a problem is found with the first invoice. Mr. McQuay found no problems with the one invoice and progress report that he tested, and made the judgment that his examination was adequate. Mr. Reilly believed that, based on the overall scope of problems with Mid- Florida Center's documentation, Mr. Reilly concluded that the entity's invoices and progress reports were "lightly tested." As to this issue, it is found that Mr. McQuay did not violate professional standards or generally accepted accounting principles. Mr. Reilly testified that he might have conducted the compliance testing more strenuously than did Mr. McQuay, but he could not state that Mr. McQuay's actions were outside the boundaries of his professional judgment. Petitioner offered the testimony of Allan Nast, an expert in accounting and auditing. Mr. Nast reviewed the audit performed by Mr. McQuay, and also reviewed the reports prepared by Mr. Reilly. Mr. Nast agreed with Mr. Reilly's opinions in every particular. Mr. Nast's opinion has been considered and is respected by the undersigned, but does not change the findings of fact made above. Mr. Nast testified that he billed Department $1,365.00 for his services. No billing statements, invoices, or other documents were entered into evidence to support the amount of Mr. Nast's fee. No expert testimony was offered to establish the reasonableness of the fee. Mr. McQuay testified that he believes he has been singled out for disciplinary action based on business reasons. Mr. McQuay pointed out that the initial complaint in this matter was filed by a competitor who was also the father of an accountant whose firm Mr. McQuay had rejected for work in his role as director of quality assurance for WorkNet Pinellas, Inc. Mr. McQuay, an African-American, also testified as to incidents of racism as he pursued his career in a profession dominated by white men. The undersigned has considered this testimony by Mr. McQuay, but cannot find that these matters had any bearing on the merits of the allegations lodged by the Department in the Complaint after its thorough investigation of the initial complaint. In summary, as to the four allegations regarding the financial statements recited in the Preliminary Statement above, it was found that the first allegation as to missing statements in the audit was proven, though ameliorated by the fact that all of the reports referenced by the missing statements were included in the audit report. As to the second allegation as to missing disclosures, it was found that Mr. McQuay violated professional standards as to only one of several of the alleged omissions. As to the third allegation regarding the "Memorandum Only" statement in the "total" columns, it was found that Mr. McQuay violated the relevant standards. As to the fourth allegation regarding the categorization of long-lived depreciable assets, it was found that Mr. McQuay did not violate professional standards. There were six allegations regarding the working papers recited in the Preliminary Statement above. As to the first allegation regarding the disclosure checklist, it was found that Mr. McQuay did not violate auditing standards or the duty of professional care. As to the second allegation regarding lack of evidence for fraud risk factors or planning materiality, it was found that Mr. McQuay violated professional standards as to documenting his work, though he may have performed the assessments in question. As to the third allegation regarding omissions in the management representation letter, it was found that Mr. McQuay violated professional standards. As to the fourth allegation regarding going concern considerations, it was found that Mr. McQuay violated professional standards. As to the fifth allegation regarding removal of liabilities owed to the executive director, it was found that Mr. McQuay violated professional standards. As to the sixth allegation regarding the sufficiency of compliance testing, it was found that Mr. McQuay did not violate professional standards.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that A final order be entered finding that David McQuay, Jr. committed the violations alleged in Counts One, Two, and Four of the Amended Administrative Complaint and requiring Mr. McQuay to take sixteen hours of Continuing Professional Education beyond the regular requirement, including eight hours related to nonprofit organizations, and placing Mr. McQuay on probation for a period of two years. During the first year of probation, all audits (including financial statements and working papers) will be reviewed by a consultant selected by the Board, at Mr. McQuay's expense. If any audit is deemed deficient upon review by the Board, review of all audits will continue through the second year of Mr. McQuay's probation. DONE AND ENTERED this 27th day of October, 2008, in Tallahassee, Leon County, Florida. S LAWRENCE P. STEVENSON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 27th day of October, 2008. COPIES FURNISHED: Eric R. Hurst, Esquire Department of Business and Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-2202 David McQuay, Jr. 110 North Lincoln Avenue Tampa, Florida 33609-2908 Veloria A. Kelly, Director Department of Business and Professional Regulations, Board of Accountancy 240 NW 76th Drive, Suite A Gainesville, Florida 32607 Ned Luczynski, General Counsel Department of Business and Professional Regulations Northwood Centre 1940 North Monroe Street Tallahassee, Florida 32399-0793
The Issue Count I of the Amended Administrative Complaint as modified by the August 22, 1991 Order on Reconsideration alleges Respondent Certified Public Accountant (CPA) practiced public accounting in an unlicensed firm by appending the CPA designation after her name in the telephone book and on business cards in violation of Sections 473.323(1)(a), (g), and (h) F.S. and Rule 21A-20.012 F.A.C. Count II of the Amended Administrative Complaint as modified by the August 22, 1991 Order on Reconsideration alleges that Respondent CPA violated Sections 473.323(1), (g), and (h) and Rule 21A-24.001(1)(g) F.A.C. by appending the certified financial planner (CFP) designation along with the CPA designation after her name in the telephone book and on business cards, in that the CFP designation allegedly is an unapproved specialty of accountancy. Count III of the Amended Administrative Complaint as modified by the August 22, 1991 Order on Reconsideration alleges that Respondent CPA practiced public accounting by holding herself out as a CPA by appending the CPA designation after her name in the telephone book and on her business cards, implying that she abides by the provisions of Chapter 473 F.S., and is thereby in violation of Sections 473.323(1)(f), (g), and (h) F.S. and Rule 21A-24.001 F.A.C. [no specific subsections cited].
Findings Of Fact Respondent Silvia S. Ibanez is a practicing attorney, a member of the Florida Bar, and holds active Florida CPA License No. 10842, currently in good standing. She is also a Registered Investment Advisor with the Florida Division of Securities and a certified financial planner (CFP). At all times material, she has been actively certified as a CFP in good standing with the International Board of Standards and Practice for Certified Financial Planners (IBCFP). The IBCFP is a corporation. "CFP" and "certified financial planner" are registered trademarks. The IBCFP has no governmental affiliations within the state of Florida. The Florida Board of Accountancy has no involvement in the CFP accrediting process and no proprietary interest over the CFP mark. As a licensee with the federal Securities and Exchange Commission, Ibanez is required to, and does, disclose the fact that she is a CPA. Ibanez' CPA certificate (like all Florida CPA certificates) authorizes her to display her CPA credentials. The CPA certificate represents that the recipient, . . . has passed all examinations and has met all other requirements prescribed by law and by rule of this board for certification as an expert public accountant, and *is therefore entitled to append the letters CPA after this registrant's name to evidence registration by this board as a Certified Public Accountant.* [Emphasis supplied between *] The Board of Accountancy's only classifications of CPA licenses/licensees are "active" or "inactive." "Active" and "inactive" refer to the status of the CPA license and do not refer to or imply that the licensee is actively practicing public accounting. One can be an actively licensed CPA and not be practicing public accounting. The Board of Accountancy issued a letter opinion to Ibanez that a CPA who offers financial planning services for a fee but who does not hold out as a CPA or become associated with financial statements would not be practicing public accounting. Ibanez is listed in the yellow pages under the heading, "Attorneys," as, "Ibanez, Silvia, S., CPA, CFP." Respondent also is listed in the white pages as "Ibanez, Silvia S., CPA CFP atty." On their face, there is nothing false or fraudulent about these listings. As an attorney, Petitioner also places "CPA" after her name on her business cards and on her letterhead. The Respondent's business card states "Silvia Safille Ibanez, JD, CPA, CFP." DPR contends that because Petitioner "holds out" to the public as a CPA, uses accounting skills, and provides one or more types of management, advisory or consulting services, she is currently "practicing public accounting." Ibanez is not listed in the yellow pages under "accountants," "accountants, certified," or "CPAs." Neither the CFP nor CPA credential is part of the firm name, "Silvia S. Ibanez, P.A. - Law Offices," which also appears on Ibanez' business card. Ibanez' telephone directory listings and card at issue show the CPA and CFP credentials strictly appended to Respondent's individual name. Louis Dooner, accepted as an expert certified public accountant, testified that the Respondent is involved in the practice of public accounting because by merely appending the CPA designation after her name on her business cards, she is telling the public that she is offering to perform services that CPAs perform. Respondent Ibanez currently operates as a sole practitioner of law employed by the law firm of "Silvia S. Ibanez, P.A." As such, she provides specialized legal services for her clients not provided by CPAs. As part of her current, normal professional activities as an attorney, she provides all types of tax services to her clients, including tax opinion work, representation before the Internal Revenue Service, and evaluation of the tax consequences of certain transactions. She also performs financial counselling and planning for her clients. In doing so, she utilizes both her legal education, training, and experience and her education, training, and experience as a CPA. Prior to admission to the Florida Bar, Ibanez was employed by two CPA firms where she did substantially similar work, plus audits. It is conceded by the parties that it is possible to practice law and public accounting in the same business activity and that many activities conducted by professionals and nonprofessionals other than by CPAs and other than by attorneys are identical to activities performed by CPAs engaged in public accounting. For instance, anyone can legally prepare a tax return. Bookkeepers and free-lance tax assistors of all sorts are unregulated in any way. Truthful use, communication, or disclosure of the CPA credential by an actively licensed CPA does not per se constitute false, misleading, or deceptive advertising. The evidence does not support a finding that withholding truthful disclosure that one has earned the CPA credential benefits the public welfare or effects the purposes of the enabling legislation, or indeed, how such nondisclosure could promote them, particularly since it has been shown that persons of considerably lesser competency and achievement levels in the discipline of accounting may legally offer to the public almost all the services provided by CPAs. The use of the term "CPA" implies a specific competency to the public. The fact that Ibanez is a CPA is valuable to her legal clients. CPA status is a valuable property right to each CPA, and the ability of a practicing attorney to publicize the fact that s/he holds an active CPA license is a valuable asset to that individual. The only activity among public accounting activities that is a unique activity of CPAs is the "attest" function. See, Section 473.322(1)(c) F.S. There is no evidence that Respondent Ibanez attests as a CPA in the course of her law practice or that she personally performs audits. Ibanez testified credibly that her intent in appending the CPA and CFP credentials solely to her own name is to indicate that she is, in her own right, individually licensed as a CPA and CFP. Respondent Ibanez has clearly marked her office premises with all the indicia of a law office, including two signs posted outside the building itself. One sign specifies that the building constitutes "law offices," that "Silvia S. Ibanez, P.A." is located there, and that Ibanez is an "attorney at law," with no reference to her CPA or CFP credentials. Another sign specifies, "law offices," without any reference to her CPA or CFP credentials. A potential client must pass these two signs just to enter the building that houses Ibanez' law office. Once in the building, a potential client also must be admitted by a secretary to Ibanez' inner office. Ibanez has consistently required her secretary to screen all telephone calls and potential clients who enter the office to be certain that persons seeking out Ibanez will be fully informed that Ibanez is not offering strictly accounting services and that she is practicing law. Ibanez also personally makes that information clear to individuals at each initial office consultation and consistently follows up office consultations at which her legal employment has been negotiated with letters and/or employment contracts which set forth the parameters of the legal services she has agreed to perform for clients. Elise Rice is an employee of Petitioner Department of Professional Regulation who has earned a vocational school accounting diploma. She is not a CPA, nor is she an attorney. Ms. Rice testified that she, personally, drew the conclusion from looking at Respondent's business card that the Respondent was a CPA, but that she did not know what CFP or JD signified and therefore she would not assume from the card that Ibanez was a lawyer or a certified financial planner. Clearly, the designation "CFP" did not suggest to Ms. Rice that Ibanez was advertising either a specialty or particular competence in public accounting. Ms. Rice further stated that, despite Ibanez' business card's clear use of the term "law offices," she would continue to believe that Ibanez was doing both CPA work and legal work out of "law offices." Ms. Rice further stated that even if she telephoned ahead and spoke to a secretary who clearly indicated that Ibanez was a CPA but was working as a lawyer, she would persist in believing that Ibanez was doing both CPA work and legal work out of "law offices." Ms. Rice also testified that if she arrived at Ibanez' office building and was confronted by the sign posted there which clearly indicates Ibanez is an attorney at law and the two signs that clearly state that the building houses only "law offices," she would then believe that she had come to the wrong place to find Ibanez the CPA. However, Ms. Rice conceded that, under the latter circumstances, the premises were, indeed, law offices. Ms. Rice's personal view that Ibanez must be acting as a CPA in the face of significant information to the contrary is not persuasive that the average layman would be misled by Ibanez' business card and telephone listings in the face of all her other disclosures. One who has initially consulted the yellow pages of the telephone directory under the heading "attorneys" would most logically infer from Ibanez' yellow pages listing that Ibanez is a practicing attorney who is dually licensed as a CPA and who possesses a CPA's education, training, experience, and skills and that Ibanez is offering to act as a lawyer capable of applying her additional education, training, experience, and skills as a CPA and CFP. The inferences that the average viewer might draw from Ibanez' white pages telephone listing and her business card are more blurred, but Ibanez demonstrated, and it is conceded by both parties, that an individual may have the opportunity to disabuse members of the public that s/he is engaged in the activity of the practice of public accounting or that s/he is offering all the services normally associated with a CPA, as opposed to law or some other profession, at least where there is direct contact by letter or telephone. It may be reasonable that at least until making direct contact with Ibanez or her office staff, the average viewer of either the telephone listings or the card would assume that, as a CPA, Ibanez is subject to disciplinary oversight by the licensing authority for accounting functions only and that she abides by all Board of Accountancy regulations while doing accounting. However, prior to any meaningful employment, Ibanez exercises reasonable care to disabuse the average viewer of that belief. Since 1982, the Board has consistently issued letter opinions on an individual basis to the effect that the designation "certified financial planner" is an accountancy specialization which has not been approved by the Board and further holding that "CFP" could not be displayed by CPA licensees on stationery or in yellow pages listings in conjunction with the CPA designation. The Executive Director of the Florida Board of Accountancy did not know how "certified financial planner" came to be viewed as a specialty designation of certified public accounting, and the letter opinions do not set forth the Board's rationale for considering it as a specialty. The Board has adopted no rule to that effect. Further, in this proceeding, the agency has not proven any rationale for the policy set forth in the Board opinions. The agency presented no evidence by way of anecdotal experience, professional studies, or accumulated data to show that licensed CPAs or certified CFPs have ever mislead members of the public purely by displaying their credentials in the manner Ibanez has done here. DPR knows of no complaint and has never received any complaint from a member of the public regarding Ibanez' professional activities or advertising. Nor is there any evidence that any member of the public has ever been confused about whether or not Ibanez was practicing accounting or law or financial planning or that any member of the public was mislead into hiring Ibanez under the impression that she would be acting as a CPA solely and not as an attorney, or that she would be performing audits or performing the attesting function of a CPA. Upon the scenario established in the case sub judice, Ibanez is not guilty of any fraudulent advertising so as to mislead the public to the effect that she abides by all regulations of the Board of Accountancy.
Recommendation Upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Board of Accountancy enter a Final Order that: Finds Respondent Ibanez is not "holding herself out as a certified public accountant" and Finds her not guilty of all charges alleged under Counts I through III and dismisses them. DONE and ENTERED this 15th day of January, 1992, at Tallahassee, Florida. ELLA JANE P. DAVIS, Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of January, 1992.
