Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of violating Chapter 473 and rules promulgated thereunder as set forth in the Conclusions of Law portion of this Order. His license should be suspended for one year with probation thereafter for a period of two years. He should also be required to take such additional continuing education courses as the Board deems appropriate. DONE and ORDERED this 15th day of April, 1986, in Tallahassee, Florida. DONALD R. ALEXANDER, Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 15th day of April, 1986.
Findings Of Fact Petitioner John T. Barnes is currently employed by Santa Rosa County in the capacity of Veterans Service Officer. At some undisclosed date, apparently in 1985, Petitioner submitted a request to Respondent that he be permitted to "purchase" a period of employment with the Santa Rosa County School Board from 1939-1941 as creditable service under the Florida Retirement System (testimony of Petitioner, Hearing Officer Exhibit 2). In his petition, Petitioner claims that he worked as a full time employee as a janitor at the Chumuckla High School from July 1, 1939 to June 30, 1941. He was a student at the school during this period, but would have been unable to return in the fall of 1939 since his father died and it was necessary for him to work to support the family. With the janitorial job, Petitioner was able to attend school while performing his janitorial duties before and after regular school hours, plus weekends. He testified that his salary was $30 per month, which was paid by check that he received from the Superintendent each month. Petitioner performed his duties under the supervision of the school principal. Petitioner is unsure as to whether or not he had a written agreement with the Superintendent. Both the Superintendent and Principal at that time are now deceased. Petitioner was the first janitor to be employed at the Chumuckla High School (testimony of Petitioner, Petitioner's Exhibit 1). In order to establish his claim of prior service, Petitioner requested that the School Board of Santa Rosa County search the School Board's records concerning his employment from 1939-1941. Pursuant to this request, the School Board Personnel Officer, Gertrude E. Wolfe, searched the School Board records for the period in question, but was unable to find any mention of Petitioner. However, subsequent to that search, a copy of the minutes of a regular meeting of the Board of Public Instruction of Santa Rosa County on June 3, 1941 was discovered. It stated that the sum of $7.50 was paid to Petitioner for an unstated purpose and was simply characterized as a "bill." Petitioner submitted the affidavits of his sister, Clara B. Lloyd, who had been a teacher at the Chumuckla School during the period of June 1, 1939 to May 31, 1941 and therein certified that Petitioner had served as a janitor at the school during that period and had received a salary of $30 per month from the Santa Rosa County, Florida school system. Another affidavit to like effect was submitted by a "student and co-worker," Jack D. Jernigan, to the same effect, except that it showed the period as July 1, 1939 to June 30, 1941. Another affidavit from Mrs. A. L. Gillman, who was a teacher and assistant principal at the school during the time in question, certified also that Petitioner had been employed by the School Board during that period at a salary of $30 a month (testimony of Barnes, Wolfe, Petitioner's Exhibits 1- 2). By letter, dated February 27, 1987, the Respondent's State Retirement Director denied Petitioner's request for retirement service credit on the basis that he had been a temporary student employee during 1939-41 and did not therefore meet the definition of a regularly established position, and thus the service was not creditable and could not be purchased under the Florida Retirement System. The letter noted, however, that Respondent had received a letter from the Superintendent of Schools, presumably of Santa Rosa County, which stated "We have researched our records for the employment of John T. Barnes for the school terms of 1939-40 and 1940-41 as janitor for the Chumuckla High School and failed again to find such employment for him. We feel that it is possible that Mr. Barnes was paid by the Principal with School Funds or General Funds which each school had funds of this type. If he were paid in this manner, the County office would have no record to substantiate his salary or employment." (Hearing Officer's Exhibit 2) Based on the foregoing uncontroverted evidence, it is found that the Petitioner did in fact perform janitorial duties for the Santa Rosa School Board during the period July 1, 1939 to June 30, 1941, at a salary of $30 a month.
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.
The Issue The issue is whether respondent's certified public accountant's license should be disciplined for the alleged violations set forth in the administrative complaint.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Respondent, Flanagan & Baker, P. A. (respondent or firm), was a certified public accounting firm having been issued license number AD 0006179 by petitioner, Department of Professional Regulation, Board of Accountancy (Board). When the events herein occurred, the firm's offices were located at 2831 Ringling Boulevard, Suite E-118, Sarasota, Florida, and John R. Flanagan and Michael L. Baker, both certified public accountants (CPA), were partners in the firm. In addition, Thomas A. Menchinger, also a CPA, was a junior partner. The firm has since been dissolved, and Flanagan and Menchinger have now formed a new firm known as Flanagan & Menchinger, P. A., at the same address. It is noted that Flanagan, Baker and Menchinger are not named as individual respondents in this proceeding, and at hearing respondent's representative assumed that only the firm's license was at risk. Whether license number AD 0006179 is still active or valid is not of record. In 1987, respondent, through its partner, Flanagan, accepted an engagement to prepare the 1986 calendar year financial statements for Ballantroe Condominium Association, Inc. (BCA or association), an owners' association for a fifty unit condominium in Sarasota. Financial statements are a historical accounting of what transpired for an entity during a particular period of time as well as the status of its assets, liabilities and equity on a given date. They are prepared for a variety of persons who rely upon them to see what transpired during that time period. If the statements are not properly prepared, the possibility exists that harm or other problems may accrue to the users of the statements. After the statements were prepared and issued, a unit owner made inquiry with respondent in August 1987 concerning two items in the statements. When he did not receive the desired response, the owner wrote the Department in September 1987 and asked for assistance in obtaining an opinion regarding the two items. Eventually, the matter was turned over to a Board consultant, Marlyn D. Felsing, and he reviewed the statements in question. Although Felsing found no problems with the two items raised by the owner, he noted what he perceived to be other errors or irregularities in the statements. This led to the issuance of an administrative complaint on September 29, 1988 charging the firm of Flanagan & Baker, P. A., with negligence in the preparation of the statements and the violation of three Board rules. That precipitated the instant controversy. The engagement in question represented the first occasion that the firm had performed work for BCA. The association's annual financial statements from its inception in 1980 through calendar year 1983 had been prepared by Touche Ross & Company, a national accounting firm, and for the years 1984 and 1985 by Mercurio and Bridgford, P. A., a Sarasota accounting firm. Some of these statements have been received in evidence. As a part of the Board investigation which culminated in the issuance of a complaint, Felsing visited respondent's firm, interviewed its principals, and reviewed the work papers and financial statements. A formal report reflecting the results of his investigation was prepared in June 1988 and has been received in evidence as petitioner's exhibit 1. In preparing his report, Felsing relied upon a number of authoritative pronouncements in the accounting profession which underlie the concept of generally accepted accounting principles (GAAP). These included various opinions issued by the Accounting Principles Board (APB), Statements on Auditing Standards (SAS) issued by the Auditing Standards Board, and Accounting Research Bulletins (ARB) issued by the Committee on Accounting Procedure. The three organizations are a part of the American Institute of Certified Public Accountants (AICPA). With regard to the concept of materiality, which requires an accountant to consider the relative importance of any event, accounting procedure or change in procedure that affects items on the statements, Felsing did not exclude any matters on the ground they were immaterial. Rather, he included all possible irregularities, regardless of their materiality, on the theory that the probable cause panel (for which the report was initially prepared) should consider all items in the aggregate. According to Felsing, a number of irregularities or errors were found in the financial statements prepared by respondent. These are discussed separately in the findings below. The first alleged deficiency noted by Felsing concerned a change by the association from accelerated to the straight-line method of depreciation. According to APB 20, such a change is considered to be significant, and "the cumulative effect of changing to a new accounting principle on the amount of retained earnings at the beginning of the period in which the change is made should be included in net income of the period of the change." In other words, APB 20 requires the cumulative effect of the change to be reported in the net income of the current year. However, respondent accounted for the change as a prior period adjustment on the statement of members' equity. Respondent justified its treatment of the item on the ground the prior year's statements prepared by Mercurio and Bridgford, P. A., did not show any accumulated depreciation. Thus, respondent asserted it was merely correcting an error because the other firm had not reported depreciation on the balance sheet. In addition, respondent noted that the effect on the balance sheet was only $721, deemed the item to be immaterial, and concluded its treatment of the item was appropriate. However, APB 20 requires the auditor to address the cumulative effect of the change ($2,072) rather than the effect of only the current year ($721), and therefore the cumulative effect should have been reported in current income. By failing to do so, respondent deviated from GAAP. The association had designated several cash accounts as being reserve accounts for deferred maintenance and replacements. Under ARB 43, such accounts must be segregated in the balance sheet from other cash accounts that are available for current operations. This would normally be done in a separate classification called "other assets" so that the user of the statements would be aware of the fact that the reserves were not available for current operations. However, the statements reflect that three such reserve accounts were placed under the classification of current assets. It is noted that these accounts totaled $25,514, $18,550 and $30,927, respectively. While respondent recognized the difference between cash available for current operations and reserves for future use, and the requirements of ARB 43, it noted that the association's minute book reflected the association regularly withdrew funds from the accounts throughout the year to cover current operations. Also, the prior year's statements prepared by Mercurio and Bridgford, P. A., had classified the item in the same fashion. Even so, if respondent was justified in classifying the accounts as current assets, it erred by identifying those accounts as "reserves" under the current assets portion of the balance sheet. Therefore, a deviation from GAAP occurred. One of the most important items in a condominium association's financial statements is how it accounts for the accumulation and expenditure of reserves, an item that is typically significant in terms of amount. The accounting profession does not recommend any one methodology but permits an association to choose from a number of alternative methods. In this regard, APB 22 requires that an entity disclose all significant accounting policies, including the choice made for this item. This disclosure is normally made in the footnotes to the financial statements. In this case, no such disclosure was made. Respondent conceded that it failed to include a footnote but pointed out that when the statements were prepared by Touche Ross & Company, one of the world's largest accounting firms, that firm had made no disclosure on the basis of immateriality. However, reliance on a prior year's statements is not justification for a deviation from GAAP. It is accordingly found that APB 22 is controlling, and footnote disclosure should have been made. The financial statements contain a schedule of sources and uses of cash for the current fiscal year. According to APB 19, all transactions in this schedule should be reported at gross amounts irrespective of whether they utilize cash. However, respondent reported all transactions in the schedule at their net amount. In justifying its action, respondent again relied upon the prior years' statements of Touche Ross & Company and Mercurio and Bridgford, P. A., who reported the transactions in the same manner. It also contended the item was immaterial and that a detailed explanation of the item is found in the statement of members' equity. Despite these mitigating factors, it is found that the schedule was inconsistent with APB 19, and a deviation from GAAP occurred. Felsing's next concern involved the language used by respondent in footnote 6 to the statements. That footnote pertained to the unfunded reserve and read as follows: NOTE VI - UNFUNDED RESERVE As of December 31, 1986, the Association reserves amounted to $103,953 consisting of $18,931 as a reserve for depreciation and statutory reserves of $85,022. The amount funded was $95,422 leaving an unfunded balance of $8,531 due to the reserves from the operating funds. Felsing characterized the footnote as "confusing" because it referred to depreciation as a part of a future reserve for replacements. Felsing maintained the footnote contained inappropriate wording since depreciation relates to assets already placed in service and not to their replacements. Respondent agreed that the footnote, taken by itself, might be confusing. However, it contended that if the user read the preceding footnote, which he should, there would be no possible confusion. That footnote read as follows: NOTE V - RESERVE FOR DEPRECIATION The Association funds the reserves for depreciation through its operating budget. These funds are to be used for the replacement of property and equipment as the need arises. As previously noted, the Association changed its method of computing depreciation to conform with generally accepted accounting principles. As of December 31, 1986, the reserve for depreciation totaled $18,931. According to respondent, the above footnote made clear to the user that the firm was not referring to depreciation as a reserve but rather was setting aside funds equal to depreciation in an effort to have sufficient cash to purchase assets in the future. While the deficiency here is highly technical and minute in nature, it is found that the footnote is not sufficiently clear and that the user might be confused. Felsing next observed that the footnotes did not disclose how the association accounted for lawn equipment or other capital assets. According to APB 22, such a choice is considered a significant accounting policy and, whatever policy is utilized, the same must be disclosed in the footnotes to the statements. In response, Flanagan pointed to a footnote in Note I of the statements which read in part as follows: Property and Equipment and Depreciation Property and equipment capitalized by the Association is stated at cost. During 1986, the Association changed its method of depreciation from the accelerated cost recovery method to a straight line method in which property and equipment is depreciated over its estimated useful life in accordance with generally accepted accounting principles. According to respondent, this footnote was adequate in terms of explaining the method of depreciation. Also, a number of other statements were introduced into evidence to show that other entities routinely used a corresponding footnote. Flanagan's testimony is accepted as being the most credible and persuasive evidence on this issue, and the footnote is accordingly deemed to be adequate disclosure on this policy. In the statement of members' equity, there is an item in the amount of $1,730 described as "capitalization of lawn equipment expensed in previous year." Although Felsing did not question the amount shown, he faulted respondent for not properly describing whether the item was a change in accounting principle or an error correction. According to APB 20, the disclosure of an error correction is required in the period in which the error was discovered and corrected. Although respondent considered the footnote described in finding of fact 11 to constitute adequate disclosure, it is found that such disclosure falls short of the requirements of APB 20. Work papers are records and documentary evidence kept by the accountant of the procedures applied, tests performed, information obtained and pertinent conclusions reached in the engagement. They serve the purpose of documenting the work performed and provide verification for the accountant. In addition, another important, required tool is the audit program, a written plan for how the auditor intends to perform the audit. The plan serves the purpose of documenting the accountant's mental process of deciding what procedures are necessary to perform the audit and to communicate those procedures to the persons actually conducting the audit. The audit plan should include in reasonable detail all of the audit procedures necessary for the accountant to perform the audit and express an opinion on the financial statements. Although a variety of checklists have been prepared by the AICPA and other organizations, each audit program must be tailored to fit the needs of a particular client. Felsing noted what he believed to be a number of deficiencies with respect to respondent's work papers, audit program, and engagement planning. In reaching that conclusion, Felsing relied upon various SAS pronouncements which govern that phase of an auditor's work. Those pronouncements have been received in evidence as petitioner's exhibits 7-14. Although the work papers themselves were not introduced into evidence, Felsing stated that his review of them reflected they were "deficient" in several respects. For example, he did not find a planning memorandum, time budget, checklist or other evidence that planning procedures were performed as required by SAS 22. In this regard, Flanagan corroborated the fact that no formal planning memorandum to the file was prepared. Although respondent's audit program was written for a condominium association, Felsing found it "extremely brief" and was not tailored to this particular client. He opined that such a program should have included reasonable detail of all audit procedures necessary to accomplish the audit and to express an opinion on the financial statements. In particular, it was noted that some required procedures were not on the list while some procedures actually used by respondent were not included. Through conversations with respondent's members, Felsing learned that much of the audit work was performed by Menchinger, the junior partner in the firm. In addition, "a few" other work papers were prepared by an unknown assistant. Although Menchinger reviewed all work performed by the assistant, Felsing found no evidence that the papers were reviewed by the supervising partner, Flanagan. Such review, which is a required step in the audit process, is generally evidenced by the supervising partner placing check marks or initials on the individual work papers. Felsing noted further that the decision to rely on the testing of internal controls was not documented in the work papers by respondent. He added that the amount of time budgeted by respondent for this engagement (around thirty hours) was inadequate given the fact that it was the first year the firm had prepared this client's statements. Finally, Felsing concluded that the violations were not peculiar to a condominium association but were applicable to all enterprises. Respondent pointed out that the association was a small client with less than five hundred line items, and the audit program and engagement planning were planned within that context. Respondent introduced into evidence its audit program which contained the steps taken by the firm in planning for the engagement. Testimony that all steps contained therein were followed was not contradicted. Similarly, Flanagan testified without contradiction that he reviewed all work performed by Menchinger but did not evidence his review with tick marks on each page. According to Flanagan, on a small audit such as this, he considered the signing of the tax return and opinion letter evidence that he had reviewed the work papers. However, Flanagan acknowledged that someone examining the papers would not know they had been reviewed by the supervising partner. Based upon the above findings, and after reconciling the conflicting testimony, it is found that respondent violated GAAP by failing to have a planning memorandum, time budget, and evidence of testing of internal controls within its work papers. All other alleged violations are found to without merit. Respondent has continued to represent the association since the Board issued its complaint. Indeed, Flanagan noted that the association is pleased with the firm's work, and this was corroborated by a letter from the association's board of directors attesting to its satisfaction with the firm. There was no evidence that the association or any other third party user of the statements was injured or misled by relying on the statements.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that respondent be found guilty of the violations discussed in the conclusions of law portion of this Recommended Order, and that license number AD 0006179 be given a reprimand. All other charges should be dismissed. DONE and ENTERED this 30th day of October 1989, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER 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 30th day of October 1989.
The Issue Did Respondent, Highlands County Board of County Commissioners (County), discriminate against Petitioner, Annette Whitner, on account of her age?
Findings Of Fact At the time of the alleged discrimination, Ms. Whitner was 71 years old. Ms. Whitner claims that the County discriminated against her by not interviewing her for its business services director position due to her age. Ms. Whitner claims that she was discriminated against because the position required an applicant to be a Certified Public Accountant (CPA). She argues that older people are less likely to hold a CPA certification. The weight of the credible evidence did not establish this claim. Ms. Whitner did not establish any connection between possessing a CPA certification and age. On November 10, 2014, the County posted the position online. It was a newly created position, established as part of a reorganization by the County. Because of previous audit errors and the departments the position would oversee, the County determined the minimum qualifications for the position should be: Bachelor’s degree with major course work in public administration, business administration, accounting, finance or related field and possession of Certified Public Accountant (CPA) professional certification or equivalent is required. Master degree in business administration, finance management, public administration, or related discipline is preferred. In determining the equivalent to a CPA, the County referred to the Guide for Certifications for Accounting, Finance and Operations Management (Guide). This was a reasonable non- discriminatory decision. Based on the Guide, the County determined a Certified Government Auditing Professional, Certified Governmental Financial Manager, and Certified Internal Auditor would constitute an equivalent to a CPA certification. The certifications were deemed equivalent because they required similar education, experience, and completion of an examination, similar to one taken for a CPA certification. The closing date for all applicants was December 15, 2014. Ms. Whitner submitted her application near midnight of December 15. Ms. Whitner is not a CPA. In addition, Ms. Whitner did not follow the instructions on the application. She scratched out the instructions on the application and wrote “first” above where it read “current or most recent employer.” Ms. Whitner’s application contained typed and handwritten information. Ms. Whitner’s application did not provide her complete work history as the application instructed. In one of the fields of employment, after 1992, Ms. Whitner wrote “various employers.” Ms. Whitner’s application left an unexplained gap in work history, from 1992 to the present. Ms. Whitner’s application included copies of her Bachelor of Science in Business Administration degree, Master of Public Affairs degree, certification as a Certified District Manager, Certificate of Recognition from the Indiana Executive Program, and a letter of reference from Al Grieshaber, General Manager at Sun ‘N Lake of Sebring, dated February 8, 2010. Ms. Whitner’s application indicated she had a certification as a Certified Professional Government Accountant. Ms. Whitner asserts that a certification as a Certified Professional Government Accountant should be equivalent to a CPA certification. However, the Guide does not include a certification for a Certified Professional Government Accountant as a CPA equivalent, nor does the County consider it equivalent. Additionally, Ms. Whitner did not attach a copy of her certification or provide persuasive evidence of the certification criteria and their similarity to CPA criteria. The County could not determine if Ms. Whitner had worked since 1992. Ms. Whitner argues that her letter of reference from Al Grieshaber demonstrated her employment since 1992. However, the letter did not include the dates Ms. Whitner worked, the position held, or her duties and the type of work she performed at Sun ‘N Lake of Sebring. Randal Vosburg, Assistant County Administrator, was involved in the hiring and selection process for the position. The primary criteria he was looking for when reviewing the applications was whether the applicant had a CPA. Mr. Vosburg did not have any contact with Ms. Whitner and did not know her age when reviewing her application. Mr. Vosburg did not consider Ms. Whitner’s age when reviewing her application. The County did not select Ms. Whitner for an interview because she was not a CPA and did not possess a certificate that is equivalent to a CPA certification. Additionally, Ms. Whitner presented an unprofessional application, did not provide a complete work history so that there appeared to be more than a twenty-year gap in employment, and did not follow the instructions on the employment application. These were all reasonable non-discriminatory bases for deciding not to interview Ms. Whitner. On January 5, 2015, Ms. Whitner submitted an addendum to her employment application. This was after the application deadline and after the County had selected candidates to interview. Ms. Whitner’s addendum did not provide documentation or certification that she possessed a CPA certification or the equivalent. The County selected Tanya Cannady and Stanoil Raley for interviews. Both possessed CPAs. Both were reasonably deemed to be more qualified than Ms. Whitner. A panel of three people interviewed Ms. Cannady and Mr. Raley. Randal Vosburg, June Fisher, County Administrator, and Mark Hill, then-Development Services Director, served on the panel. Ms. Cannady performed much better than Mr. Raley during the interview. Additionally, Ms. Cannady’s work experience was more relevant to the position than Mr. Raley’s work experience. The County selected Ms. Cannady for the position because she met the requirement of having a minimum of five-years of progressively responsible relevant experience, was a CPA, and was more qualified than Mr. Raley and the other applicants. The County offered the position to Ms. Cannady. She did not accept the offer and withdrew her application. On August 5, 2015, the County re-posted the position online. The county changed the CPA requirement from “required” to “preferred” because the County was having trouble finding CPA applicants. Ms. Whitner did not reapply for the position. The County conducted additional interviews and selected Tasha Morgan. Ms. Morgan was female and was a CPA. The preponderance of the credible, persuasive evidence did not establish that the County discriminated against Ms. Whitner due to her age. The preponderance of the credible, persuasive evidence established that the County had legitimate non-discriminatory reasons for not interviewing Ms. Whitner.
Findings Of Fact Joshua A. Freedman was issued a certificate in accounting from Temple University in 1945 (Exhibit 3). He attended evening classes at Temple during the periods 1937-1940 and 1944-1946. Transcript of Freedman's scholastic record at Temple University (Exhibit 1) shows he completed 56 semester hours during this period. The testimony of Dr. Laibstain (Exhibit 15) is that he completed 58 hours, includes 2 hours earned in 1965. Of the courses completed 26 semester hours were in accounting and 24 semester hours were classified as business courses. Requirements for a certificate in accounting are shown in Exhibit 23 to be completion of 12 one-year courses, or a total of 48 credits. The courses so outlined meet three evenings a week for four years but the time period may be altered if the student attends more or less classes than three evenings a week. A total of 124 semester hours is required by Temple University for a baccalaureate degree in accounting and the requirement has not been less than 120 semester hours since prior to Petitioner's matriculation. Petitioner was issued CPA Certificate Number 2872 on 4-26-50 after having successfully passed the AICPA examination in Pennsylvania with grades of 75 in Law (1947) and 69 in Practice (1949) Respondent stipulated that the only grounds for denying Petitioner's application for a reciprocal CPA certificate was his failure to complete the requirements for a baccalaureate degree and his failure to make a grade of at least 75 on the AI CPA examination- he took in 1949. With this stipulation the evidence regarding Petitioner's experience, professional qualifications and moral character become irrelevant to these proceedings. In 1949-1950 Florida required its applicants for CPA certification to pass examinations in subjects including Auditing, Commercial Law, Theory of Accounts and Accounting Practices with a minimum grade of 75 in each subject. Florida has always required a passing grade of not less than 75 on CPA examinations given. As a result of difficulties in obtaining information from certain states regarding the examinations and grades obtained for those seeking reciprocal CPA certificates in Florida, the Florida Board of Accountancy stopped accepting applications from applicants from these states for reciprocal CPA certification. This led to a meeting between the Pennsylvania Board and the Florida Board in 1974 at which the former agreed to provide all requested information to Florida and Florida agreed to accept the examination grades in which a mark of at least 75 was received as equivalent to the Florida examination even though the same subjects were not covered by the examination. Prior to 1969 the Florida Board of Accountancy had certain discretions in granting reciprocal CPA certificates. The statute was amended in 1969 by what is now Section 473.201 F.S.
Findings Of Fact On September 21, 1987, petitioner, Terrell Oil Company (TOC), filed an application for renewal of its certification as a disadvantaged business enterprise (DBE) with respondent, Department of Transportation (DOT). TOC had been previously certified as a DBE for a two-year period commencing in January 1986. After reviewing the application, DOT advised TOC by letter dated January 20, 1988, that its application had been denied on the grounds the firm "(did) not appear to be performing a commercially useful function nor (was) it an independent business entity as required by D. O. T. Rule 14-78.05, Florida Administrative Code." 2/ The letter of denial precipitated this proceeding. Later correspondence from DOT on February 8, 1988, advised TOC that its existing certification would remain in effect until this proceeding was concluded. According to its original application dated September 21, 1987, TOC was established on February 5, 1986, and engaged in the business of "oil-gas- petroleum products." Its offices were then located at 1908 West Cass Street, Tampa, Florida. The application identified Grady F. Terrell, Jr., a black man, as being the sole stockholder in the firm, its president and chairman of the board. Other directors included Richard W. Gilliam, a white man, and Walter Scott, a black man. The application represented that Terrell served as president and treasurer of TOC while Gilliam held the positions of vice president and secretary. The application reflected also that Terrell and Gilliam shared the power in the areas of policy making, financial decisions, job estimating, bidding and supervising field operations and that Terrell alone had the power to dismiss employees and sign checks. Finally, the application represented that the corporation owned no equipment, it had earned $14,000 in calendar year 1986, Terrell had invested $6,000 of his own money in the firm, and it had two full-time and two cart-time employees. After receiving the original application, two DOT employees made an on- site investigation of the business and conducted an interview with Terrell on October 20, 1987. They found no sign on the building at 1908 West Cass Street indicating that TOC occupied the premises, but they were directed by the landlord to a small 8' x 10' rear corner office. During the interview, Terrell was asked for copies of TOC business contracts but had none. Also, he did not have any cancelled checks, insurance coverage or bonding at that time. Terrell stated he had no employees so no insurance was needed. He represented further that he was "self-employed" by TOC and devoted 100% of his time to that endeavor. When the parties reviewed the application item by item and found several discrepancies or incorrect responses, Terrell agreed to amend his application in the presence of the DOT representatives. As amended, the application reflected that Terrell, Gilliam and J. Anthony Belcher, a white man, were the current directors, the firm had one full-time (Terrell) and no part- time employees, Terrell, Gilliam and Belcher served as president, vice-president and treasurer, respectively, while William V. Gruman, a white man and attorney, served as secretary, and there were no written, oral or tacit agreements concerning the operation of the firm between any persons associated with the firm. Terrell denied that Belcher worked for Belcher Oil Company (BOC), a large oil concern, and described him as a retired individual serving as an independent consultant for TOC. As to Gilliam, Terrell described him as an independent contractor who worked on a 100% commission basis and solicited business for the firm. During the same interview, Terrell represented that the $6,000 investment in capital was actually a loan from a local bank and denied that TOC owned or leased any equipment. Terrell could offer no proof that the firm had earned $14,000 in 1986 and indicated the firm had no projects underway. He described his business as being a broker of gasoline, diesel fuel and motor oil and that other persons supplied and delivered the fuel. According to Terrell, business transactions were conducted in the following manner. He first determined the market price of fuel from BOC, his principal supplier, and based upon that price, submitted a bid on a job. If TOC was successful, Terrell made a telephone call to BOC requesting that the fuel be delivered to the buyer. Through BOC, Terrell was able to purchase fuel two percent below the "rack" rate. TOC then added a percentage of profit to its sales price. In actuality, TOC never had physical possession of the fuel and, accordingly, needed no equipment to engage in this activity. At the same inspection, the DOT personnel confirmed through reading the firm's bylaws that each of three directors had one full vote, regardless of the number of shares held. Thus, the two white directors could outvote Terrell on any TOC decision. Also, a quorum of the directors could convene a meeting and theoretically conduct business without Terrell's knowledge. On November 23, 1987, or a little over a month after the DOT visit was made, TOC adopted a corporate resolution authorizing any one of the three directors to execute binding contracts on behalf of TOC. Thus, either of the two white directors had the authority to enter into contracts without Terrell's approval. A copy of the resolution has been received in evidence as respondent's exhibit 12. Shortly after the above resolution was approved, Gilliam and Belcher were given the opportunity to each purchase 19% of TOC's stock while Gruman was allowed to purchase the remaining 2%. This meant the three white officers now owned 40% of the stock while Terrell owned the remaining 60%. On December 1, 1987, TOC and BOC entered into an agreement whereby TOC agreed to buy fuel and petroleum products from BOC for resale to customers, and in return, BOC extended TOC a $200,000 line of credit. The agreement has been received in evidence as respondent's exhibit 1. Under the agreement, TOC's invoices to customers had to be approved by BOC, and the customers were required to remit moneys due for fuel to a special bank account controlled by BOC. That firm then sent its invoices to the bank and was paid out of the proceeds. The remainder in the account was for the use of TOC. This agreement was negotiated on behalf of TOC by Belcher, whose family once owned BOC, and until 1987 served as a consultant to that oil company. Because of numerous concerns raised during the October 10 visit, DOT continued its investigation of TOC. Besides learning about the above resolution, stock sale and agreement, DOT obtained various corporate records of T0C, including tax returns, cancelled checks, records of fuel sales and applications for minority certification with other governmental entities. Through its investigation, DOT uncovered the fact that Terrell did not devote 100% of his time to TOC as he had earlier claimed but had been employed as a car salesman by Crown Pontiac in St. Petersburg, Florida, on a full-time basis since July 1987. Indeed, Terrell worked there more than fifty hours per week. Contrary to Terrell's representation, authority to sign TOC checks had been delegated to Gilliam who had done so on numerous occasions prior to and after the application was submitted. As to Terrell's contention that TOC owned no equipment, the firm's corporate income tax return indicated it purchased a small tank truck in 1986 and carried the same on its books. The claim that Terrell alone controlled the business was refuted by the firm's corporate records which reflected that the two white board members could effectively control all management decisions and run the business on a day-to-day basis. DOT learned also that, although TOC had five customer accounts in 1988, of which four came from the private sector, the fifth account was with Hillsborough County, a governmental entity, and comprised more than 99% of its total business. In addition to the DOT application, TOC has sought minority business status from the City of St. Petersburg, the City of Orlando, Hillsborough County, Broward County and the federal government. A review of these applications revealed a maze of conflicting information submitted to the respective agencies. For example, Terrell represented to Hillsborough County that one Noble Sissel (a black man) was TOC's vice-president, secretary, treasurer and board member when in fact Sissel never held any of those positions. Terrell represented to Hillsborough and Broward Counties that TOC had two full-time employees while the amended DOT application reflected that TOC had only one. Further, Terrell gave conflicting answers to the various agencies as to the equipment owned by TOC and the purported gross receipts of the firm. In order to perform a commercially useful function, a DBE must manage and perform at least 51% of its work. In other words, the firm cannot subcontract out more than 49% of its business. Also, there is a requirement that a DBE's principal customers be entities other than governmental agencies in order to perform a commercially useful function. Through testimony and admissions of its officers, TOC acknowledged that it was merely acting as a broker. In industry parlance, this means that TOC did all its work by telephone, obtained a seller and buyer and then obtained a common carrier to deliver the product. As such, TOC never took physical possession of the product on its own equipment since it owned none, and it was not responsible for the movement of the product from the terminal to the customer. Further, since TOC purchased virtually all of its fuel from BOC, and under an agreement customer checks went directly to that firm, TOC was, in essence, conducting a broker operation for BOC. Therefore, TOC was not performing a commercially useful function. At hearing, Gilliam was TOC's only witness, and he attempted to establish TOC's entitlement to certification. Besides pointing out that Terrell was a black man and the majority shareholder in the firm, Gilliam attempted to show that Terrell actually controlled and ran the business. Also, he attempted to demonstrate the commercially useful function of the firm by the fact that 80% (4 out of 5) of TOC's five accounts are nongovernmental customers. Although not reflected on the amended or original applications, Gilliam acknowledged that TOC owns one 1200 gallon truck capable of making fuel deliveries. Gilliam contended further that Terrell had made an initial contribution to the corporation of $120,000 of his own funds. However, no proof of this claim was submitted. Given the overwhelming contradictory evidence of record, and the numerous inconsistencies in the testimony of TOC representatives, Gilliam's testimony is not accepted as being credible.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that a Final Order be entered denying the application of Terrell Oil Company for certification as a Disadvantaged Business Enterprise. ENTERED this 9th day of November, 1988, in Tallahassee, Florida. DONALD R. ALEXANDER 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 9th day of November 1988.
The Issue The central issue in this case is whether the Respondent is guilty of the violation alleged in the administrative complaint dated August 7, 1989; and, if so, what penalty should be imposed.
Findings Of Fact Based upon the testimony of the witnesses and the documentary evidence received at the hearing, the following findings of fact are made: The Department is the state agency authorized to regulate and discipline licensees pursuant to Chapters 455 and 473, Florida Statutes. The Respondent is a licensed certified public accountant, license number AC 3214 (election of rights submitted by Respondent). In connection with an investigation of another licensee (not at issue herein), the Respondent submitted to the Department a financial report that Respondent had performed for the entity identified as Moreil Interiors, Inc. (Moreil). That document (Department's exhibit 1) consisted of four pages and represented financial information related to Moreil for a 6 month period ending December 31, 1984. Certified public accounts 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. The financial report identified in paragraph 3 failed to comply with the SSARS in at least four material ways. The level of service indicated by the Respondent's report is not accepted practice for certified public accountants and has been rejected by the American Institute of Certified Public Accountants. The type and number of the deficiencies in that report constitute negligence on Respondent's part and establish a failure to exercise professional competence and due professional care in the performance of accounting services.
Recommendation Based on the foregoing, it is RECOMMENDED: That the Department of Professional Regulation, Board of Accountancy enter a final order requiring the Respondent to complete 24 hours of continuing education regarding compliance with the SSARS guidelines, and placing the Respondent on probation with his work to be reviewed, at his expense, by a consultant or certified public accountant approved by the Board, for a period of one year following completion of the continuing education. DONE and ORDERED this 19th day of July, 1990, in Tallahassee, Leon County, Florida. JOYOUS D. PARRISH Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32301 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 19th day of July, 1990. COPIES FURNISHED: Tobi Pam Senior Attorney Department of Professional Regulation 1940 North Monroe, Suite 60 Tallahassee, Florida 32399-0792 Frank Berman P.O. Box 14156 North Palm Beach, Florida 33408 Martha Willis Executive Director Board of Accountancy Suite 16 4001 Northwest 43rd Street Gainesville, Florida 32606 Kenneth E. Easley General Counsel Department of Professional Regulation 1940 North Monroe, Suite 60 Tallahassee, Florida 32399-0792
Findings Of Fact At all times pertinent to the issues herein, the Petitioner, Board of Accountancy was the state agency responsible for the certification and licensing of public accountants and the regulation of the public accounting profession in Florida. Respondent, Gerald E. Shaw, was licensed as a certified public accountant, (CPA), in Florida and operated a public accounting practice in Florida as Gerald E. Shaw, P.A. During the period between December 31, 1990 and April 20, 1991, Respondent was retained to audit the financial books and records of High Point of Fort Pierce Condominium Association Section I, Inc. His audit report and allied papers were submitted to the membership of the association by letter dated April 20, 1991. In his letter he indicated he had conducted his audit in accordance with generally accepted auditing standards, (GAAS), and he opined therein that the financial statements he prepared, "present fairly, in all material respects, the financial position of the [Association] as of December 31, 1990 and the results of its operations for the year then ended in conformity with generally accepted accounting principles." At some point thereafter, the Department/Board of Accountancy received the financial statements prepared by the Respondent which contained apparent deficiencies on the face, particularly the lack of adequate note disclosure. Thomas F. Reilly, C.P.A., an expert in public accounting and an individual who had, on previous occasions, conducted similar investigations for the Board of Accountancy, was retained to conduct an investigation to ascertain the facts related to the instant financial statements prepared by the Respondent. By letter dated October 4, 1991, the Department notified Respondent that the investigation would take place and the subject matter thereof. Mr. Reilly thereafter met with the Respondent and discussed the financial statements and work papers in issue with him. Though Respondent was initially reluctant to participate in the investigative process unless he was provided, ahead of time, with a list of the reported deficiencies, he later agreed to a review of his work product. When he had completed his investigation, Mr. Reilly prepared a report in which he stated his opinions regarding the sufficiency of the financial statement prepared by Respondent which he determined to be inadequate. His opinion was based on his findings that there were a significant number of departures from the accounting standards called for in Statement of Accounting Standards, (SAS), 58 developed and promulgated by the American Institute of Certified Public Accountants, (AICPA). Mr. Reilly also found there were no references in the Financial Statement prepared by Respondent to footnotes as required by Accounting Principles Board, (APB), Statement 4. There also was no summary of significant accounting policies as required by APB Statement 22. All of this was determined from the hierarchy of accepted auditing principles as found in SAS 5. APB Statement 22 is at the top of the hierarchy and indicates that a failure to follow generally accepted accounting principles is a significant deviation. Among the deviations Mr. Reilly found were included: Cash in reserve funds was incorrectly referred to as a current asset. Reserve funds should not be considered current assets. (See APB Statement 43). Leases should be disclosed and here these were significant. (See FASB 13, Section L-10). Related party disclosures are not mentioned in the notes as they should be. Here there were 3 separate condominium associations and this financial statement related to only one of them. Since the 3 associations were related, however, the statement should have referred to the others within the complex shared by them all. Because of their interrelationship, disclosure was important. There was no allocation of expenses among the three different associations. There were some invoices paid which may have been allocated among the 3 associations and this was not discussed. It could be significant. Rule 7D-23, F.A.C., requires disclosure of common property and the costs of repair thereof. This requires reserves be maintained for future repair, and the method of allocation, or the waiver thereof, should be explained. This can be very significant, and it was not done by Respondent here. Among the work papers submitted some things which should have been shown were not in evidence. These included: A written audit program should have outlined as required by SAS 22 and SAS 41. This is very significant. A client representation letter should have been obtained as called for in SAS 19. Without it, a limitation on the audit is imposed. This is very significant. A review of related party transactions was not shown to have been done as required by SAS 45. Because of the related organi- zations, this was a material deviation. There appeared to be no review of the internal control structure, (policies, pro- ceedings, etc. relating to the accounting practices of the organization). The auditor should look at this and understand it so he can plan his audit, as required by SAS 55. Here, the audit report did not show it was done and this is significant. A preliminary judgement of materiality levels, as required by SAS 47 was not done. There was no showing that planning had been done as required by SAS 22 and 47, or analytical procedures used in planning the nature, timing and extent of other audit procedures, as required by SAS 56. Each of these alone might not be significant, but taken together, they all are significant. There appeared to be no consideration given to applicable assertions in develop- ing audit objectives as required by SAS 31. An attorney's letter was not in the file as required since the books showed an attorney had been used during the year. This is called for by SAS 12 and is used to check on the status of the legal work and any potential liability of the client. No check was made to see if any test- ing had been done to insure the association was in compliance with Rule 7D-23, FAC. No inquiry was made to see if the client was in compliance with the laws and regulations of the state in general, as called for by SAS 63. The work papers contained a lot of unnecessary bills and statements not norm- ally included. These should not have been there in that form without a showing they were used in the audit. (See SAS 41) There was no showing that any tests were done to insure a correct expense all- ocation among the 3 entities. There was no reporting disclosure checklist. While not required, such a list is common practice to insure all required disclosures pertinent to condo associations were made. The failure to do this is, in Reilly's opinion, practice below commonly accepted standards. The checklists are available from many sources readily access- ible to accountants. There is nothing secret or exclusive about them. Accounting competency standards are found in Rule 21A-22.001 - 21A- 22.003, F.A.C. In Mr. Reilly's opinion, based on, among other discrepancies, the matters outlined above, Respondent deviated from these standards to a point below the standard for a reasonably prudent certified public accountant. He defines "generally accepted accounting practices", (GAAP), as a source of knowledge that exists as defined within the parameters of SAS 5. Certified public accountants keep current in literature pertinent to their professional practice by attendance at continuing education courses, conferences, by performing quality and peer reviews, by doing investigations for the Board of Accountancy, and by networking with other CPA's. These are, of course, not the sole methods of maintaining currency but the ones used mostly by active practitioners, to the best of Mr. Reilly's knowledge. In his report of investigation, Mr. Reilly notes that Respondent is not a member of either the Florida Institute of Certified Public Accountants or the American Institute of Certified Public Accountants and does not participate in the peer review or quality review programs of either organization. His continuing professional education, as reported by him, consisted mainly of self study programs published by Accounting Publications, Inc., and though his practice is related, to a substantial degree to condominium associations, he has not attended any recognized continuing professional education course in that area. Mr. Felsing, also a CPA, heard Mr. Reilly's testimony at the hearing and reviewed his report of investigation. He agrees with Mr. Reilly concerning Respondent's report and he also considers Respondent's departure from generally accepted accounting standards to be significant. He notes that the Respondent here expressed a "clean" opinion regarding the status of the association which he should not have done because of the deficiencies in his work. Mr. Felsing did not review Respondent's work papers, but based on his understanding of Reilly's testimony, he identified what he considers to be significant departures from standard. These include: There should have been a work program developed as required by SAS 22. This is very significant. There should have been a client representation letter as required by SAS 19. This is significant because the failure to have it requires a qualification of the report. SAS 45 requires a review of all related parties and this was not done here even though related parties existed. Respondent's failure to document his thought processes on understanding on internal control standards is indicative of Respondent's attitude toward those standards. Felsing generally concurs with the opinions given by Mr. Reilly right down the line. He concludes that the Respondent's demonstrated lack of planning raises a question as to the effectiveness of the audit since one cannot determine if all required tasks were done. Generally accepted accounting standards require the use of analytical procedures as a valuable tool. Failure to use them would be a significant departure from accepted standards since they all relate to the planning of the engagement and without documentation, a reviewer of the audit report cannot tell if the required tasks were performed. The mere inclusion of client documents in the work papers is not acceptable proof that the work was done. The significance of the disclosure checklist lies in the fact that it is the only way to insure that all required items are included in the financial statement. After a review of all the evidence available to him, Mr. Felsing concluded that Respondent failed to use due diligence as a CPA in this audit. In the aggregate, the information available shows Respondent was either not aware of or chose to disregard the applicable professional standards pertinent here. In his defense against the charge of failing to conform to generally accepting accounting standards, Respondent refers to SAS 5 and AU 411.02 and 411.05. These authorities basically outline the standards against which accounting practice is measured. He notes that the term, "generally accepted accounting practices" includes not only pronouncements but also concept statements of the Financial Accounting Standards Board and "broad conventions and rules" which are not pronouncements. Respondent urges that a practitioner has to follow generally accepted accounting practices when performing an audit. There are two subgroups of these practices which pertain to (1) profit and nonprofit organizations, and (2) governmental entities. According to the AICPA interpretation of Conduct Rule #3, there are reasons to depart from GAAP when appropriate. One is the evolution of a new form of business transaction and another is new legislation requiring a departure. In either case, a certified public accountant might legitimately deviate from GAAP. Since, he claims, GAAP is somewhat fluid in application, the auditor has the responsibility and the right not to act as a robot but to see that the audit properly serves the purpose of the entity being audited so as to promote decision making and to identify net income and net worth. Respondent asserts that GAAP are not an end in themselves but a tool in making business decisions. The usefulness of the financial information should be the primary quality to be sought. Usefulness deals with relevance and reliability. In the instant case, Respondent claims that the concept of condominium ownership of realty is so new and so different, and governed by such new legislation that GAAP which have been in use over the past 10 or 15 years and developed to deal with the condominium association are not pertinent. Here, he claims, he had to modify. His position, however, is not well taken. The audit report in issue was to be read by the condominium owners who are interested in the stewardship of the condominium board and the net worth of the association. Respondent contends they are not interested in profit or tradable net worth. A condominium association has a clear and stated purpose which is the management and maintenance of the condominium property. Therefore, an accountant who goes into an audit of a condominium association without having these concepts in his mind is, in his opinion, not doing a good job. Turning to the specifics of the allegations made by Petitioner's witnesses and in the report of investigation, while he accepts some of the comments as valid so far as they allege a particular action, he also claims, in those cases, that the alleged inadequacy has no significant effect on the financial statements. For example, on page C-1 of Mr. Reilly's report, under the heading, Financial Statements, he refers to audits (plural) when only one year is reported on. On the other hand, Respondent disagrees with Reilly's comments regarding an "unorthodox" practice of presenting separate operating statements for the general and reserve funds. Respondent claims there is no definition of "unorthodoxy" for a condominium association and, as evidenced by the 1990 budget of the association, there were more than one reserve account indicated on the financial statement. In his opinion, the accountant should honor that segregation of funds. Respondent agrees that his financial statements do not contain a general reference to the accompanying notes, but he cannot see where any damage was done to a reader of those statements because the footnotes were there without a separate reference. He disagrees that it is generally accepted to record changes in financial position as a basic part of the financial statement when dealing with condominium associations. They are "new animals" and as the accountant, he has the right, he claims, to decide if that information is necessary to the reader of the financial statement. Here, he concluded it was not and, in fact, could be a source of confusion. Respondent also disagrees the Reilly's comment regarding the information regarding reserve funds. He believes that if the financial reporter feels there is a need for segregation of funds, he has to present that segregation in detail. In this case, Respondent believes there is no orthodoxy for condominium reporting and it would be useful to the reader of the statement to see total assessments from all sources so as to determine the justification for his monthly assessment. He also disagrees with Reilly's conclusion that the financial statements do not contain a summary of significant accounting policies. There are, he claims, no alternatives to the way he presented them. Respondent has difficulty responding to Reilly's seventh assertion which is to the effect that cash in reserve funds was inappropriately reflected as a current asset since the reserves are long term. Mr. Shaw believes that if the cash is there, it is available to the board whether it is used or not. This appears to be a matter of semantics and not an issue particularly related to the accounting for condominium associations. While it is true the reserve asset is current and available, it is a dedicated asset and the better accepted accounting practice, as indicated by both experts, is to treat it more as a long term asset. It is so found. Respondent also disagrees with Reilly's conclusion that his terminology in Sections 2 and 3 of the balance sheet is unorthodox. He asserts that those sections do not have to be defined anywhere in the financial statements and are not related to Section 1. He contends that any reader of the audit report would know what is what and be able to understand it. With regard to the "missing" note disclosures, he disagrees with all allegations. He claims that disclosures under FASB #13 and #96 clearly do not apply to condominium associations but relate to investor owned leaseholds. Review of the pertinent bulletin does not necessarily support Respondent's position. He also claims that since there are no related parties none need be disclosed as regards the property management company or the other Sections. The same, he contends, relates to disclosure of potential allocation of expense between the three associations in the same complex. He also does not accept the need to disclose the allocation of interest income between funds utilized by the association. As to disclosures related to reserves and the funding for major repairs and replacements, he contends there is no GAAP that requires this disclosure. Only the state requires it. If a practice is called for in either a statute or rule governing a business activity, whether the profession agrees or not, that requirement must be met and one who fails to do so omits at his peril. In general, those things omitted from his audit, such as a cash flow statement, were not requested by the client, he claims. Had he been asked for them, he would have provided them. Respondent also seeks to rebut some of Mr. Reilly's comments regarding his work papers. He has no complaint with the first two which are not critical of his audit, and he admits he may be in violation of GAAP with regard to Reilly's finding that certain required documentation was not included therewith. However, if, as he alleged, the financial statement conforms to GAAP, there is no harm done when the supporting work papers are not exactly as they should be. He contends, as well, that several, such as SAS #22 which refers to assistants, do not apply. Admitting to a violation of SAS #19 which calls for a client representation letter, he claims to have cured that defect by subsequently getting one and thereafter saw no reason to change the financial statement. Again, as with his response to the complaints regarding the financial statement, he claims any alleged failure regarding related parties is invalid since, he asserts, there are none. With regard to the remaining alleged defects in the supporting documentation to the work papers, he claims there was a search for unrecorded liabilities but because there was no mention made of it, Reilly could not tell this from the documents. Admitting there was no documentation regarding understanding of the internal control structure, as required by SAS #55, Respondent claims he understood it. He alleges he did accomplish an assessment of control risk as required by SAS #55 but admits there is no record of it in the work papers. The preliminary judgement of materiality levels, planning, and analytical procedures in planning the nature, timing and extent of other audit procedures, as required by SAS #'s 22,47 and 56 were all accomplished, he claims, but admits they were not included in the work papers. He also admits he did not get an attorney's letter and that this is a violation. However, he claims he did test to determine if the association was in compliance with pertinent statutes and rules, but it was not written down in the work papers, and he claims that confirmation of accounts receivable was not necessary because there were none except from Sections 2 and 3, which he did verify. In this latter assertion, it appears he was correct. Mr. Shaw refers to allegations 4 - 6 regarding work papers as mere statements of fact with which he takes no issue. A closer look at the report, however, reveals that numerous omissions were noted here as well. He admits that a financial statement reporting checklist was not in evidence but relates he deemed it not necessary. Mr. Reilly disagreed and his opinion is more supportable. There is little to disagree with in Mr. Reilly's item 8 under work papers when he asserts that the omission of an overall index of the work papers made them difficult to review and void of audit methodology. Taken together, the evidence demonstrates that Respondent's audit did not sufficiently conform to GAAP and was less than required under the circumstances.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is recommended that a Final Order be entered in this case placing Respondent, Gerald E. Shaw's, license as a certified public accountant in Florida on probation for a period of three years under such terms and conditions relating to practice and continuing education as are deemed appropriate by the Board of Accountancy. RECOMMENDED this 12th day of October, 1992, in Tallahassee, Florida. ARNOLD H. POLLOCK, 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 12th day of October, 1992. APPENDIX TO RECOMMENDED ORDER IN CASE NO. 92-3420 The following constitutes my specific rulings pursuant to Section 120.59(2), Florida Statutes, on all of the Proposed Findings of fact submitted by the parties to this case. FOR THE PETITIONER: Accepted and incorporated herein except as they relate to the treatment of reserve accounts as long term assets. FOR THE RESPONDENT: None submitted. COPIES FURNISHED: Charles F. Tunnicliff, Esquire Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Gerald E. Shaw 10780 South US 1 Port St. Lucie, Florida 34952 Jack McRay General Counsel Department of Professional Regulation 1940 North Monroe Street Tallahassee, Florida 32399-0792 Martha Willis Executive Director Department of Professional Regulation/Board of Accountancy Suite 16 4001 Northwest 43rd Street Gainesville, Florida 32606
Findings Of Fact Leslie H. Roth is a licensed CPA in the State of Florida, holding License No. R0004593. He was employed by the CPA firm of Rachlin & Cohen from December 2, 1974, through August 26, 1977. During that period of employment he was paid a salary plus a commission based upon the number of clients he brought to the firm and the fees he generated. The Respondent left that firm on August 26, 1977, and became an employee of Holiday Inn at Calder Race Course in Miami. Upon leaving the firm of Rachlin & Cohen the Respondent signed acknowledgements disclosing the status of the clients' work to which he had been assigned and the related amount of money owed to the firm. When he left that firm, the firm owed him no additional commissions or salaries. The Respondent failed to remit to Rachlin & Cohen the fees collected from their clients for whom he had performed services and when Rachlin & Cohen attempted to collect those fees some of the clients claimed they had already paid the Respondent. Rachlin & Cohen, therefore, filed suit in circuit court and obtained a judgment against the Respondent in the amount of $550 representing the firm's fees collected by the Respondent. In early 1978, while working as a CPA for Holiday Inn at Calder Race Course, the Respondent prepared some unaudited financial statements in order to help the business maintain or keep a loan with a financial institution. These unaudited financial statements are required to comply with applicable generally accepted accounting principles and auditing standards. They contained a technical deficiency because the Respondent failed to disclose an aggregate future minimum lease payment and a potential deficiency in that the notation that the statements were "before final year-end adjustments" did not disclose whether material adjustment needed to be made. The Respondent also was shown to have performed the service of filing a "1120-SK-1 form" for Pro-Management, Inc., while Pro-Management, Inc., was a client of Rachlin & Cohen. Filing s such a form is normally the duty of the regularly retained accounting firm for that company. The Respondent's "reestablishment period" for his CPA license was 1977 through 1979. He was required to file yearly continuing professional education reports related to his reestablishment period. These were due by January 15, of each following year, reporting on his level of compliance with continuing professional education (CPE) requirements for the preceding year. In 1977, when the period started, the CPE requirements were 30 hours per year, with at least 8 hours of accounting and auditing. If not completed the first year and any time during the 3-year period, he would have to completed 120 hours of CPE courses, including at least 32 hours of accounting and auditing. In October, 1977, the law changed and licensees could choose to complete the old requirements or the new ones which were 24 hours per year including at least 64 hours of auditing and accounting, but licensees could not use a combination of those. If a licensee files such a form substantially late it must be accompanied by a verification of attendance at the subject CPE courses. The CPA is also required to maintain documentation of CPE courses attended for 3 years following his reestablishment period. The Respondent filed a CPE education report for 1977 on January 1, 1978. It was reviewed and returned February 1, 1978, with a letter by the Board explaining that the Respondent had reported one course incorrectly for "accounting and auditing" when it was only half-approved for that category. He also was informed by the Board that he reported 7 hours of accounting and auditing credit for Dade County, Florida Institute of CPA Monthly Meetings, but with no dates and no titles of sessions attended. The Respondent returned the 1977 form to the Board's office January 7, 1980, along with the 1978-1979 CPE report forms, approximately 2 years late with regard to the 1977 form and 1 year late with regard to the 1978 reporting period. The forms filed by the Respondent reflected that in 1977 he had obtained 22 hours of accounting and auditing and 34 hours total CPE. He still supplied no dates for the meetings of the Dade County Chapter of FICPA, nor had he apportioned hours properly. He reported 15 hours accounting and auditing and 37 hours total CPE for 1878, but again he included FICPA monthly meetings for 4 hours of his accounting and auditing requirement and 4 hours for "other." Under the category "Accountants for Public Interest," he reported 3 hours accounting and auditing and 10 hours "other," but with no itemization of the programs attended on his 1979 form. The 1979 form was, however, timely filed. The hours reported by the Respondent which were verified still did not fulfill the continuing professional education requirements imposed by the Board for the years involved. The staff of the Board attempted to notify the Respondent of the deficiencies in his reporting and requested verification of his courses attended. The Board received no response from the Respondent. In view of his lack of response and the deficiency in reporting CPE courses attended, the Continuing Education Committee recommended to the Board of Accountancy that the Respondent's license be reverted to inactive status. The Respondent was accordingly notified on March 1, 1980, that his continuing professional education appeared deficient and he was given 30 days to correct the situation. The Respondent did not respond and on May 1, 1980, he was informed by the Continuing Professional Education Committee that it would recommend to the Board that it relegate his license to inactive status. On July 30, 1980, the Respondent was sent another letter with essentially the same information giving him an additional period of time to resolve his difficulty. Finally, at the August, 1980, meeting of the Board of Accountancy the reversion to inactive status was accomplished. The Respondent's license has thus legally been inactive since August 20 of 1980. Since May of 1980, to the date of the hearing, the Respondent has been employed by Gerson, Preston & Co., a CPA firm, where he has utilized his accounting skills and worked as a staff accountant. He has thus practiced as a CPA since August 20, 1980.
Recommendation Having considered the foregoing findings of fact, conclusions of law, the candor and demeanor of the witnesses and the pleadings and arguments of the parties, it is RECOMMENDED that the Respondent, Leslie H. Roth, be found guilty of the charges in the Administrative Complaint herein and that his License No. ROOO4593 be placed in a suspended status for 3 months from the date of the final order herein; that his licensure then be returned to active status, but that he be placed on probation for 3 years and be required to complete 120 hours of continuing professional education, including at least 32 hours of accounting and auditing and that he be fined the sum of $1,000. DONE AND ORDERED in Tallahassee, Leon County, Florida, this 5th day of October, 1981. P. MICHAEL RUFF Hearing Officer Division of Administrative Hearings Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 5th day of October, 1981. COPIES FURNISHED: Drucilla E. Bell, Esquire Department of Professional Regulation 130 North Monroe Street Tallahassee, Florida 32301 Leslie H. Roth Post Office Box 9174 Pembroke Pines, Florida 33024
