Transcript of Mark H. Crocker, CPA, CGMA Executive Director, Tennessee State Board of Accountancy Don Mills, CPA,...
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- Mark H. Crocker, CPA, CGMA Executive Director, Tennessee State
Board of Accountancy Don Mills, CPA, CFE, CFF TNSBA Investigator
Ray Butler, Jr., CPA TNSBA Investigator
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- THIS PRESENTATION IS BEING BROUGHT TO YOU BY THE MEMBERS OF THE
TENNESSEE STATE BOARD OF ACCOUNTANCY
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- William Blaufuss, CPA, Chairman. Nashville William Blaufuss,
CPA, Chairman. Nashville Don Royston, CPA, Vice- Chair Kingsport
Don Royston, CPA, Vice- Chair Kingsport Henry Hoss, CPA, Sec.
Chattanooga Henry Hoss, CPA, Sec. Chattanooga Vic Alexander, CPA
Nashville Vic Alexander, CPA Nashville Gay Moon, CPA Nashville Gay
Moon, CPA Nashville Jennifer Brundige, JD Nashville, Public Member
Jennifer Brundige, JD Nashville, Public Member Stephen Eldridge,
CPA Jackson Stephen Eldridge, CPA Jackson John Roberts,
Attorney-at- Law Nashville, Attorney Member John Roberts,
Attorney-at- Law Nashville, Attorney Member Charlene Spiceland, CPA
Memphis Charlene Spiceland, CPA Memphis Casey Stuart, CPA
Chattanooga Casey Stuart, CPA Chattanooga Trey Watkins, CPA Memphis
Trey Watkins, CPA Memphis
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- Quiz Question New Members of the Accountancy Board are selected
by: a.The Governor b.The TNSBA c.Current members of the Board d.A
secret committee that meets in Nashville e.A random drawing that
includes all active Licensees
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- IN THE TNSBA COMPLAINT SYSTEM, THERE ARE TWO SEPARATE YET
DISTINCT ENTITIES: THOSE INDIVIDUALS WHO ARE LICENSED BY THE STATE,
AND THOSE WHO ARE NOT. THESE ARE THEIR STORIES
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- In the last 5 years, over 40% of the complaints received by the
TNSBA involved Unlicensed Activity.
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- Such as this case study.
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- Unlicensed Activities Case Study: An anonymous individual
submitted the following opinion and asked if we could tell if it
was a real audit; noting that the company used the word audit 5
times in their letter. What do you think?
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- ABC Accounting & Tax Services, Inc. We have audited XYZs
statement of financial position for the calendar year 2006, 2008,
and 2010. These financial statements are the responsibility of XYZ
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
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- An audit includes examining on a test basis, evidence
supporting the amounts reported on the financial statements. We
have audited the following items in your financial statements:
Revenues for all three years Expenses for all three years
Collections for all three years 1099 Filings Tax return filing
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- In our opinion, the financial statements are referred to above
to be fairly presented with except of the items listed below: 2010-
A $1.00 variance between Revenue calculated and what was deposited.
Tax return was prepared properly. 2008- Tax filing and income
statement includes $2000 Transfer from operating account to
Certified Deposit as being an expense when this is just a balance
sheet transfer. Transfer from one bank account to another (or CD
for this transaction) is not an expense; entity still holds control
over this money. 2006- Revenue for this year could not be tested
due to a lack of supporting documents; did not have bank statements
to verify that all revenue was deposited. We understand this is due
to change in property manager. Tax return was prepared
properly.
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- Signed: ABC Accounting & Tax Services, Inc. Disclosure: ABC
Accounting & Tax Services and its associates are not certified
public accountant. Owner does have a masters degree with
concentration in accounting. This information was disclosed to the
companys president and approved us for performing this audit.
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- Believe it or not There is a provision in the Law & Rules
that provides disclaimer language for non-licensees in connection
with financial statements that will not be a violation.
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- Rule 0020-4-.06 Safe Harbor Language We have prepared the
accompanying (financial statements) of (name of entity) as of (time
period) for the (period) then ended. This presentation is limited
to preparing, in the form of financial statements, information that
is the representation of management. We have not audited, reviewed
or compiled, under professional standards prescribed for such
services, the accompanying financial statements and accordingly do
not express an opinion or any other form of assurance on them. We
are not licensed by this state, as a certified public accountant or
accounting firm, to provide those types of services.
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- Quiz Question Which of the following activities are prohibited
unless the individual is a licensed CPA in the state of Tennessee?
a.Using the designation CPA b.Using the word accountant or
accounting c.Issuance of a report on financial statements of any
person, organization or governmental unit. d.Use of any language in
any statement relating to the financial affairs of a person or
entity that is conventionally used by licensees. e.All of the
above.
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- The Repeat Offender 1997- paid a $500 civil penalty for issuing
a review report on financial statements. 2004- Two complaints for
advertising his firm under Accountants- Certified Public. 2008-
paid a $5,000 civil penalty with regard to two complaints for
holding out as a CPA and use of the word Accounting in his firm
name 2010-Fined $7,500 for signing a Federal tax return as a
CPA.
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- 2012- During the investigation of two new complaints against
the individual, special agents from the Tennessee Department of
Revenue asked that the complaints be suspended while they conducted
an investigation. It appears that our repeat offender had
discovered a new way to prepare his clients sales tax returns.
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- In October of 2012, The Board dismissed both complaints against
the individual in favor of criminal charges brought by the State,
consisting of over 3 dozen felony counts. Most of the felony counts
were for obstructing lawful tax collection; however, one felony
count of impersonation of a professional was added at the Boards
request.
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- Quiz Question A Licensee must, upon request by a client or
former client, furnish which of the following records? a.Any
reports or other documents belonging to or obtained from the
client. b.Any accounting or other documents belonging to or
obtained from the client. c.Any working papers that would
ordinarily constitute part of the clients books and records, such
as general ledgers, fixed asset and depreciation schedules. d.a.
and b., but not c. e.All of the above.
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- HOW MANY CPAS IN TENNESSEE TODAY? Active 10,459 Inactive 4,188
Closed 2,811 Probation/Suspended 2 Revoked 54 Retired 1,008 Expired
(Grace) 142 Expired 2,281 Deceased 2,262 Other 251 Total Licenses
24,056
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- Top 5 Problems with Licensees: 1.License renewal 2.Firm permit
renewal 3.Continuing Professional Education 4.Peer Review
5.Professional Privilege Tax
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- 1. License renewal - Good Standing StatusPay License Renewal
Fee Complete CPEPay Professional Privilege Tax ActiveYes
InactiveYesNo Retired (55 yrs+) YesNo Retired Over 65 No ClosedNo
But Must Return Wall Certificate No
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- 1. License Renewal Not so Good Expired-Grace Expired Probation
Suspended Revoked Expired-Grace Expired Probation Suspended
Revoked
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- Quiz Question The only difference between a retired license and
an expired license is that no fees are required to maintain an
expired license. a.True b.False.
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- 2. Firm Permit Renewal Annually Update and Confirm: Physical
Information Where is your office? Ownership- Must be 51% owned by
CPAs Experience of Resident Manager Peer Review Selection or Exempt
Request Sign up with TSCPA upon application for firm permit CPA
owners and CPA employees
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- Quiz Question A Licensee is not required to obtain a firm
permit in which of the following circumstances? a.Licensee is a
sole proprietor and does not perform attest services. b.Practice is
limited to preparation of tax returns. c.Practice is limited to
personal financial planning. d.Licensee advertises practice as
limited to consulting. e.All of the above are exceptions to the
firm permit requirement.
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- 3. Continuing Professional Education All Licensees Holding
Active License 80 Approved Hours every two years add 8 penalty
hours if you dont 40 Technical Hours (A&A, Taxes, Ethics &
Management Advisory) 2 Hours State Specific Ethics Such as this
course! Minimum of 20 Hours Each Year add 8 penalty hours if you
dont Special Areas: Attest Services 20 Hours A&A Expert Witness
Services 20 Hours in Area
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- 3. Continuing Professional Education Helpful Hints: If you are
short on technical hours but still have completed 80, you can make
them up without penalty. 40 Technical Hours (A&A, Taxes, Ethics
& Management Advisory) You may carry over up to 24 hours from
the previous reporting period, but they become reclassified as
other. And They cannot be used to meet the annual 20 hour
requirement. If you miss your 20 hour requirement in one year but
have a total of 88 hours for the reporting period the extra 8 hours
can be reported as your penalty hours
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- 4. Peer Review Requirements Tennessee requires peer review for
any firm that performs the attest function. Tennessee defines the
attest function to include compilations. Only engagements conducted
under SSARS #8 may be excluded from the requirement. (Be careful,
this is a high risk area)
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- 5. Professional Privilege Tax Assessed every June by the
Tennessee Department of Revenue. Every Licensee with an active
license is subject to the tax regardless of where you are
practicing.
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- Quiz Question After a Formal Hearing, the Board may revoke,
suspend, reprimand, censure or limit the scope of practice of a
licensee for which of the following reasons: a.Fraud in obtaining a
license b.Disciplinary action taken by another state c.Revocation
of the right to practice before any state or federal agency
d.Dishonesty, fraud or gross negligence in the performance of
services e.Violation of the rules of professional conduct f.All of
the above
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- How about a case study to illustrate the idea that- No good
deed goes unpunished.
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- THE COMPLAINT The Complainant stated that the Licensee had been
hired to serve as a Power of Attorney; to pay bills; and to serve
as the Executor of her elderly mothers will. Specific allegations
were as follows: The Licensee told the 93 year old client she had
dementia. The Licensee tried to force the client into a living
situation against her will. The Licensee filed a lawsuit against
the client that cost her $10,000 Approximately $1,000 of the
clients money was spent in unexplainable ways.
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- THE RESPONSE The Licensee stated that the clients physician
told family members that she had mild dementia and needed help with
her finances. The Licensee admitted meeting with the client and her
financial advisor because the client was being forced to sell her
home (by the Complainant). The lawsuit was actually a filing by the
Licensee of a petition for conservatorship in order to protect the
clients assets. All issues were resolved by settlement of the
family members and the petition was dropped.
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- THE STORY CONTINUES A review of the Licensees workpaper files
showed that the unexplainable expenses consisted of blank checks
that had been given to the client and signed for by the client. The
Licensee did not have check signing privileges. Two of the
Complainants siblings provided affidavits stating that they had
full confidence in the Licensee; however, they did assert that the
Complainant was responsible for over $500,000 in unaccounted for
funds missing from their mothers investment accounts.
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- THE RESOLUTION Throughout the investigation, the Complainant
was unable to provide any documentation regarding her allegations
against the Licensee. Although the Board dismissed the complaint,
the client passed away during the investigation and the Licensee is
now working as the Executor of the clients estate; having been told
by the Complainant that no fees will ever be paid for the work
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- Quiz Question Which of the following actions are available to
the Board concerning complaints? a.Dismissal. b.Letters of Caution,
Warning or Instruction. c.Consent Order. d.Informal Hearing.
e.Formal Hearing. f.All of the above.
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- Whoever said, There is nothing new under the sun, was
definitely not an accountant
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- New Rules for the Tennessee CPA Rule 0020-01-.04(1) Fees
Amended to reduce the CPA license renewal fee to one hundred ten
dollars ($110.00) biennially Rule 0020-01-.04(1) Fees Amended to
reduce the CPA license renewal fee to one hundred ten dollars
($110.00) biennially
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- Rule 0020-01-.05 Applications Amended paragraph (3) to read as
follows: A candidate who fails to appear for the examination shall
forfeit all fees charged for both the application and the
examination. All applications for initial licensure shall expire
one (1) year from the date of the application for initial
licensure. Amended paragraph (3) to read as follows: A candidate
who fails to appear for the examination shall forfeit all fees
charged for both the application and the examination. All
applications for initial licensure shall expire one (1) year from
the date of the application for initial licensure.
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- Rule 0020-01-.06 Applications Amended by adding a new paragraph
(11) to read as follows: All CPA Exam scores shall expire ten (10)
years after the first passing score is earned. However, upon
written request by the applicant, the Board may, in its sole
discretion, grant an extension of the score expiration date for
good cause shown. Amended by adding a new paragraph (11) to read as
follows: All CPA Exam scores shall expire ten (10) years after the
first passing score is earned. However, upon written request by the
applicant, the Board may, in its sole discretion, grant an
extension of the score expiration date for good cause shown.
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- Rule 0020-04-.03 Grounds for Disciplinary Action Amended by
adding a new paragraph (3) to read as follows: The Board has no
jurisdiction over fee disputes between a licensee and a client. The
Board shall not seek to impose discipline against a licensee solely
on the basis of a dispute between the licensee and the client
regarding payment of fees by the client for professional services
rendered by the licensee. Amended by adding a new paragraph (3) to
read as follows: The Board has no jurisdiction over fee disputes
between a licensee and a client. The Board shall not seek to impose
discipline against a licensee solely on the basis of a dispute
between the licensee and the client regarding payment of fees by
the client for professional services rendered by the licensee.
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- Rule 0020-05-.03(3) Basic Requirements Amended by adding new
subparagraphs to read as follows: (a)For purposes of disciplinary
action, the Board shall retain jurisdiction over all certificate
holders whose license is in inactive status. (b)Certificate holders
who are granted inactive status by the Board shall be required to
place the word inactive adjacent to their CPA or PA designation
when using such designation for any lawful purpose, including, but
not limited to use of such designation on any business card,
letterhead, resume or biography. Amended by adding new
subparagraphs to read as follows: (a)For purposes of disciplinary
action, the Board shall retain jurisdiction over all certificate
holders whose license is in inactive status. (b)Certificate holders
who are granted inactive status by the Board shall be required to
place the word inactive adjacent to their CPA or PA designation
when using such designation for any lawful purpose, including, but
not limited to use of such designation on any business card,
letterhead, resume or biography.
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- Rule 0020-05-.03(3) Basic Requirements (continued) c)A
certificate holder who has been granted inactive status may not for
compensation perform or offer to perform for the public, including
the providing of accounting services from a licensed accounting
firm, any of the following services: any accounting or auditing
services which involves the issuance of reports on financial
statements (including opinions, reviews, compilations, or attest
engagements), any consulting engagement which would constitute the
attest function, or furnishing advice on tax matters.
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- Rule 0020-05-.03(3) Basic Requirements (continued) d)A
certificate holder who has been granted inactive status may perform
the services set forth in c) above if: the services are provided
without compensation to the certificate holder, if the services are
performed solely for the certificate holders employer and such
employer is not a licensed accounting firm, or if the certificate
holder does not use the CPA or PA designation in association with
his or her name while providing such lawful services.
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- Rule 0020-05-.03(3) Basic Requirements (continued) e)A
certificate holder who is 65 years old or older and possesses a
certificate in inactive status shall not be required to pay the
biennial license renewal fee required for licensees as set forth in
these rules.
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- Rule 0020-05-.03(3) Basic Requirements (continued)
f)Certificate holders who are granted inactive status must complete
eighty (80) hours of CPE in the areas of accounting, accounting
ethics, attest, taxation, or management advisory services during
the twenty-four (24) month period preceding the date of their
request for reactivation of their license. The CPE hours required
to reactivate a license may also be used as credit toward the
renewal requirement so long as those hours are completed within the
two (2) year window prior to the licensees next December 31 renewal
date.
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- Rule 0020-05-.03 Basic Requirements Amend paragraph (6) to read
as follows: An applicant for renewal whose license has expired as
set forth in Rule 0020-1-.08(7) shall complete no less than eighty
(80) hours of CPE in the areas of accounting, accounting ethics,
attest, taxation, or management advisory services during the six
(6) month period preceding the date of reapplication. The CPE hours
required to reinstate an expired license are considered penalty
hours and may not be used to offset the CPE hours required for the
renewal of a license. Amend paragraph (6) to read as follows: An
applicant for renewal whose license has expired as set forth in
Rule 0020-1-.08(7) shall complete no less than eighty (80) hours of
CPE in the areas of accounting, accounting ethics, attest,
taxation, or management advisory services during the six (6) month
period preceding the date of reapplication. The CPE hours required
to reinstate an expired license are considered penalty hours and
may not be used to offset the CPE hours required for the renewal of
a license.
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- Quiz Question A Consent Order from the Board may contain which
of the following: a.Civil penalty b.Additional CPE or peer review
c.A probationary period for the Licensee d.Revocation of the
Respondents license. e.All of the above. f.Every action except
revocation.
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- Before we quit, lets do one more case study for the auditors in
the crowd
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- THE COMPLAINT Respondent was engaged to perform an audit of a
school system that had been previously audited by Legislative
auditors. Respondent failed to contact predecessor auditors before
or after accepting the engagement.
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- THE STORY An initial review of the Licensees working papers
raised questions as to whether or not they met auditing standards.
An Investigator from another Board was engaged to perform a working
paper review and report the results to the Board.
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- AUDIT DEFICIENCIES The Auditor: Failed to obtain management
representations, but still gave an unqualified opinion. Incorrectly
asserted that he was not a successor auditor. Identified
supplemental information but did not provide an opinion as to
whether or not that information was fairly stated. Did not include
any language in the engagement letter stating the responsibilities
of management or the auditor.
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- AUDIT DEFICIENCIES The Working Papers: Did not contain audit
programs related to account balances, transaction classes, or audit
objectives. The audit programs in the working papers were mostly
incomplete and not referenced to the working papers. Did not
contain a method of sampling used for tests of controls or any
indication of the sampling method used for substantive tests. Did
not support the conclusions reached by the auditor in 9 audit areas
identified as significant during the planning phase of the
audit.
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- BEST WORKING PAPER EVER The Audit Process Checklist Document
stated that the auditor performed preliminary analytical review
procedures. And here it is..
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- THE REPORT The Investigators report concluded that the Licensee
had failed to provide a clear understanding of the work performed;
the audit procedures followed; the audit evidence obtained; and,
the conclusions reached.
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- THE RESOLUTION In a formal hearing, the Board ordered the
following: A Civil Penalty of $13,500 plus court and investigative
costs. An immediate peer review. A pre-release review of all audits
performed by the Licensee.
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- Questions? Contact Information Contact Information Phone:
888-453-6150 or 615-741-2550 Phone: 888-453-6150 or 615-741-2550
Fax: 615-532-8800 Fax: 615-532-8800 Web:
http://tn.gov/commerce/boards/tnsba Web:
http://tn.gov/commerce/boards/tnsba
http://tn.gov/commerce/boards/tnsba E-Mail: TNSBA web page has
direct contact information for all Board Members and Staff Members
E-Mail: TNSBA web page has direct contact information for all Board
Members and Staff Members
- Slide 63
- WHO DO I ASK FOR? TNSBA Administrative Support Staff Executive
Director Mark H. Crocker, CPA, CGMA Executive Director Mark H.
Crocker, CPA, CGMA Investigator Don Mills, CPA, CFE Investigator
Don Mills, CPA, CFE Investigator Ray Butler, CPA Investigator Ray
Butler, CPA Advisory Attorney Chris Whittaker, Esq. Advisory
Attorney Chris Whittaker, Esq. Education Coordinator Denise
Hickerson Education Coordinator Denise Hickerson Complaint
Coordinator Josh Canan Complaint Coordinator Josh Canan Licensing
Coordinator Brenda Demastus Licensing Coordinator Brenda Demastus
Firm Permit Coordinator Karen Condon Firm Permit Coordinator Karen
Condon Administrative Assistant Sandy Cooper Administrative
Assistant Sandy Cooper
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- FUNCTION OF ADMINISTRATIVE OFFICE Initial Licensing (testing
and reciprocity) Initial Licensing (testing and reciprocity)
Renewing Licenses Renewing Licenses Updating Files Updating Files
Assisting Licensees & Public Assisting Licensees & Public
Investigation of Complaints Investigation of Complaints Education
Education
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- Final Quiz Question On December 31 st, you realize that you do
not have enough CPE. Which is your best option regarding your
renewal? a.Continue to practice on a delinquent license and pray
that no one notices. b.Go ahead and renew. Answer no to the CPE
question, then finish your hours. c.Close your license and get a
job with H & R Block. d.Request an extension of time because
your in-laws came to visit at Thanksgiving and are still in your
house. e.Move to another state.
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