ALJDEC decisions subject to certification as final

13F-2012.008-ACY · State Board of Accountancy · 2013-03-27

IN THE OFFICE OF ADMINISTRATIVE HEARINGS

HEARING: November 7, 2012 and January 8, 2013, with the record held open until March 8, 2013. APPEARANCES: The Arizona State Board of Accountancy was represented by Assistant Attorney General Seth Hargraves. Respondent Charlotte Anne Viterbo and Respondent V Accounting, PLLC were represented by David Derickson. ADMINISTRATIVE LAW JUDGE: Tammy L. Eigenheer _____________________________________________________________________ FINDINGS OF FACT 1. Charlotte Anne Viterbo (“Respondent”) is the holder of Certified Public Accountant (“CPA”) Certificate No. 7402-E, issued by the Arizona State Board of Accountancy (“Board”). The Board also issued to Respondent the CPA Firm Registration No. 2085-L for her business, V Accounting, PLLC (“Firm”). 2. On or about April 28, 2011, Respondent submitted an Application for a Certified Public Accounting Firm to the Board seeking to have the entity Retirement Plan Auditors, Ltd. registered as a CPA firm in Arizona. On the application, Respondent listed herself as the sole CPA owner and designated Arizona CPA of Retirement Plan Auditors, Ltd. Respondent signed the application indicating the statements contained therein were true, complete, and accurate and agreeing that the Board would be notified in writing within 30 days of any organizational changes including, but not limited to, termination of the firm and the admission or withdrawal of any officer, director, or partner. 3. At the time of the April 28, 2011 application, Retirement Plan Auditors, Ltd. was being investigated by the Board (File No. 2011.100) for holding itself out as a CPA firm without being registered with the Board in violation of A.R.S. § 32-747. 4. On May 17, 2011, Respondent was sent a questionnaire by the Board regarding Retirement Plan Auditors, Ltd. and File No. 2011.100. In the accompanying cover letter, the Board requested that Respondent complete and return the questionnaire within 30 days of the date of the letter. 5. On June 13, 2011, the Board received a letter dated June 10, 2011, from Respondent stating that in response to the May 17, 2011 letter, she was withdrawing the application for Retirement Plan Auditors, Ltd., as she had made the decision not to complete the purchase of stock in Retirement Plan Auditors, Ltd. 6. On June 14, 2011, the Board sent Respondent a letter indicating it was in receipt of her June 10, 2011 letter, but that she had failed to include the completed questionnaire. Respondent was notified that if the completed questionnaire was not received by the close of business on June 17, 2011, the Board might vote to open a complaint against her certificate and/or proceed with disciplinary proceedings. 7. On June 17, 2011, the Board received a letter dated June 16, 2011, which provided that “This statement is pursuant to the request of the completion of the questionnaire.” Respondent stated that she erroneously sent in the application and requested that the application be withdrawn. Respondent stated that she was “unable to answer any of the questions on the questionnaire. The questions are not applicable to this situation.” Respondent included a blank copy of the questionnaire. 8. On June 17, 2011, the Board sent Respondent a letter indicating it was in receipt of her June 16, 2011 letter, but that the statements included were inconsistent with the Arizona Corporation Commission records. Respondent was notified that based on her inconsistencies, Retirement Plan Auditors, Ltd.’s unauthorized use of the CPA designation, and her failure to complete and return the questionnaire, the Board might vote to open a complaint against her certificate and/or proceed with disciplinary proceedings. 9. On June 22, 2011, the Board received a letter dated June 18, 2011, from Respondent stating that she had not had any involvement with Retirement Plan Auditors, Ltd. other than payment of $1.00 upon inception and that the stock had since been redeemed by Retirement Plan Auditors, Ltd. Respondent included a letter of resignation from the Board of Directors of Retirement Plan Auditors, Ltd. dated May 1, 2011, and a Stock Redemption Agreement effective April 1, 2011. 10. On June 29, 2011, Respondent emailed the Board and requested additional time to complete the questionnaire. Respondent stated she had been caring for her father since March 2011 as he had lost his insurance and she was his sole caregiver. 11. On July 8, 2011, the questionnaire was received by the Board. In response to a question regarding the relationship or connection that any owner or employee of Retirement Plan Auditors, Ltd. had with Michael S. Edelen, Respondent indicated that for a short time in the 1990s, she had worked for a company that she believed Michael Edelen was a shareholder of and that their children knew each other. 12. In a July 8, 2011 letter to the Board, Respondent, through her attorney, stated that she did not recall ever having provided any payment or service in exchange for stock in Retirement Plan Auditors, Ltd. 13. On July 11, 2011, the Board voted to open an investigation (File No. 2012.008) assigned to the Board’s Accounting and Auditing Standards Committee (“A&A Committee”) to review possible false and misleading statements, Respondent’s failure to timely respond, and the accuracy of statements on the Board’s questionnaire. 14. In an August 31, 2011 letter to the A&A Committee, Respondent, through her attorney, indicated that she was not involved in the formation of, had not performed any work for, and had not reviewed any work by Retirement Plan Auditors, Ltd. 15. On September 26, 2011, Respondent met with a Board investigator for an interview. During the interview, Respondent made several statements, including the following: a. She knew Christopher Edelen was going to set up Retirement Plan Auditors, Ltd., and she had agreed to be a majority owner and director to assist him. b. She was willing to be the designated CPA for Retirement Plan Auditors, Ltd. because it needed to have a CPA for the work that it was going to do, but she was not planning on doing any audits for the firm. c. She signed the application for firm registration d. The Firm primarily performs tax return services, compilations without disclosures, one reviewed financial statement, and consulting services. e. She had not done any audits. f. She did not have any formal training or experience with performing audits. 16. Following the interview, the Board’s investigator determined Respondent had completed at least two audits for Aztec Engineering in 2011. 17. In a December 16, 2011 letter to the Board’s investigator, Respondent, through her attorney, stated that she was not fully forthcoming during the September 26, 2011 interview. Respondent stated she had performed a retirement plan audit on March 31, 2011, for which she directly billed the client and was paid. Respondent also stated that on September 13, 2011, she had entered into an asset purchase agreement with Retirement Plan Administrators (“RPA”) to purchase a list of 24 pension audit clients for whom she performed retirement plan audits with the help of two other individuals between September 13, 2011, and October 17, 2011. 18. On February 8, 2012, the Board’s investigator performed an on-site review and interview of Respondent at her office. The investigator selected and reviewed the audit work paper files for three of the clients’ defined contribution plans that Respondent had purchased from RPA, as well as the March 31, 2011 retirement plan audit. 19. The audit opinions were issued with the statement that “[w]e conducted our audit in accordance with generally accepted auditing standards [‘GAAS’].” 20. GAAS consists of ten auditing standards found in Statement on Auditing Standards (“SAS”), AU 150, Generally Accepted Auditing Standards. Those ten auditing standards in AU 150 are comprised of three General Standards, three Standards of Field Work, and four Standards of Reporting. 21. In reviewing the audits, the Board’s investigator determined the following: a. There was no documentation of communications with the predecessor auditor regarding any known disagreements with management or concerns about management integrity and there was no evidence of Respondent having requested permission from the clients to review the predecessor auditor’s work papers. b. The audit work paper files for all four engagements selected and reviewed did not include any general audit planning memoranda, internal control documentation, or detailed risk assessment, including fraud risk assessment and inquiries and related documentation. c. There was no documentation of required analytical review procedures having been performed during the planning and final audit stages as required. d. The extent of the audit work performed largely appeared to be reviewing the various reports obtained from third parties for the investment account activity and using those amounts for the audited financial statements. e. There were no attorney letters requested or obtained, and there were no management representation letters prepared or provided to the clients for their review and signature. However, the Firm advised its clients in the engagement letters that it would request written representations from the clients’ attorneys and written representations from management about the financial statements and related matters. f. The work papers for the March 31, 2011 audit did not include any supporting audit documentation for the real estate investments which totaled approximately $12.8 million (58 percent of total assets and net assets available for benefit on June 30, 2010). Similarly, there was no supporting audit documentation for other significant investment amounts on June 30, 2010. The only third-party investment statement included in the audit work papers was a copy of the Merrill Lynch investment activity reports and related documents that accounted for approximately $717,000.00 of the total $21.9 million in assets on June 30, 2010, a fact that Respondent was aware of, as evidenced by her handwritten notes included in the work paper file. g. The work papers for the ESOP audit did not include a copy of the independent appraisal report for the valuation of the company’s common stock as of December 31, 2010. h. With respect to the other two audit engagements, Respondent performed no auditing procedures with respect to the investment information included in the financial statements and as summarized in Note 4 to the financial statements and expressed no opinion with respect to that information. 22. In an April 27, 2012 letter to the A&A Committee, Respondent stated that she signed the client purchase agreement with RPA on September 13, 2011, with the purchase conditioned on RPA training her and working with her to perform audit functions, compile all documentation, and timely complete the clients’ reports. Respondent further stated that her work on the audits of clients purchased from RPA and training in performing the audits from Michael Edelen from RPA was to begin in September 2011, but due to the impending deadline to complete the audit reports by the extended filing due date, and to avoid filing late and clients being subject to late filing penalties, additional training and completing the work papers was to be done later. 23. In the April 27, 2012 letter, Respondent indicated that she had known Michael Edelen for more than 22 years, that she had worked with him professionally on client retirement plans, that they had common clients over the years for whom Michael Edelen did plan document conformance and she did the annual administration and filing, and that she had worked for him many years ago. 24. In the April 27, 2012 letter, Respondent stated that the March 31, 2011 retirement plan audit was to serve as her introduction to doing audit work. Respondent also stated that Michael Edelen and RPA typed the report and statements using the prior year as a guide and added a computer-generated signature before placing the report on falsified letterhead and submitting it without her review. 25. On May 17, 2012, Respondent met with the Board’s A&A Committee for an investigative interview. In the interview, Respondent provided the Committee with the following information: a. Prior to purchasing the 24 audit engagements from RPA, Respondent did not perform any due diligence regarding the analysis of documents and clients to determine whether she was capable of completing the audits during the time limits. b. Respondent agreed that the audit opinions would be typed up at RPA’s office with RPA staff using her letterhead to issue them. c. To avoid filing late and the clients being subject to late filing penalties, Respondent authorized in advance that the reports could be issued without her first reviewing them. d. Respondent did not finish reviewing the audit opinions before they were issued and did not receive supporting documents on the audits before they were issued. At the time of the interview, Respondent still did not have the supporting documents for many of the opinions that were issued. e. Although Respondent believed the majority of the audits were to be limited scope audits, they were issued as full scope audits. f. At the time of the interview, Respondent had not recalled or withdrawn any of the issued opinions and had not informed any of the clients that there were any issues with the audits issued on her letterhead. 26. Respondent billed nine clients for the audit opinions that were issued and that she acknowledged she did not perform. 27. At the time of hearing, Respondent had issued letters to the clients and to the United States Department of Labor informing them that she had not performed the audits. Respondent indicated the audit opinions were issued on computer-generated letterhead intended to simulate her letterhead. 28. At the time of the hearing, Respondent had not refunded any fees collected from the nine clients for the audit opinions she did not issue. 29. On or about December 16, 2011, the Board received the Firm’s 2011 Firm Renewal Form. On the form, Respondent failed to disclose that the Firm had performed audits and reviews within the three years prior to the renewal. The form was signed by Respondent certifying under the penalty of perjury that she was the Partner in Charge of the Firm; that she had read the renewal form and knew the contents thereof; that all the statements and information contained therein was true, accurate, and correct in every respect to the best of her knowledge and belief. 30. In or about May 2010, Respondent submitted an application for firm name change to the Board in which the Firm would be changed from Viterbo Accounting, PC to V Accounting, PLLC. 31. On June 7, 2010, the Board approved Respondent’s request for firm name change. 32. The March 31, 2011 retirement plan audit was issued through Viterbo Accounting, PC. 33. Respondent invoiced clients as Viterbo Accounting as late as July 1, 2011. CONCLUSIONS OF LAW 1. The Board has personal and subject matter jurisdiction over Respondent and her firm pursuant to A.R.S. §§ 32-701 et seq. and A.A.C. R4-1-101 et seq. 2. The Board has the authority to discipline Respondent and her firm pursuant to A.R.S. § 32-741 and A.R.S. § 32-742. 3. Pursuant to A.R.S. § 41-1092.07(G)(2), the Board has the burden of proof in this matter. The standard of proof is by a preponderance of the evidence. A.A.C. R2-19-119(A). Failure to Timely Respond 4. On May 17, 2011, the Board sent Respondent a questionnaire to be completed within 30 days. 5. Respondent did not return the completed questionnaire until July 8, 2011, more than 30 days after the questionnaire was sent to Respondent. 6. The Board established that Respondent failed to timely respond to the Board’s May 17, 2011 request to submit a completed questionnaire within 30 days. Respondent’s failure to respond constitutes a violation of A.R.S. § 32-741(A)(15).[1] False or Misleading Statements 7. On the April 28, 2011 application for Certified Public Accounting Firm, Respondent listed herself as the sole CPA owner and designated Arizona CPA of Retirement Plan Auditors, Ltd. 8. In her June 10, 2011 letter, Respondent indicated she had decided not to complete the purchase of stock in Retirement Plan Auditors, Ltd. 9. In her June 18, 2011 letter, Respondent indicated she had paid $1.00 for stock upon Retirement Plan Auditors, Ltd.’s inception, but the stock had since been redeemed. 10. With the June 18, 2011 letter, Respondent submitted a May 1, 2011 letter of resignation from the Board of Directors of Retirement Plan Auditors, Ltd. and a Stock Redemption Agreement effective April 1, 2011. 11. In her July 8, 2011 letter to the Board, Respondent indicated she had not provided any payment or service in exchange for stock in Retirement Plan Auditors, Ltd. 12. In her August 31, 2011 letter to the A&A Committee, Respondent indicated she had not performed any work for and had not reviewed any work by Retirement Plan Auditors, Ltd. 13. During the September 26, 2011 interview, Respondent stated she knew Christopher Edelen was going to set up Retirement Plan Auditors, Ltd. and agreed to be a majority owner and director to help with the process. Respondent also indicated that she had not done any audits. 14. In her December 16, 2011, letter to the Board, Respondent admitted she had not been forthcoming during the interview and that she had performed a retirement plan audit on March 31, 2011, and that she had purchased the list of 24 clients for whom she performed retirement plan audits between September 13, 2011, and October 17, 2011. 15. In her April 27, 2012 letter to the A&A Committee, Respondent indicated that Michael Edelen and RPA typed the March 31, 2011 audit report and statements and added a computer-generated signature before placing the report on falsified letterhead and submitting it without her review. 16. During the May 17, 2012 interview, Respondent indicated she agreed that the audit opinions for the 24 clients would be typed up at RPA’s office with RPA staff using her letterhead to issue them and that she did not have an opportunity to review the audit opinions before they were issued. 17. In the July 8, 2011 response to the questionnaire, Respondent answered the question regarding her relationship with Michael Edelen by stating that for a short time in the 1990s, she had worked for a company that she believed Michael Edelen was a shareholder of and that their children knew each other. 18. In the April 27, 2012 letter to the A&A Committee, Respondent indicated that she had known Michael Edelen for more than 22 years, that she had worked with him professionally on client retirement plans, that they had common clients over the years for whom Michael Edelen did plan document conformance and she did the annual administration and filing, and that she had worked for him many years ago. 19. Respondent testified she initially stated that she had completed the audits in question because the audit opinions were issued on her letterhead and her signature appeared on them, even though she had not done any of the work related to the audits. Respondent stated she was trying to make things right after the fact. Respondent’s explanation does not justify her false or misleading statements to the Board. 20. The Board established that Respondent made false or misleading statements to the Board during the course of the investigation. Respondent’s false and misleading statements constitute multiple violations of A.R.S. § 32-741(A)(14).[2] Failure to Notify the Board of an Organizational Change 21. On the April 28, 2011 application to the Board, Respondent indicated she was the CPA owner of Retirement Plan Auditors, Ltd. 22. In her June 18, 2011 letter to the Board, Respondent included a May 1, 2011 letter of resignation from the Board of Directors of Retirement Plan Auditors, Ltd. and a Stock Redemption Agreement effective April 1, 2011. 23. The Board established that Respondent failed to notify the Board of the organization changes in Retirement Plan Auditors, Ltd. within one month. Respondent’s failure to notify the Board within one month constitutes a violation of A.R.S. § 32-741(A)(15) and A.R.S. § 32- 741(A)(6),[3] specifically A.R.S. § 32-731(E),[4] A.R.S. § 32-734,[5] and A.R.S. § 32-735.[6] Use of Viterbo Accounting, PC after June 7, 2010 24. On June 7, 2010, the Board approved Respondent’s request to change the Firm from Viterbo Accounting, PC to V Accounting, PLLC. 25. Respondent continued to use the name Viterbo Accounting, PC after June 7, 2010. Respondent’s invoiced clients using Viterbo Accounting, PC as late as July 1, 2011. 26. Respondent testified she intended that the name change would take effect at the end of 2010 and that the use of Viterbo Accounting, PC after January 1, 2011, was an oversight on her part. 27. Nothing in Respondent’s request or the Board’s approval indicated the name change would take effect on January 1, 2011. As such, the name change should have been acted on when Respondent received the Board’s approval. 28. The Board established that Respondent continued to operate the Firm as Viterbo Accounting, PC after the Board approved a name change to V Accounting, PLLC. Respondent’s use of Viterbo Accounting, PC after June 7, 2010, constitutes a violation of A.R.S. § 32-741(A)(6), specifically A.R.S. § 32-747(A),[7] and A.R.S. § 32-741(A)(9),[8] specifically A.A.C. R4-1-455.03(D).[9] Other Allegations 29. Respondent admitted that she had no training or experience performing audits and was not qualified to do audits at the time she conducted the March 31, 2011 audit or when she purchased the client list from RPA. Respondent’s conduct constitutes a violation of A.R.S. § 32- 741(A)(9), specifically A.A.C. R4-1-455.01(A).[10] 30. Respondent admitted that she gave RPA permission to type the audit opinions and RPA staff would use her letterhead to issue them. Respondent also admitted that she authorized that the reports could be issued without her review to avoid late filing penalties. Respondent’s conduct constitutes a violation of A.R.S. § 32-741(A)(9), specifically A.A.C. R4-1-455.03(E).[11] 31. Respondent acknowledged she had billed clients for the audit opinions she had not conducted. By billing clients, Respondent implied she had done the work being billed in accordance with GAAS. Respondent’s conduct constitutes a violation of A.R.S. § 32-741(A)(9), specifically A.A.C.R4-1-455(B)[12] and A.A.C. R4-1-455.01(B).[13] 32. Respondent’s act of billing the clients for work she had not done, had not reviewed, and had no knowledge if it was done in accordance with GAAS was indicative of Respondent’s dishonesty, fraud, or gross and continuing negligence in the practice of accounting. Respondent’s conduct constitutes a violation of A.R.S. § 32-741(A)(4)[14] and A.A.C. R4-1-455.01(F).[15] 33. The conduct and circumstances set forth previously constitute a failure to comply with the professional standards set forth in A.A.C. R4-1-455.03(A).[16] 34. Respondent’s failure to disclose on the Firm’s 2011 renewal form that Respondent and/or the Firm had performed audits and reviews constitutes violations of A.R.S. § 32-741(A)(14) and A.R.S. § 32- 741(A)(15). Summary 35. It appears from the testimony presented at hearing that Respondent found herself embroiled in a situation with some untrustworthy characters. While Respondent appeared to sincerely believe she was acting appropriately to correct the mistakes that had been made, she made one misstep after another. Rather than explaining everything to the Board from the outset, Respondent ended up making matters worse by obfuscating the truth every step of the way. Despite the wrongful acts of others, Respondent was responsible for her own choices and conduct. 36. The Board has established grounds to revoke or suspend Certificate No. 7402-E issued to Respondent or to impose other disciplinary action as defined in A.R.S. § 32-701(6).[17] 37. Respondent’s conduct described in the above Findings of Fact and her violations of the above-referenced statutes and rules would also be grounds for disciplinary action against her Firm Registration No. 2085- L, pursuant to A.R.S. § 32-742[18] and A.A.C. R4-1-455.03(D)(2). Any discipline imposed by the Board on Respondent’s CPA certificate as a result of these proceedings would affect the eligibility of her Firm Registration No. 2085-L. RECOMMENDED ORDER Based on the foregoing, it is recommended that on the effective date of the Board’s final order, the Board revoke Respondent Charlotte Anne Viterbo’s Certified Public Accountant Certificate No. 7402-E. It is further recommended that on the effective date of the Board’s final order, the Board revoke Certified Public Accounting Firm Registration No. 2085-L previously issued to V Accounting, PLLC. Respondent shall reimburse the Board’s costs of investigation and proceeding to hearing pursuant to A.R.S. § 32-701(6)(f) within 180 days of the effective date of the Board’s final order. In the event of certification of the Administrative Law Judge Decision by the Director of the Office of Administrative Hearings, the effective date of the Order will be five days from the date of that certification. Done this day, March 27, 2013.

/s/ Tammy L. Eigenheer Administrative Law Judge

Transmitted electronically to:

Monica L. Petersen, Executive Director Arizona State Board of Accountancy ----------------------- [1] A.R.S. § 32-741(A)(15) allows the Board to revoke or suspend a registrant’s CPA certificate for “[f]ailing to respond or furnish information in a timely manner to the board or its designated agent, if the information is legally requested by the board and is in the registrant's possession or control.”

[2] A.R.S. § 32-741(A)(14) allows the Board to revoke or suspend a registrant’s CPA certificate for “[k]nowingly making a false or misleading statement: (a) To the board or its designated agent. (b) On a form required by the board. (c) In written correspondence to the board.” [3] A.R.S. § 32-741(A)(6) allows the Board to revoke or suspend a registrant’s CPA certificate for “[v]iolation of any of the provisions of this chapter.” [4] A.R.S. § 32-731(E) provides as follows: An applicant for registration or a partnership registered pursuant to this section shall notify the board in writing within one month of any change of partners whose principal place of business is in this state, any change in the number or location of offices of the partnership in this state, any change in the identity of the individuals in charge of the partnership's offices in this state and any issuance, denial, revocation or suspension of a registration, license or permit by any other state. [5] A.R.S. § 32-734 provides as follows: Professional corporations composed of certified public accountants or public accountants shall meet the requirements of title 10, chapter 20 and any additional nonconflicting requirements contained in sections 32-731 and 32-732. For purposes of this section, wherever in section 32-731 or 32-732 the word "partner" appears, the term shall apply to any shareholder of a professional corporation and, wherever in section 32-731 or 32-732 the word "partnership" appears, the term shall apply to a professional corporation. [6] A.R.S. § 32-735 provides as follows: Limited liability companies, professional limited liability companies and limited liability partnerships composed of certified public accountants or public accountants shall meet the applicable requirement of title 29, chapters 4 or 5 and any additional nonconflicting requirements contained in sections 32-731 and 32-732. For purposes of this section, wherever in section 32-731 or 32-732 the word "partner" appears, the term shall also apply to any member of a limited liability company or a professional limited liability company and, wherever in section 32-731 or 32-732 the word "partnership" appears, the term shall also apply to a limited liability company or a professional limited liability company. [7] A.R.S. § 32-747(A) provides as follows: An individual who has received from the board a certificate to practice as a certified public accountant or as a public accountant issued under the laws of the state or who is a limited reciprocity privilege holder under section 32-725 shall be known as a "certified public accountant" or "public accountant", in accordance with the certificate or the privilege and may also use the abbreviation "C.P.A.", "CPA", "P.A." or "PA", in accordance with the certificate or the privilege. No other individual or firm shall assume or use any title, designation or abbreviation or any other title, designation, sign, card or device in this state tending to indicate that the individual or firm using it is authorized to practice public accounting or is a certified public accountant or a public accountant. [8] A.R.S. § 32-741(A)(9) allows the Board to revoke or suspend a registrant’s CPA certificate for “[k]nowing violation of any decision, order or rule issued or adopted by the board.” [9] A.A.C. R4-1-455.03(D) provides as follows: Form of practice and name 1. Certified public accountants or public accountants may practice public accounting, whether as owners or employees, only in a firm as defined in A.R.S. § 32-701(8). 2. A certified public accountant or public accountant shall not use a professional or firm name or designation that is misleading about the legal form of the firm, or about the persons who are partners, officers, members, managers, or shareholders of the firm, or about any other matter. A firm name or designation shall not include words such as "& Company," "& Associates," or "& Consultants" unless the terms refer to additional full-time CPAs that are not otherwise mentioned in the firm name. [10] A.A.C. R4-1-455.01(A) provides “Registrants shall not undertake any engagement for the performance of professional services which they cannot reasonably expect to complete with due professional competence, including compliance, where applicable, with subsections (B) and (C).” [11] A.A.C. R4-1-455.03(E) provides “Certified public accountants or public accountants shall not knowingly permit others to carry out on their behalf, either with or without compensation, acts which, if carried out by the certified public accountants or public accountants, would place them in violation of any of the provisions of R4-1-455 through R4-1-455.04.” [12] A.A.C. R4-1-455(B) provides “Integrity and objectivity: Certified public accountants, public accountants, or firms shall not knowingly or recklessly misrepresent facts when engaged in the practice of public accounting, including the rendering of tax and management advisory services.” [13] A.A.C. R4-1-455.01(B) provides “Auditing standards: Registrants shall not permit their names to be associated with financial statements in such a manner as to imply that they are acting with independence with respect to the financial statements unless they have complied with applicable generally accepted auditing standards.” [14] A.R.S. § 32-741(A)(4) allows the Board to revoke or suspend a registrant’s CPA certificate for “[d]ishonesty, fraud or gross or continuing negligence in the practice of accounting.” [15] A.A.C. R4-1-455.03(F) provides as follows: In expressing an opinion on representations, in financial statements which they have examined, certified public accountants, public accountants, or firms have violated A.R.S. § 32-741(A)(4) if they: . . . . 3. Are materially negligent in the conduct of their examination or in making their report on the examination; 4. Fail to acquire sufficient information to warrant expression of an opinion, or their exceptions are sufficiently material to negate the expression of an opinion . . . . [16] A.A.C. R4-1-455.03(A) provides “Discreditable acts: Certified public accountants, public accountants, or firms shall not commit any act that reflects adversely on their fitness to engage in the practice of public accounting.” [17] A.R.S. § 32-701(6) defines “disciplinary action” as follows: any other regulatory sanctions imposed by the board in combination with, or as an alternative to, revocation or suspension of a certificate or registration, including the imposition of: (a) An administrative penalty in an amount not to exceed two thousand dollars for each violation of this chapter or rules adopted pursuant to this chapter. (b) Restrictions on the scope of registrants' accounting practice, including, without limitation, restriction of audit or attest function practice, restriction of tax practice or restriction of management advisory practice. (c) Peer review and professional education requirements. (d) A decree of censure. (e) Probation requirements best adapted to protect the public welfare that may include a requirement for restitution payments to accounting services clients or to other persons suffering economic loss resulting from violations of this chapter or rules adopted pursuant to this chapter. (f) Reimbursement of the board's costs of investigations and proceedings initiated under this chapter. [18] A.R.S. § 32-742 provides as follows: A. After notice and an opportunity for a hearing, the board shall revoke a firm's registration to practice public accounting if at any time it does not have all the qualifications prescribed by this chapter. B. After notice and an opportunity for a hearing, the board may revoke or suspend a firm's registration to practice public accounting and may additionally take disciplinary action concerning the registrant for any of the causes enumerated in section 32-741, subsection A or for any of the following additional causes: 1. The revocation or suspension of any certificate issued by the board of any partner, shareholder, member, manager, officer, director, agent or employee of the firm. 2. The cancellation, revocation, suspension or refusal to renew the authority of the firm or any Arizona partner, shareholder, member, manager, officer, director, agent or employee to practice public accounting in any other state for any cause other than failure to pay an annual registration fee in the other state.

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