Agunbiade, Kayode G. of East Orange, NJ
August 4, 2023
As a result of an investigation of alleged violations of the codes of professional conduct of the AICPA and the New Jersey Society of CPAs, Mr. Agunbiade, with the firm of Kayode Agunbiade & Co. CPAs entered into a settlement agreement under the Joint Ethics Enforcement Program, effective June 12, 2023.
Information came to the attention of the Ethics Charging Authority (ECA – AICPA Professional Ethics Executive Committee and the New Jersey Society of CPAs Professional Ethics Committee) alleging a potential disciplinary matter with respect to Mr. Agunbiade’s performance of professional services on the audit of the financial statements of a not-for-profit entity as of and for the fiscal year ended June 30, 2018.
The ECA has reviewed Mr. Agunbiade’s responses to the ECA’s inquiries, and other relevant documents Mr. Agunbiade submitted to support his response, including certain work papers, financial statements, and relevant correspondence.
Based on this information, there appears to be prima facie evidence that Mr. Agunbiade has violated the following rules of the AICPA and the New Jersey Society of CPAs codes of professional conduct as follows:
Violations
General Standards Rule .01b. Due Professional Care (1.300.001)
The auditor failed to exercise due professional care as demonstrated by the following errors:
a. The Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control Over Compliance in Accordance with Uniform Guidance incorrectly:
i. reported the period covered by the report in the introductory paragraph as the prior year.
ii. opined on both the current period and prior period in the Opinion on Each Major Federal Program.
iii. included a partial sentence “and which are described in the accompanying Schedule of Findings and Questioned Costs as items” when there are no reported items of noncompliance in the schedule.
b. The auditor’s documentation of his evaluation of independence in accordance with Government Auditing Standards is inconsistent as it indicates that the performance of multiple nonattest services created a significant threat that could not be reduced to an acceptable level through the application of safeguards, while also indicating that the firm is independent with respect to the engagement.
c. The Schedule of Findings and Questioned Costs reports the major program as passed through when the Schedule of Expenditures of Federal Awards presents it as a direct award.
d. The pages referenced in the Supplementary Information paragraph in the auditor’s report on the financial statements do not reference all of the Supplementary Information presented with the financial statements.
Compliance with Standards Rule (1.310.001)
- The Report on Internal Control and Compliance Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards failed to include a statement that material weaknesses may exist that have not been identified in the section on internal control over financial reporting. (Government Auditing Standards, 2011 Revision 4.23-.24 AU-C §265; AICPA Audit Guide – Government Auditing Standards and Single Audits (AAG-GAS) 4.54)
- The auditor failed to document the firm’s consideration of threats for the preparation of the financial statements as a nonaudit service and management’s ability to oversee that nonaudit service. (Government Auditing Standards 2011 Revision 3.59; AAG-GAS par. 2.27)
- The auditor failed to adequately document the testing performed to address the risk of management override of controls. (AU-C §230; AU-C §240; AICPA Audit and Accounting Guide – Not-for-Profit Entities 2.41 and 2.103)
- The auditor failed to document the procedures performed to determine whether the Schedule of Expenditures of Federal Awards was fairly stated in relation to the financial statements as a whole. (AU-C §725, AAG-GAS 7.26)
- Related to the major federal program, the auditor failed to:
a. document an understanding of internal control over the activities allowed or unallowed, allowable costs/cost principles, earmarking, period of performance, and sub-recipient monitoring compliance requirements. (2 CFR §200.514(c); AU-C §230; AU-C §935; AAG-GAS 6.30)
b. document the auditor’s judgment used for determining the planned sample size was sufficient for testing internal controls over compliance and compliance for activities allowed or unallowed, allowable costs/cost principles, earmarking, and period of performance compliance requirements (AU-C §230; AU-C §530; AU-C §935; AAG-GAS Chapter 11)
c. document how the sample tested for the activities allowed or unallowed, allowable costs/cost principles, earmarking, and period of performance compliance requirements was representative of the expenditures for the major program and, therefore, sufficient to report on compliance. (AU-C §230; AU-C §530; AU-C §935; AAG-GAS 11.37 and 11.43)
d. obtain sufficient evidence in the testing of the internal controls over compliance and compliance for the sub-recipient monitoring and special tests and provisions compliance requirements. (2 CFR §200.514(d); AU-C §500; AU-C §935; AAG-GAS Chapter 10)
Accounting Principles Rule (1.320.001)
The notes to the financial statements failed to:
a. include a description of revenue recognition over parent fee revenues. (FASB ASC 235-10-5)
b. present comparative information for notes 7, 8, 9, and 10. (FASB ASC 958-205-10-45)
Governmental Bodies, Commissions, or Other Regulatory Agencies (1.400.050)
The notes to the Schedule of Expenditures of Federal Awards failed to indicate whether or not the entity elected to use the 10-percent de minimis indirect cost rate. (2 CFR §200.510)
Governmental Audits (1.400.055)
The auditor failed to meet the 80-hour continuing professional education requirement during the firm’s 2-year Government Auditing Standards reporting period. (Government Auditing Standards, 2011 Revision 3.76)
Agreement
In consideration of the ECA forgoing further investigation of Mr. Agunbiade’s conduct as described above, and in consideration of the ECA forgoing any further proceedings in the matter, Mr. Agunbiade agreed as follows:
a. To waive his rights to further investigation of this matter in accordance with the Joint Ethics Enforcement Program (JEEP) Manual of Procedures.
b. To waive his rights to a hearing under AICPA bylaws section 7.4 and the New Jersey Society of CPAs bylaws Article I., section 1.8.
c. To neither admit nor deny the above specified charges.
d. To his suspension of membership in the AICPA and New Jersey Society of CPAs for a period of one year from the effective date of this agreement. During the period of suspension, he is prohibited from representing himself as a member of the AICPA and New Jersey Society of CPAs and from using any AICPA credentials or certificates.
e. To comply immediately with professional standards applicable to the professional services he performs.
f. To complete the following 23.5 hours of continuing professional education (CPE) courses within 12 months of the date he signs this letter and provides evidence of such completion (e.g., attendance sheets, course completion certificates).
Advanced Topics in a Single Audit 10
Auditing Bits in BytesTM Session 5: Substantive Testing 2
Governmental and Not-for-Profit Annual Update 11.5
g. To hire an outside party, acceptable to the ECA, to perform a pre-issuance review of the reports, financial statements, and working papers on five (5) audits performed by him for one year from the date the reviewer has been approved by the ECA. He must submit the names of the chosen reviewers to the ECA for approval no later than 30 days after the date he signs this letter. Also, no later than 30 days after the date he signs this letter, he must submit a list to the ECA of the audits on which he expects to participate and reports will be issued in the upcoming 12 months from which the engagements subject to pre-issuance review will be selected.
He agreed to permit the outside party to report quarterly to the ECA on his progress in complying with this agreement as stated herein to comply with professional standards. The report should include the reviewer’s comments in detail for each engagement (a report that omits such detail will be unacceptable); a description of the nature of the entity reviewed; the entity’s year end; and the date of the review.
The first report is due 120 days after the reviewer has been approved by the ECA, with subsequent reports due every 90 days thereafter. If none of the engagements selected for pre-issuance review were performed during a reporting period, he agreed to inform the ECA of such. He agreed to have this pre-issuance review performed at his expense. The ECA has the right to extend the period of time and number of engagements subject to pre-issuance review if there are deficiencies.
He agreed to inform the ECA of any changes in the composition of his practice, changes in his role, or if he has not performed any audits during the period he is subject to the pre-issuance reviews. If his practice changes and he is no longer involved with audits, no longer acts in a supervisory capacity on such engagements, or he has not performed such engagements during the above specified period, he must inform the ECA of this change and the ECA may require that he attest every six months for three years as to the nature of his practice. If, during the three-year attestation period he returns to performing such engagements, he must inform the ECA of this change and undergo the required pre-issuance reviews.
h. To submit six months after completion of the pre-issuance reviews, a list of the highest level (audits, reviews, and compilations with note disclosures) of engagements that he performed in the six-month period following the date he completed the pre-issuance reviews.
The ECA will select one of these engagements for review. He will be informed of this selection and will be asked to submit information to include a copy of the auditor’s report, the financial statements, and working papers related to that engagement for review by the ECA. The ECA may extend the period to select an engagement to ensure a suitable selection is available. A peer review undergone by his firm would not exempt him from this requirement.
He agreed to inform the ECA of any changes in the composition of his practice, changes in his role, or if he has not performed any audits, reviews, or compilations with note disclosures until a suitable work product is selected for review. If his practice changes and he is no longer involved with audits, reviews, or compilations with note disclosures, no longer acts in a supervisory capacity on such engagements, or he has not performed such engagements during the above specified period, he must inform the ECA of this change, and the ECA may require that he attest every six months for three years as to the nature of his practice. If, during the three-year attestation period he returns to performing such engagements, he must inform the ECA of this change, and the ECA will select a suitable work product for review.
After an initial review of such report, financial statements, and working papers, the ECA may decide he has substantially complied with professional standards and close this matter. Or, the ECA may decide that an ethics investigation of the engagement he submitted is warranted. If, at the conclusion of the investigation, the ECA finds that professional standards have in fact been violated, the ECA may refer the matter to the AICPA joint trial board for a hearing or take such other action as it deems appropriate.
i. To submit, within 30 days after he has signed this agreement, evidence that his firm has submitted an application to join the Governmental Audit Quality Center. Upon membership in that center, he agreed that his firm will comply with the directives of that center.
j. To be prohibited from performing peer reviews in any capacity until he has completed all directives in this letter. This prohibition will be communicated to his firm’s peer review administering entity.
k. To be prohibited from serving as a member of any ethics or peer review committee of the AICPA or the New Jersey Society of CPAs until he has completed all directives in this letter. This prohibition will be communicated to those responsible for appointments to such committees. In addition, if he applies to join any other committee of the AICPA or the New Jersey Society of CPAs, he must inform those responsible for such appointments of the results of this ethics investigation.
l. To be prohibited from teaching continuing professional education courses approved by the AICPA or the state CPA societies in the areas of accounting, auditing, Government Auditing Standards and Uniform Guidance until he has completed all directives in this letter. This prohibition will be communicated to those responsible for engaging CPE instructors at the AICPA and the New Jersey Society of CPAs.
m. That the ECA shall provide a copy of this settlement agreement to the AICPA’s Peer Review Division staff, his firm’s peer review administering entity, and his firm’s peer reviewer.
n. That the ECA shall publish his name, the name of his firm, the charges, and the terms of this settlement agreement.
o. That the ECA shall monitor his compliance with the terms of this settlement agreement and initiate an investigation where the ECA finds there has been noncompliance.
