The Member performed an audit of a client which depends upon government funding for its operations. At the year-end, the client had significant balances owing from related parties. At the request of the client, the Member did not record these balances owing, instead reflecting them as “outstanding deposits” in the bank account reconciliations. These amounts did not clear the client’s bank account for several weeks after year-end. Accordingly, the financial statements:
- did not accurately reflect the amounts owing from related parties at year-end
- were materially misstated, and
- did not accord with generally accepted accounting principles.
When this matter was brought to the Member’s attention by CPABC, the Member amended the financial statements and the affected audit report.
The Investigation Committee determined that the Member contravened the CPABC Rules of Professional Conduct as follows,
201.1- Maintenance of the good reputation of the profession
202.1 - Integrity and due care
202.2 - Objectivity
205 - False or misleading documents and oral representations
206.1 - Compliance with professional standards
The Committee recommended that the Member:
- accept a reprimand;
- pay a fine of $15,000;
- pay expenses of $2,444 plus GST of $122.20;
- prior to the issuance of an assurance report for the next two years, obtain an engagement quality control review;
- consent to the publication of a redacted copy of this Determination and Recommendation on the public area of the CPABC website; and
- attend and successfully complete by the next date offered the courses:
- Identifying and responding to risks for small audits
- Auditing refresher; and
- Business ethics – it starts with you.