BEFORETHE . CALIFORNIA BOARD OF ACCOUNTANCY

DEPARTMENT OF CONSUMER AFFAIRS

STATE OF CALIFORNIA

In the Matter ofthe· Accusation A~ainst: Case No. AC~2016.91

. ROBERT ALAN GUSTAFSON . OAH No. 2016090259 "7076A Skyway · ~a,radise, CA 95969

Certified Public Account~nt Certificate No.

CPA2l788

Re~pond~nt. ·

DECISION AND ORDER . . . .

Th~· attached, Stipulated Set.tlemen,t and Disciplinary Orde.r is he1·eby adopted oy the . . .

Qalifomia.Board ofAccountancy, Department of Consumer Affairs, as its Decision in this

::t)latte~'..

· This Decision shall become effective on: \(.;\'1~\\\(.>. It .is ·so ORDERED .. __,_~.1,..,1,\\·~'1;..:;...~;:::....il..ll\4'\a:;_,..._~

FOR~~ ACCOUNTANCY . DEPARTMENT OF CONSUMER AFFAIRS

http:AC~2016.91

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BEFORE THE

9•'. ,CALlFORNlABOAIID OF ACCOUN'l'ANCY D])J;'AB~M:EN'( OF GONSUMER A.IrFAIRS

lO .STATE OF'CALIFORNIA fl

.Case No. AC-2016-91

:KA.MAL.(D;.HAlUU$ Attorney Gf;:neral9f Ca)ifornia · .K:ENT D. :HARRIS Supervising Deputy Attorney General Pf!ILLW:L. f\R1J[[JR Pyputy A:ttomey·Gen~ral StftN B~rNo. 238~·3.9

1300 I.Street, .Stiite 125 P.·.b.. Box 944255 Sacramento, CA 94244~2550 Telephone:· (916}322~0032 .Facsimile; (9l6}327-8643 E~mail:.Phjllip.Arthw@dqj.ca,.gqy.

· Attorneys/orConwlaincmt ·

• : Ih:the Matter·.oftheAccusationAgainst:.

:ROBERT ALAN GUStA,FS.()N.

· P~u:adise,.·ca.9~.969·

Certified Public Accountant C'er.tit1cate'No,

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· Respondent .. ·

13 • :7(l76A:S.I~yway

15 .. ·:epA; ·U788

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,19: : : : entitled~ro~eedings:.that t,b.e' f~llo.W.iJXf,tip.attets.:ate nu~:..

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OAU.No. 2.0l60902~9

STIPULATED SETTLEMENT AND}4 DISCIPLINARY OlU>ER

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lR IT lSHEREIW STIP:ULATED AND AORBED by and between;the pa1ties to the above

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20 .PARTIES

21 · .Patti B:owirs.(C

:22 : Accountanc.y (CBA). She. brought this action solely .in.her officiaL caracity and is represented in 23 th.is matter .by Kamala D; Hatds,. A:ttotrtey General of the State of California? by'. Phillip L. Arthur,

24 · D.etrqtyAttoni~~GeneJ;al,.

25 2. Re'sp6nd~mtR~bflrtAlan Gustafson (Respondent) .is represented in this proceeding by •

26 a.ttom.~yP!;!,ulPflV.ic;l.:Fife,wbose addr~ss is: W.ilc;l, C?!rey ~Fife, 100 Montgomery St., Ste 1410, ·.. ·

27 San Francisc.o, C:A 94104.

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mailto:E~mail:.Phjllip.Arthw@dqj.ca,.gqy

'l _3, O.n or about

1 l 0, Respondent agrees that his Certified Public Accountant Certificate is subject to

2 discipline.and he.·. agrees to be bound by the CBA's probationary tenns as setforth in the

3 'DisciplinatyOrder below.

4 CONTINGENCY

5 il. Thi~ stipulation shall be .subject to appr'ov~l by t~e GBA Respondentunderstands

6 .atid agJ;f;les,th,~;~t.

. . 17 . ·shalt con~ain :statements· relative. to. Resportdent'.s .compliance With. all the terms and conditions of

l·~: . probatiQn. Respondent. shall bmnediat.ely exe.cute alhelea~.e of:infonnation. fonn13 as nmy be

19: : requitedl:!ythe~CBA'orits.representativ~s;

20·. , .4,, ·:Pers.otJal Ap.pearances·

'2l · : Respondent shall,:durin~. the·,period·ofprobatiOQ, appear in person ~t interviews/mee~gs a~

22 directed by'the .CBA:or'its designated representatives; provided such notification is accomplished

23 ' · ..in a;tirr,r~ly :m&Plle:r.

?4 :5.. · Gompiy With :Probation

2.5 Res];)ondent snail f\l:Uy cotn,ply·with the term$· and conditions. of the probation imposed }ly

·26- · : .the,CBAanclshall cooperat~ fully whh representatives ofthe CBA in .its monitoring and

27 , in:v.estigation of~espondent's.. compliance Withptob.ation Jenns and 9011ditions,

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STU'UI;ATED SETTLEMENT (AC~20l6.-91)

1 6. P.ractice Investigation

2 Respondentshallbe s'Ubject tq, apd shall pennit, a pr;16tice investigation of Respondent's

.3 professional practice. Such a practice investigation shall be conducted by representatives of the . .

4 CBA, provided notification of Sl+Qhreview is accomplished in a timely manner.

5 7, Comply With Citations

6 Respondetitshal1 comply. with all final orders resulting from citations issued by the CBA.

7 8.. TQllinirofPJ,'ob::ttion for Out-of-State Reside~ce/l'r~ctice

·8 · b;lthe ewntRespon(ie.-o.tshouldle.ave Califom1~ to reside or·.practice outside this stat~::,

9 Respondentmust notifythe,CBA in writing of the. dates of departure and return. Periods ofnon

10 · •CaHfornJaxesidenqy otpr~c.tiqe.outside. the. stE~.te.shallJ1'otapply to·re.duction of the probation~ry

ll · period, or ofanysuspension. No obligation imposed herein, including requirements to file.

12 •written: repmts, reimburs.e the CBAcosts,. and make restitution to consumers, shall be suspended

1:3 · • or othen~ijse ;affected Q.y.suph periods of out,of.-state residency or practice e;x:cept at the written

14 . direction ofthe. CBA.

JS . · 9. VlolatloJt·o{ Prob~tion

16 IfResp~;mdent y~dl~tes probation in any respect, the CBA, after giving Respondent notice.

J7 . ·and an opportunity to be heard;. :may revoke pl'obation and, canyoutthe disCiplinary order that

18. · : w&s stay~d. Ifa.n. a~cusatiou.:ora petition to ,revoke probation is flied against Respondent during

·19 ·· •probation, the:CBAshalLhave:continuing jut'isdiction \:illtil the 1nattet.is final, and the period of

2.0 . · probatio,il shall be.;~~tend$d until the matter jsfinal.

21 Jlw.QBA'~ E~ecuttv~ OffJ.per.may issue·a citation under title 16 of the California Code of

.22 . . Regulations, section 95., to a lice!lsee for a violation of a.te11n ot condition contained in.a decision ·

23 · placiug thafli.cense.e on probation.

24 . l(l'. Completion .of.Probation

25 Upoti s~tccessfutqomp.letion of probation, Respol,dent's .license will be· fully restored.

26 . lL Ethics Continuing Education

.27 Withinl80 . .days of this Decision and Order, Resp~ndent shall complete four haul's of

28 continuing education in course subject matter pertaining to .the following: a review of nationally

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STIPULAtED SETTLEMENT (AC-201.~-91).

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recognized codes of conduct emph&sizing how the codes relate to professional responsibilities;

·case"'based instruction focusing on real~life situational learning; ethical dilemmas facing the . . .

aqcb'tJ.ptingp:rofessio.n; or bp.siness ethics, ethical sen'sitivity, and consumer expectations. Courses

mu,st be a n1inhnum ofone ho:rtr .as. d~scribed in title 16 ofthe California Code of Regulations,

·Section 88.2. The hours shaltbe in.addition to the continuing education requirements for re-

licensing, . .

IfRespondent failsto complete said courses within the time period provided, Respondent

: shall so notify the CBAand shall cease ptactice until Respondent completes said courses, has

subntittedptoof of same to the CBA,. and has been :il.Oti:fied by the CBA that he may resume

· practice. Failure to completethe required courses within the time provided shall constitute a

11 : · yioH.ttion qf probat~on;

12. 12, R~gul~tory:Re.vi¢yv Course:

l3 · Within 1RO days·. ofthis Decision and Order, Respondent shall coinplete a CBA-approved

J4 · · coilctse· o11.the ,provisioi:J,s of.the. Califoniia Accountancy Act and the California Board of

:15 ' , Accountancy Regulations specific to the. practice of public accountancy in California emphasizing .

J ¢> ·.· ' the :provisions. applicable to current practib.e .situations.. ·The course also will include an overview . .

17 •ofhistoric and recent disqiplinary actions take.n by the CBA, higlilighting the misconduct which

1.8. ied.to licensees being disciplined. 'the course shall'be a minimum of two hours. The hours are

·19 . : in:additionto the ~continuing; education tequireincnts .for te~licens.ing.

20. IfRespondent fails to coniplete said courses within the time period provided, Respondent

21 •shall'so.. n,otify the CBA and,shEill..cease pra¢tice until Respondent completes said courses, has

22 . : S'Ubri;iitted proof of:same to the .CBA, and·has been notified by the CBA that he may resume . .

23 · . practice. .Failure to complete the requited courses within the time provided shall constitute a.

24 ·. ·violation of probation.

25 13. Continuing Education Courses

26 Within 180 day~ ofthis Decision and Order, Respondent shall complete and provide proper

27 . documentation of twenty-four hours ofprofessional education courses, in the subject area of

28 audits. This shall be in addition to continuing education reql\irements for relicensing.

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STIPULATED SETTLEMENT (ACe2016~91)

12 · 15.. Active License Status

. 13 Re~pcmd~rit sh~l) ,a( ali thries maintain an active license status with the CBA, including

14 · dnd'tJ:g l:\,ny petiod of sus·pel'l&ion. lfthe licetls¢ is e'((pired ·at the time the CBNs Decision becomes.

15 effective,, the· license must be renewed with ill 30 days of the effective date of the Decision.

16 ACCEPTANCE

17 I have cai·efiilly l'e.ad the above Stipulated Settlement ai1d Disciplinary Qrder and !uiv.e· Mly

1. 8 .dis¢ilssed 'it with my attorney, Paul David Fife.• · I understand the stipulation and the effect it will

19 hi;!.ve.on my G~rti:fted Pt!blic Accquntllnt Cettificate. I ent.er into this Stipulated· Settlement and ·

20 :O.isciplinary Order voimitarily,knowingly, .and intelligently, and agree to be bound by the

. 21 Dedsion and Order ofthe California Board ·of Accountancy.

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23 DATED: (cu. . : .

ROBERT.ALAN GU.STAFSQN24 Re.s1Joi1dent

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If Respondent fails to complete said courses within the time period provided, Respondent·

:shall ~o notify the. CBA ~1id .~lu)JJ yef\se practice 1,111til Respondent completes said courses, has

submitt.!:id pro·of of san1e to the CBA, and has been notified by the CBA that he may resu~ne practice. Failure to\ complete the required courses within the time provided shall constitute a

violation of probation.

14. Samples~ Audit, Review, ot· Compilation

D1,td11g the pedod ofpl'obation, if•Respondent undeJiakes an audi.t, review, or compilation

engagement1 Respo11dMt shall sub1nit to the· CBA as an attachment to the required quarterly

report a. listing of:th¢ same, 'rhe CBA or its designee i11ay select one ~r niore from each category

and the resulting rep01t and financial statement and all related workii1g papers must be stibrnitted

. to the CBA 'or its des.ignee upon request..

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STIPULATED SETTLEMENT (AC-2016-9.1)

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1 lhave read and fully discussed with Rf;)spondent Robert Alan Gustafson the tem1s and

2 conditions and other matters contained :in the above $tipulated Settlement and Disciplinary Order.

3 · I ~pp:rove its fo:rtn a,n.d content;

4 ·. DATED: \: . PAUL DAYID FIFE'

5 · Attorney for Responden ·

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7 ENDORSEMENT

8 The .foregoing Stipulated Settlementand Disciplinary Order is hereby respectfully

9 ...subinittedfor consideration by the Cali£omia Board of Accountancy .

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.Date\!: Jlfj; 6 Respectfully submitted,

11 KAMALA D. HARRIS · 12: Attorney General of California KENTD; HARRJSl3 Supervising Deputy

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STIPULATED SETTLEMENT (AC-20.16-91) · ·

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KAMAlA D. HARRIS Attorney General of California KENT D. HARRIS Supervising Deputy Attorney General PHilLIP L. ARTHUR Deputy Attorney General State Bar No. 238339

1300 I Street, Suite 125 P.O. Box 944255

Sacramento, CA 94244-2550

Telephone: (916) 322-0032

Facsimile: (916) 327-8643

E-mail: Phillip.Arthur@doj .ca.gov

Attorneys for Complainant 1..

BEFORE THE

CALIFORNIA BOARD OF ACCOUNTANCY

DEPARTMENT OF CONSUMER AFFAIRS

STATE OF CALIFORNIA

In the Matter of the Accusation Against: Case No. AC-2016-91

ROBERT ALAN GUSTAFSON 7076A Skyway Paradise, CA 95969 ACCUSATION

Certified Public Accountant Certificate No. CPA21788

Respondent.

Complainant alleges:

PARTIES

1. Patti Bowers (Complainant) brings this Accusation solely in her official capacity as

the Executive Officer of the California Board of Accountancy, Department of Consumer Aff~irs.

2. On or about June 20, 1975, the California Board of Accountancy issued Certified

Public Accountant Certificate Number CPA 21788 to Robert Alan Gustafson (Respondent). The

Certified Public Accountant Certificate was in full force and effect at all times relevant to the

charges brought herein and will expire on March 31, 2017, unless renewed.

Ill

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(ROBERT AlAN GUSTAFSON) ACCUSATION

mailto:Phillip.Arthur@doj

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I.

JURISDICTION

3. This Accusation is brought before the California Board of Accountancy (CBA),

Department of Consumer Mfairs, under the authority, of the following laws. All section

references are to the Business and Professions Code (Code) unless otherwise indicated.

4. Section 5100 of the Code states, in pertinent part:

11 Mter notice and hearing the board may revoke, suspend, or refuse to renew any permit or

certificate granted under Article 4 (commencing wit~ Section 5070) and Article 5 (commencing

with Section 5080), or may censure the holder of that permit or certificate for unprofessional I

conduct that includes, but is not limited to, one or any combination of the following causes:

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"(c) Dishonesty, fraud, gross negligence, or repeated negligent acts committed in the same

or different engagements, for the same or different clients, or any co~blnation of engagements or

clients, each resulting in a violation of applicable. professional standards that indicate a lack of

competency in the practice of public accountancy or in the performance of the bookkeeping

operations .described in Section 5052.

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"(e) Violation of Section 5097.

"(g) Willful violation of this chapter or any rule or regulation promulgated by th~ board

under the authority granted under this chapter ...."

5. Section 5100.5(a) of the Code states, "After notice and hearing the board may, for

unprofessional conduct, permanently restrict or limit the practice of a licensee or impose a

probationary tenn or condition on a license, which prohibits the licensee from performing or

engaging in any of the acts or services described in Section 5051."

6; Section 5109 of the Code states:

"The expiration, cancellation, forfeiture, or suspension of a license, practice privilege, or ·

other authority to practice public accountancy by operation of law or by order or decision of the

board or a court of law, the placement of a license on a retired status, or the voluntary surrender of

a license by a licensee shall not deprive the board of jurisdiction to commence or proceed with

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(ROBERT ALAN GUSTAFSON) ACCUSATION

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any investigation of or action or disciplinary proceeding against the licensee, or to render a

decision suspending or revoking the license."

REGULATIONS

7. California Code of Regulations, title 16 (Regulation), section 58 states, "Licensees

engaged in the practice of public accountancy shall comply with all applicable professional

standards, including but not limited to generally accepted accounting principles and generally

accepted auditing standards."

8. Regulation section 68.2 states:

"(a) To provide for the identification of audit documentation, audit documentation shall

include an index or guide to the audit documentation which identifies the components of the audit

documentation.

"(b) In addition to the requirements ofBusiness and Professions Code Section 5097(b),

audit documentation shall provide the date the document or working paper was completed by the

preparer(s) and any reviewer(s), and shall include the identity of the preparer(s) and any

reviewer(s).

"(c) Audit documentation shall include both the report date and the date of issuance ofthe

report."

STATUTES

9. Section 5062 of the Code provides that a licensee shall issue a report which conforms

to professional standards upon completion of a compilation, r.eview or audit of financial

statements.

10. Section 5097 of the Code states:

"(a) Audit documentation shall be a licensee's records of the procedures applied, the tests

performed, the information obtained, and the pertinent conclusions reached in an audit

engagement. Audit documentation shall include, but is not limited to, programs, analyses,

memoranda, letters of confirmation and representation, copies or abstracts of company

documents, and schedules or commentaries pr~pared or obtained by the licensee.

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(ROBERT ALAN GUSTAFSON) ACCUSATION

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"(b) Audit documentation shall contain sufficient documentation to enable a reviewer with

relevant knowledge and experience, having no previous connection with the audit engagement, to

understand the nature, timing, extent, and results of the auditing or other procedures performed,

evidence obtained, and conclusions reached, and to determine the identity of the persons who

performed and reviewed the work.

"(c) Failure of the audit documentation to document the procedures applied, tests

performed, evidence obtained, and relevant conclusions reached in an engagement shall raise a

. presumption that the procedures were not applied, tests were not performed, information was not

obtained, and relevant conclusions were not r~ached. rhis presumption shall be a rebuttable

presumption affecting the burden of proof relative to those portions of the audit that are not

documented as required in subdivision (b). The burden may be met by a preponderance of the

evidence.

"(d) Audit documentation shall be maintained by a licensee for the longer of the following:

"(1) The minimum period of retention provided in subdivision (e).

"(2) A period sufficient to satisfy professional standards and to comply with

applicable laws and regulations.

"(e) Audit documentation shall be maintained for a minimum of seven years which shall be

extended dufing the pendency of any board investigation, disciplinary action, or legal action

involving the licensee or the licensee's firm. The board may adopt regulations to establish a

different retention period for specific categories of audit documentation where the board finds that .

the nature of the documentation warrants it.

"(f) Licensees shall maintain a written documentation retention and destruction policy that

shall set forth the licensee's practices and procedures complying with this article.

COST RECOVERY

11. Section 5107(a) of the Code states:

"The executive officer of the board may request the administrative law judge, as part of the

proposed decision in a disciplinary proceeding, to direct any holder of a permit or certificate

found to have committed a violation or violations of this chapter to pay to the board all reasonable

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(ROBERT ALAN GUSTAFSON) ACCUSATION

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costs of investigation and prosecution of the case, including, but not limited to, attorneys' fees.

The board shall not recover costs incurred at the administrative hearing. 11

12. Section 5116 of the Code states:

"(a) The board, after appropriate notice and an opportunity for hearing, may order any

licensee or applicant. for licensure or examination to pay an administrative penalty as provided in

this article as part of any disciplinary proceeding or other proceeding provided for in this chapter. ·

"(b) The board may assess administrative penalties under one or more provisions of this

article. However, the total administrative penalty to be paid by the licenseeshall not exceed the

amount of the highest administrative penalty authorized by this article.

''(c) The board shall adopt regulations to establish criteria for assessing administrative

penalties based upon factors, including, but not limited to, actual and· potential consumer harm,

nature and severity of the violation, the role of the person in the violation, the person's ability to

pay the administrative penalty, and the level of administrative penalty necessary to deter future

violations of this chapter.

"~d) Administrative penalties assessed under this article shall be in addition to any other

penalties or sanctions imposed on the licensee or other person, including, but not limited to, . .

license revocation, license suspension, denial of the application for licensure, denial of the '

petition for reinstatement, or denial of admission to the licensing examination. Payment of these

administrative penalties may be included as a condition of probation when probation is ordered.

"(e) All administrative penalties collected under this article shall be deposited in the

Accountancy Fund.

APPLICABLE PROFESSIONAL STANDARDS

13. Standards of practice pertinent to this Accusation include, but are not limited to:

a. Generally Accepted Auditing Standards ("GAAS") are issued by the American

Institute of Certified Public Accountants ("AICPA"). The ten interrelated GAAS (AU§ 150.02)

are discussed in the Statements on Auditing Standards ("SAS''). Among the SAS sections

relevant here are AU§ 150, AU§ 311, AU § 314, AU§ 316, AU § 318, AU § 326, AU § 330,

AU § 333, AU§ 339, and AU § 560.

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(ROBERT ALAN GUSTAFSON) ACCUSATION

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b. Auditing sections in the Codification of Statements on Auditing Standards (contained

in AICP A Professional Standards) were redrafted according to established clarity drafting

.conventions. Clarified Statements on Auditing Standards (SAS) are effective for periods ending

on or after December 15, 2012. General information and overall objectives are discussed in AU

C 200. Among the cl~rified SAS relevant here are AU-G§ 200, AU-C § 210, AU-C § 230, AU-C

§ 240, AU-C § 315, AU-C § 330, AU-C § 520, AU-C § 560, arid AU-C § 580.

FACTUALBACKGROUND

14. ·The California Board of Accountancy (C:BA) received notice of Respondent's failed

peer review. The CBA conducted a site visit and audit documentation was obtained for two

audits-Audit 1, which Responden~ performed for the year ending June 30, 2014, and Audit 2, . .

which Respondent performed for the years ending June 30, 2010 and 2009.

FIRST CAUSE FOR DISCIPLINE

(Repeated Acts of Negligence)

Audit 1

15. Respotident is subject to disciplinary action under section 5100, subsection (c), of the

Code in that Respondent committed repeated negligent acts in his performance of Audit 1 as

follows:

a. Respondent's performance ofthe Audit 1, taken as a whole,.departed from the

following standards: AU-C § 200.06, AU-C § 200.A31, AU-C § 230.08, AU-C § 230.09, and

AU-C § 230;13.

b. Respondent's audit documentation lacked evidence to support that the engagement

'o/as properly planned. The circumstances are as follows:

i. The engagement letter was dated and signed by management in 2012.

Respondent fajled to update management of the terms of the 2014 engagement. (Violation of

AU-C § 210.13.)

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(ROBERT ALAN GUSTAFSON) ACCUSATION

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ii. Respondent failed to prepare a plan for material balances1. (Violation of AU-C

§ 330.06 and AU-C § 330.07.)

c. Respondent failed to document his understanding of internal controls and the assessed

level of risk. The circumstances are as follows:

i. Respondent failed to obtain an understanding of the entity's controls and

whether they were suitably designed and implemented. (Violation of AU-C § 240.27, AU-C §

315.15 through AU-C § 315.25, and AU-C § 330.10.)

ii. . Respondent stated that walk-throughs were performed in previous audits.

However, Respondent failed to identify or test controls in the year under audit. (Violation of AU-

c § 330.14.)

iii. Respondent failed to assess risk. The circumstances are as follows:

iy. Respondent failed to perform an initial analytical review, and in some of the

audit documentation Respondent stated an initial analytical review was unnecessary. (Violation

of AU-C § 315.06.)

v. Respondent failed to observe and inspect information that was gathered from

inquiries of management. (Violation of AU-C § 315.06.) - .

vi. Respondent failed to identify risks and design appropriate procedures for risk at

the financial statement and relevant assertion levels. (Violation of AU-C § 315.26 and AU-C §

315.27.)

vii. Fraud risks yvere noted. to be cash, revenue, receivables, disbursements, and

payroll. However, Respondent failed to address the possibility of management override, provide

a response to identified fraud risks, document management responses, and document the

discussion of the entity's susceptibility to misstatement whether due to fraud or error. (Violation

of AU-C § 240.15, AU-C § 240.17, AU-C § 240.15, and AU-C § 315.33.)

viii. Respondent failed to perform procedures in response to identified risks.

(Violation of AU-C § 330.05 and AU-C § 330.06.)

1 Loans receivable and long term liabilities, for example.

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d. Respondent failed to obtain sufficient audit evidence. (Violation of AU-C § 330.06.)

The circumstances are as follows:

i. Respondent failed to perform procedures for significant audit areas such as

revenue, loans receivable, or capital assets, despite the fact they were noted as "done'' or "OK" on

the audit programs.

ii. Respondent failed to test journal entries. (Violation of AU-C § 240.32.)

Respondent stated there were no journal entries, however internal records were kept on

QuickBooks;

ii. Amilytical procedures performed near the end of the audit did not adhere to

standards in that Respondent failed to document expectations and why a lack of variance

conformed to expectations. (Violation of AU-C § 520.05.)

iv. Respondent failed to perform subsequent event procedures. (Violation of AU-C

§ 560.09, AU-C § 260.10, and AU-C § 580.04.) Instead, Respondent relied on statements in the

management representation letter. (Violation of AU-C § 580.04.) Respondent referred to "cutoff

testing," however documentation did not include any procedures performed.

e. Respondent failed to obtain management representations. The circumstances are as

follows:

i. The management representation letter contained contradictory

information-part of the letter stated that the financial statements were prepared by management

while another part of the letter stated they were all p.t;epared by the auditor. (Violation of AU-C §

580.10.)

ii. The management representation letter did not include subsequent events

information and that all transactions had been recorded. (Violation of AU-C § 580.18 and AU-C

§ 580.11.)

f. Respondent's opinion was not supported in the areas of reporting and disclosure. The

audit documentation does not support the unqualified opinion in the report.

Ill

Ill

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(ROBERT ALAN GUSTAFSON) ACCUSATION

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SECOND CAUSE FOR DISCIPLINE

(Gross Negligence)

Audit 1

16. Respondent is subject to disciplinary action under section 5100, subsection (c), of the

Code in that Respondent committed gross negligence in his performance of Audit 1. The facts

and circumstances are set forth with more particularity in paragraph 15, and all of its ~ubparts,

above.

THIRD CAUSE FOR DISCIPLINE

(Repeated Negligent Acts)

Audit2

17. Respondent is subject to disciplinary action under section 5100, subsection (c), of the

Code in that Respondent committed repeated negligent acts in his performance of Audit 2 as

follows:

a. Respondent's performance of Audit 2, taken as a whole, departed from the following

standards: AU§ 150.02, AU§ 150.04, AU§ 339.03, AU§ 339.10, AU§ 339.18, and AU§

339.20.

b. Respondent's audit documentation lacked evidence to support that the engagement

was properly planned. The engagement letter for this audit was dated and signed by management

in 2008. Respondent failed to obtain an understanding with management for the 2010 \

engagement. (Violation of AU§ 311.08.)

c. Respondent failed to document his understanding of internal controls and the assessed

level of risk. The circumstances are as follows:

i. Respondent failed to exercise professional skepticism. (Violation qf AU §

316.15.)

ii. The audit documentation contained the word "walk-throughs," however

Respondent failed to describe how and when walk-throughs were performed or their results.

(Violation of AU§ 314.10 and AU§ 318.77.)

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(ROBERT ALAN GUSTAFSON) ACCUSATION

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iii. Respondent did not assess risk at the relevant assertion level. (Violation of AU .

§ 314.122, AU§ 318.77, and AU§ 326.15.)

iv. Respondent stated it was unnecessary to test internal controls. (Violation of AU

§ 318.28 and AU § 318.44.)

v. Respondent failed to obtain information regarding changes, or lack thereof, to

internal controls. (Violation of AU§ 318.40.)

vi. Respondent failed to obtain an understanding of the five components of internal

control. (Violation of AU§ 314.40 and AU§ 314.41.)

vii. Respondent failed to perform risk assessment procedures. (Violation of AU §

314.06.)

viii. Respondent failed to perform an.initial analytical review. (Violati~n of AU§

314.09.)

ix. Respondent failed to observe and inspect information obtained from

management for significant balances. (Violation of AU § 314.10.)

. x. The minutes described a hoard in nyed of formal training, lack of a full board, 1.

and a theft. However, Respondent failed to describe a response or how the information affected

his risk assessment. (Violation of AU§ 316.56 and AU§ 316.83.)

xi. In the audit documentation, management response noted rio defalcations,

however Respondent failed to investigate this contradictory information. (Violation of AU §

339.16.)

xii. Significant and/or fraud risks were cash, revenue, receivables, expenses,

payroll, and property and equipment capitalization policies. Respondent failed to address the

possibility of management override, provide a response to identified fraud risks, document

management responses, and document the discussion of the entity's susceptibility to

misstatement. (Violation of AU§ 316.42, AU§ 316.83, AU§ 318.07, AU§ 316.20, and AU§

314.122.)

d. Respondent failed to obtain sufficient audit evidence. The circumstances are as

follows:

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(ROBERT ALAN GUSTAFSON) ACCUSATION

i. Respondent failed to obtain confirmations of accounts receivable, a material

account. (Violation of AU § 330.34 and AU § 330.35.)

ii. Respondent failed to test journal entries. (Violation of AU § 316.58.)

iii. Accounts payable and accrued expenses decreased from $333,000 to $145,000,

and overall expenses decreased from $5,000,000 to $4,300,000, both·significant changes.

Nevertheless, Respondent noted "stable" and "ok." Audit documentation included audit

programs, general ledger and tax return pages, invoices, and a handwritten spreadsheet.

Procedures were not described and not all applicable assertions were tested. (Violation of AU §

318.07 and AU§ 326.15.)

iv. Respondent failed to perform subsequent event procedures. (Violation of AU §

560.11.) Instead, Respondent relied on the management representation letter. (Violation of AU§

333.02.)

e. The management letter, dated September 23, 2010, lacked a statement regarding plans

or intentions that would affect the carrying value of assets or liabilities. (Violation·of AU§

333.06k.)

f. Respondent's opinion was not supported in the areas of reporting and disclosure. The

audit documentation does not support the unqualified opinion in the report.

FOURTH CAUSE FOR DISCIPLINE

(Gross Negligence)

Audit2

18. Respondent is subject to disciplinary action under section 5100, subdivision (c), of tl1e

Code in that Respondent committed gross negligence in his performance of Audit 2. The facts

and circumstances are set forth in more particularity in paragraph 17, and all of its subparts,

above.

Ill

Ill

Ill

Ill

11

(ROBERT ALAN GUSTAFSON) ACCUSATION

FIFTH CAUSE FOR DISCIPLINE

(Report Conforming to Professional Standards)

19. Respond~nt is subject to disciplinary action under section 5062 of the Code in that for

Audits 1 and 2, Respondent's aud~t documentation does not support the unqualified opinions

rendered in the aud~tor's reports. The circumstances are described with more particularity in

paragraphs 15 and 17, and all of their subparts.

SIXTH CAUSE FOR DISCIPLINE

(Compliance With Standards)

20. Respondent is subject to disciplinary action under Regulation section 58 in that

Respondent failed to comply with professional standards in the performance of Audits 1 and 2.

The circumstances are described with more particularity in paragraphs 15 and 17;and all of their

subparts.

SEVENTH CAUSE FOR DISCIPLINE

(Audit Documentation Requirements) . .

21. Respondent is subject to disciplinary action under sections 5097 and 5100, subsection

(e), of the Code, and Regulation section 68.2,· in that the audit documentation for Audits 1 and 2

did not include all of the information required by section 5097 of the Code. The circumstances

are described with more particularity in paragraphs 15 and 17, and all of their- subparts.

EIGHTH CAUSE FOR DISCIPLINE

· (Willful Violation)

22. Respondent is subject to disciplinary action under section 5100, subsection (g), of the

Code in that for Audits 1 and 2, Respondent willfully violated various provisions of the Bus~ness

and Professions Code and California Code of Regulations, as more particularly set forth in

paragraphs 15 and 17, and all of their subparts.

Ill

Ill

Ill

Ill

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(ROBERT ~AN GUSTAFSON) ACCUSATIO~

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PRAYER

WHEREFORE, Complainant requests that a hearing be held on the matters herein alleged,

and that following the hearing, the California Board of Accountancy issue a decision:

1. · Revoking, suspending, restricting, limiting or otherwise imposing discipline upon

Certified Public Accountant Certificate Number CPA 21788, issued to Robert Alan Gustafson;

2. Ordering Robert Alan Gustafson to pay the California Board of Accountancy the

reasonable costs of the investigation and enforcement of this case, pursuant to Business and

Professions Code section 5107;

3. Ordering Robert Alan Gustafson to pay the California Board of Accountancy all

administrative penalties imposed pursuant t() Business and Professions Code section 5116; and

4. Taking such other and further action as deemed necessary and proper.

DATED: • Lf1 '2ol,k Executive Officer California Board of Accountancy Department of Consumer Affairs State of California Complainant

SA2016101226 12209064.doc

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(ROBERT ALAN GUSTAFSON) ACCUSATION

Disciplinary Action AC-2016-91 - California Board of Accountancy