Legislative Auditor Monitoring And Disciplinary Actions Regarding CPA Firms

The Louisiana Legislative Auditor (LLA) approves certified public accounting (CPA) firms to perform the audit and other attest engagements of local government agencies and quasi-public organizations (local auditees) that report to LLA.

The audit law (Louisiana Revised Statute (R.S.) 24:513 A. (5)) gives LLA the authority to accept the reports of local auditees that are prepared by CPAs in lieu of LLA performing these engagements. R.S. 24:513 A. (6) gives LLA the authority to prescribe the terms and conditions of CPA engagements.

In order to fulfill its oversight responsibilities under R.S. 24:513 A. (5) and (6), LLA performs ongoing monitoring activities to ensure the quality of CPA engagements and reports:

• - A CPA firm must submit certain information to LLA before it is initially approved. This information includes the CPA firm’s most recent peer review; disclosure of any investigative or disciplinary actions taken against the firm in the last ten years; continuing professional education information, and other information regarding the firm. Licenses and firm permits are confirmed by LLA through the State Board of CPAs of Louisiana’s website. The CPA firm must also provide a written confirmation that during the last ten years, the firm or its personnel have not been the subject of a disciplinary action by any state board of accountancy or other regulatory body (including but not limited to federal and state grantor agencies) due to noncompliance with the rules and regulations of the regulatory body. If the firm has been the subject of such a disciplinary action, it must provide a copy of the notification letter it received from the regulatory body that describes the noncompliance and any disciplinary actions taken against the firm or its personnel by the regulatory body; and a statement describing how the firm has or is addressing and rectifying the matter of noncompliance, if applicable. See also CPA Firm Approval.
• CPA firms must submit, on an ongoing basis and in a timely manner, its most recent peer review to LLA. See also Peer Reviews.
• CPA firms must notify LLA, on an ongoing basis and in a timely manner (as specified below), if the firm or its personnel is the subject of an investigation or disciplinary action by any state board of accountancy or other regulatory body (including but not limited to federal and state grantor agencies) due to noncompliance with the rules and regulations of the regulatory body. The firm must provide a copy of the notification letter it received from the regulatory body that describes the noncompliance and any disciplinary actions taken against the firm or its personnel by the regulatory body; and a statement describing how the firm has or is addressing and rectifying the matter of noncompliance, if applicable. The notification to LLA must occur no later than two weeks after receipt of the regulatory body's notification letter by the CPA firm.
• LLA staff members verify annually that all firms have a current firm permit, if required; and at least one firm member has a current license to practice public accounting.
• LLA staff members perform desk reviews of submitted reports. See also Legislative Auditor Report Review.
• LLA staff members perform quality control reviews (QCR), on all CPA firms on a rotating basis; and as the result of significant or recurring problems in an CPA firm’s work identified during LLA’s desk review or by other means

LLA may take disciplinary actions regarding a CPA firm for the following:

• A peer review that receives a grade of fail
• Failure of a CPA firm to provide its most current peer review to LLA in the time prescribed by LLA policy
• Cancellation of a CPA’s license or firm permit by the state licensing authority
• Failure of a CPA to renew a license or a firm permit
• Significant or recurring errors noted in a CPA’s submitted reports, identified in LLA’s desk review
• Substandard work performed on an engagement, identified by an LLA QCR
• Continued lateness of reports or other failure to comply with Louisiana law or LLA policies
• Disciplinary actions taken against the firm or its personnel by a regulatory body other than LLA
  
• Failure of a CPA firm to timely notify LLA if the firm or its personnel is the subject of an investigation or disciplinary action by any state board of accountancy or other regulatory body (including but not limited to federal and state grantor agencies) due to noncompliance with the rules and regulations of the regulatory body.
• Other performance matters or failure to comply with Louisiana law and/or LLA policies, as determined by LLA

Disciplinary actions taken by LLA may be standardized, such as the remedial actions required of a firm that has received a failed peer review; or determined by LLA on a case by case basis, depending upon the facts and circumstances of the condition.

Disciplinary actions may include but are not limited to the following, either singly or in any combination:

• Additional education requirements
• Coaching by an experienced governmental auditor
• Pre-issuance reviews of a firm’s reports before they are submitted to LLA
• Limiting the number of outstanding engagements (engagement approved and report not received) a firm may have at any one time

LLA may also suspend a CPA firm for cause, at the discretion of the Legislative Auditor.

LLA communicates any disciplinary action taken regarding a CPA firm to the firm by certified letter. The letter is copied to the State Board of CPAs of Louisiana and the Society of Louisiana Certified Public Accountants.

A CPA firm may appeal any disciplinary actions or suspension taken by LLA. The request should be in writing, and addressed to the Legislative Auditor.

Under the audit law, the Legislative Auditor has the final authority to determine the terms and conditions under which any CPA firm may perform the audit and other attest work for the local auditees that report to LLA.