ACCOUNTING AND AUDITING ADVISORY COMMITTEE OPEN SESSION MINUTES. June 2, 2016

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1 ARIZONA STATE BOARD OF ACCOUNTANCY 100 North 15 th Avenue, Suite 165 Phoenix, Arizona Phone (602) Fax (602) ACCOUNTING AND AUDITING ADVISORY COMMITTEE MINUTES Members of the Accounting and Auditing Advisory Committee met at the Arizona State Board of Accountancy Office in Suite 165, 100 N. 15 th Avenue, Phoenix, Arizona, Executive sessions were held from 8:37 a.m. to 8:42 a.m., from 8:52 a.m. to 9:28 a.m., from 9:42 a.m. to 9:56 a.m., and from 10:59 a.m. to 12:14 p.m. COMMITTEE MEMBERS: Scott Thomas Wallace, CPA... Chairperson Melinda Ann Xanthos, CPA... Vice-Chairperson Andreas Demosthenous Coumides, Jr., CPA... Member Joe Epps, CPA... Member Stephen Theodore Harris, CPA... Member Brian Robert Lee, CPA... Member Lisa B. Lumbard, CPA... Member Christopher A. Lutes, CPA... Member Steven Lavier Tait, CPA... Member Absent Left the meeting at 10:12 a.m. STAFF PRESENT: Sophia Varma Van Langen... Assistant Director, Regulation and Compliance Valli Goss... Assistant Director, Regulation and Compliance Christopher Rasmussen... Program and Project Specialist II ASSISTANT ATTORNEY GENERAL... Seth Hargraves, Esq. PUBLIC PRESENT AND/OR PARTICIPATING Marshall E. King, CPA.... Investigator Scott Morrison, CPA... Registrant D. Jay Ryan, Esq.... Attorney Crystal Hereford... Court Reporter Richard Bingaman, CPA... Registrant Rick Carter, Esq.... Attorney Nathaniel Scheer, Esq.... Attorney Peter Davis, CPA... Consultant Charles Estes, CPA... Registrant Carol McDonald... Complainant Americans with Disabilities Act: Persons with disabilities may request reasonable accommodations, such as sign language interpreters. Requests should be made as early as possible to allow time to arrange the accommodation. This document is available in alternative format upon request.

2 Page 2 The meeting was called to order at 8:17 a.m. by Chairperson Scott T. Wallace. The following order of business was then considered: CALL TO THE PUBLIC No guests were present during the call to the public. DECLARATION OF CONFLICTS OF INTEREST There were no new conflicts of interest declared. DISCUSSION, AMENDMENT AND APPROVAL OF MINUTES A motion was made by Stephen T. Harris, seconded by Steven L. Tait and passed 6 0 to accept the May 5, 2016 Open Session minutes, as drafted. Christopher A. Lutes abstained from the vote. A motion was made by Stephen T. Harris, seconded by Lisa B. Lumbard and passed 6 0 to accept the May 5, 2016 Executive Session minutes, as drafted. Christopher A. Lutes abstained from the vote. LEGAL ADVICE REGARDING THE BOARD S IMMUNITY STATUTE, A.R.S , AND ARIZONA S OPEN MEETING LAW, A.R.S TO Seth Hargraves provided a brief summary and background of the Open Meeting Act and how it relates to the Board s immunity statute. Mr. Hargraves proceeded to explain the process for when the Attorney General s Office receives a complaint regarding an Open Meeting Act violation. Discussion ensued among Committee members and Mr. Hargraves regarding the Open Meeting Act and the consequences that may result from its violation. REVIEW, DISCUSSION AND POSSIBLE ACTION ON THE FOLLOWING FILES: File No Melinda A. Xanthos provided a brief summary of the file to the Committee. After brief discussion, a motion was made by Melinda A. Xanthos, seconded by Christopher A. Lutes and passed 6 0 to close the file due to no violations of professional standards. Stephen T. Harris declared a conflict and recused himself from participation in the discussion and vote. File No ; Scott, Kenneth Lisa B. Lumbard provided a brief summary of the file to the Committee. Discussion ensued among Committee members regarding amendments to the draft Decision & Order. After discussion regarding amendments, a motion was made by Lisa B. Lumbard, seconded by Steven L. Tait and passed 7 0 to accept the Decision & Order for File No.

3 Page , as amended, and recommend that the Board offer it to the Registrant. File Nos and Scott T. Wallace provided a brief summary of the file to the Committee by reading the e- mail that Joe Epps provided regarding his recommendation on the file. Stephen T. Harris noted that he believes that the matter is a fee dispute. A motion was made by Stephen T. Harris and seconded by Lisa B. Lumbard to recommend that the Board close both of the compliance files due to no violations of professional standards. Before a final vote was called for the motion, Carol McDonald, complainant for the file, requested to speak on the matter. Seth Hargraves recommended that the Committee go into executive session for confidential information. The motion made by Stephen T. Harris was tabled. File Nos and A motion was made by Scott T. Wallace, seconded by Lisa B. Lumbard and passed 7 0 to go into executive session at 8:37 a.m. to discuss and consider confidential information and to obtain legal advice, pursuant to A.R.S (A)(2) and (A)(3) regarding File Numbers and The Committee reconvened in open session at 8:42 a.m. File Nos and Stephen T. Harris brought back his tabled motion, which was seconded by Lisa B. Lumbard to recommend that the Board close both of the compliance files due to no violations of professional standards. Scott T. Wallace called for a final vote, the motion passed 7 0. UPDATE ON COMMITTEE CASES, INVESTIGATIONS AND RELATED MATTERS The Committee did not have any comments on current compliance files. REVIEW AND DISCUSSION OF COMPLAINT AGING REPORT Valli Goss informed the Committee that to help reduce the length of time litigated cases are on the report, Board staff is currently considering the possibility of having Board staff, rather than the Attorney General s Office, file Complaints and Notices of Hearing at the Office of Administrative Hearings. REVIEW, DISCUSSION AND POSSIBLE ACTION REGARDING NEW COMMITTEE CHAIRPERSON A motion was made by Stephen T. Harris, seconded by Christopher A. Lutes and passed 6 1 to nominate and elect Lisa B. Lumbard to be the Chairperson of the Accounting and Auditing Advisory Committee.

4 Page 4 Lisa B. Lumbard was opposed to the motion. BOARD STAFF REPORT Valli Goss provided a status update to the Committee regarding the hiring of John Oyas for the Program Project Specialist II position in the Compliance and Regulation Department. SUMMARY OF CURRENT EVENTS There were no current events at the time. IDENTIFICATION OF FUTURE MEETING AGENDA ITEMS No future meeting agenda items were indicated at the time. REVIEW, DISCUSSION AND POSSIBLE ACTION ON THE FOLLOWING FILES: File No Scott T. Wallace noted that he has a conflict of interest and would therefore not participate in the investigative interview. Scott Morrison and D. Jay Ryan were present for the investigative interview. File No Scott T. Wallace declared a conflict and recused himself, passed the Chairmanship to Melinda A. Xanthos and left the Board room before the start of the Executive Session.. A motion was made by Stephen T. Harris, seconded by Christopher A. Lutes and passed 6 0 to go into executive session at 8:52 a.m. to conduct an investigative interview of the Registrant and to consider confidential information pursuant to A.R.S (A)(2) regarding File Number The Committee reconvened in open session at 9:28 a.m. File No Stephen T. Harris noted that he found the letter in the compliance file confusing, but noted that he does not believe that it rose to a level of a violation of Board statutes and rules. Mr. Harris stated that an Administrative Letter of Concern would be appropriate for this situation. A motion was made by Stephen T. Harris, seconded by Lisa B. Lumbard and passed 6 0 to recommend that the Board issue an Administrative Letter of Concern focusing on the preparation of a letter that should have been restricted as to use, that it appears that the services provided may have been agreed-upon, and that the Registrant should carefully assess the level of the services that he provides and consider using engagement letters. Scott T. Wallace returned to the room at 9:31 a.m. after the discussion and vote.

5 The Committee recessed from 9:31 a.m. to 9:41 a.m. Accounting & Auditing Advisory Committee Page 5 File Nos ; Bingaman, Richard and ; Bingaman, Richard E., CPA PLLC Richard Bingaman and D. Jay Ryan were present for the investigative interview. File Nos ; Bingaman, Richard and ; Bingaman, Richard E., CPA PLLC A motion was made by Brian R. Lee, seconded by Stephen T. Harris and passed 7 0 to go into executive session at 9:42 a.m. to conduct an investigative interview of the Registrant and to consider confidential information pursuant to A.R.S (A)(2) regarding File Numbers and The Committee reconvened in open session at 9:56 a.m. File Nos ; Bingaman, Richard and ; Bingaman, Richard E., CPA PLLC Lisa B. Lumbard asked the Committee if an Administrative Letter of Concern would be proper for this situation. Sophia V. Van Langen provided a historical perspective as to what has been done in the past for similar files. Ms. Lumbard asked if a Decision & Order (By Consent) mirroring the contents of the AICPA letter would be appropriate. Discussion ensued among the Committee members in regard to whether a Decision & Order (By Consent) would have an end date that is concurrent with the AICPA end date. A motion was made by Lisa B. Lumbard, seconded by Steven L. Tait and passed 7 0 to recommend that the Board offer the Registrant a Decision & Order (By Consent) that in substance mirrors the AICPA letter to include the same practice restrictions, continuing professional education, and reporting oversight requirements, but would include a date certain of June 26, 2018, that the Registrant be placed on probation during that time, and reimbursement of investigative costs to be repaid during the term of the probation. Ms. Lumbard noted that the Decision & Order (By Consent) would be offered based on the violations identified in the AICPA letter. Stephen T. Harris questioned if the AICPA letter can be attached to the Decision & Order (By Consent) as an exhibit. Lisa B. Lumbard confirmed that it can. D. Jay Ryan clarified with the Committee as to their recent motion. The Committee recessed from 10:09 a.m. to 10:58 a.m. Melinda A. Xanthos left the meeting at 10:12 a.m. and did not return. File No ; Estes, Charles Charles Estes, Rick Carter, Nathaniel Scheer, and Peter Davis were present.

6 Page 6 File No ; Estes, Charles A motion was made by Stephen T. Harris, seconded by Steven L. Tait and passed 6 0 to go into executive session at 10:59 a.m. to conduct an investigative interview of the Registrant and to consider confidential information pursuant to A.R.S (A)(2) regarding File Number The Committee reconvened in open session at 12:14 p.m. File No ; Estes, Charles Steven L. Tait provided the Committee a summary of the issues that the Committee has to address in regard to this compliance file. Scott T. Wallace noted that he did not see the intent to commit fraud, but indicated that carelessness would be more likely. Steven L. Tait stated that he believes that discipline is in order and questioned the severity of the discipline that the Committee should recommend. Brian R. Lee inquired if the financial institution in question was damaged by the actions of the Registrant. Mr. Tait noted that the Committee was not aware of any damages. Rick Carter stated that Charles Estes was in good standing with all of his loan obligations. Discussion ensued among Committee members regarding the details of the investigation and the severity of discipline that should be recommended. A motion was made by Steven L. Tait and seconded by Christopher A. Lutes to recommend that the Board offer a Decision & Order (By Consent) for discipline that would include probation for a period of 2 years, and within that period of time he would be required to obtain 24 hours of CPE, in addition to the statutory requirements, to include personal statements, compilations and review, and ethics, with at least 8 hours in each category. Additionally, the Decision & Order would include reimbursement of Board costs to be paid within the probationary period. Mr. Tait noted that the statutory violations that were the basis for this discipline were indicated in the investigator s reports. After discussion, Mr. Tait proposed to amend his motion to include pre-issuance review of the first attest from the Registrant, to include a review of the Registrant s work papers. Mr. Lutes seconded the amendment. Scott T. Wallace called for a final vote, and the motion passed 6 0. ADJOURNMENT A motion was made by Christopher A. Lutes, seconded by Brian R. Lee, and passed 6 0 to adjourn at 12:31 p.m.