Case Study Richard J. Rathman and the firm of Bernstein & Rath- man, An Accountancy Corporation, were subject to disciplinary action for the willful failure to comply with professional standards, the Accountancy Act, and California Board of Accountancy Regulations by: a. repeated acts of negligence in their performance of an audit of a 401 (k) profit-sharing plan for years ending December 31, 2011, and 2010; b. departing from professional standards because they did not perform the audit in accordance with GAAS; c. audit documentation that did not contain sufficient documentation to enable a reviewer with the relevant knowledge and experience, having no previous connection with the audit engagement, to understand the nature, timing extent, and results of procedures performed, evidence obtained, and conclusions reached, and to determine the identity of the persons who performed and reviewed the work; d. reporting on a Peer Review Reporting form dated September 25, 2014, that the highest level of accounting and auditing services provided in the previous three years was a compilation with disclosures when they had issued September 6, 2012, auditor's report for the Department of Labor; and e. obtaining an Engagement Peer Review when they should have obtained a System Peer Review.

They were put on probation with the following terms: a. After 3 years' probation, both Rathman and his corporation are prohibited from performing audits, reviews, or other attestation services un- less they petition for reinstatement. b. Complete and provide proper documentation of twenty-four hours of continuing education in the subject matter of compilations. c. Complete four hours of continuing education in ethics. d. Complete an approved Regulatory Review course. e. Be subject to peer review by a Board-recognized peer review program, f. Reimburse the California Board of Accountancy $7,093 for its investigation and prosecution costs.

Case Study Questions 1. What sections of the California Accountancy Act and Regulations did the firm violate? 2. How would you advise them to ensure that they comply with the rules in the future?