allan howard rosenthal and allan …2. on or about june 20, 1975, the cba issued certified public...

BEFORE THE CALIFORNIA BOARD OF ACCOUNTANCY DEPARTMENT OF CONSUMER AFFAIRS

STATE OF CALIFORNIA

In the Matter of the Accusation Against:

ALLAN HOWARD ROSENTHAL 4766 Park Granada, Suite 202 Calabasas, CA 91302 Certified Public Accountant Certificate No. 21708

and

ALLAN ROSENTHAL & ASSOCIATES ACCOUNTANCY CORPORATION;4766 Park Granada, Suite 101 Calabasas, CA 91302 Certified Public Accountancy Corporation Certificate No. COR 2863

Respondents.

Case No. AC-2014-38

DECISION AND ORDER

The attached Stipulated Settlement and Disciplinary Order is hereby adopted by the

California Board of Accountancy, Department of Consumer Affairs, as its Decision in this

matter.

This Decision shall become effective on O c t o b e r 2 4 , 2 0 1 6 .

It is so ORDERED S e p t e m b e r 2 3 , 2 0 1 6 .

FOR THE CALIFORNIA BOARD OF ACCOUNTANCYDEPARTMENT OF CONSUMER AFFAIRS

K a m a l a D. H a r r i s Attorney General of California M a r c D. G r e e n b a u m Supervising Deputy Attorney General M o r g a n M a l e ic Deputy Attorney General State Bar No. 223382

300 So. Spring Street, Suite 1702 Los Angeles, CA 90013 Telephone: (213) 897-2643 Facsimile: (213) 897-2804

Attorneys for Complainant


STATE OF CALIFORNIA



and


Respondents.

Case No. AC-2014-38

STIPULATED SETTLEMENT AND DISCIPLINARY ORDER

IT IS HEREBY STIPULATED AND AGREED by and between the parties to the above-

entitled proceedings that the following matters are true:

PARTIES

1. Patti Bowers ("Complainant") is the Executive Officer of the California Board of

Accountancy (CBA). She brought this action solely in her official capacity and is represented in

this matter by Kamala D. Harris, Attorney General of the State of California, by Morgan Malek,

Deputy Attorney General.

2. On or about June 20, 1975, the CBA issued Certified Public Accountant Certificate

Number 21708 to Allan Howard Rosenthal (Respondent Rosenthal). The Certified Public

Accountant Certificate was in full force and effect at all times relevant to the charges brought

herein and will expire on October 31, 2017, unless renewed.

3. On or about August 29, 1985, the CBA issued Certified Public Accountancy

Corporation Certificate Number COR 2863 to Allan Rosenthal & Associates Accountancy

Corporation (Respondent Corporation). The Certified Public Accountant Certificate was in full

force and effect at all times relevant to the charges brought herein and will expire on August 31,

2017, unless renewed.

4. Respondents are representing themselves in this proceeding and have chosen not to

exercise their rights to be represented by counsel.

JURISDICTION

5. Accusation No. AC-2014-38 was filed before the CBA, Department of Consumer

Affairs, and is currently pending against the Respondents. The Accusation and all other

statutorily required documents were properly served on the Respondents on or about October 9,

2015. Respondents timely filed their Notices of Defense contesting the Accusation.

6. A copy of Accusation No. AC-2014-38 is attached as exhibit A and incorporated

herein by reference.

ADVISEMENT AND WAIVERS

7. Respondents have carefully read, and understand the charges and allegations in

Accusation No. AC-2014-38. Respondents have also carefully read, and understand the effects of

this Stipulated Settlement and Disciplinary Order.

8. Respondents are fully aware of their legal rights in this matter, including the right to a

healing on the charges and allegations in the Accusation; the right to be represented by counsel at

his own expense; the right to confront and cross-examine the witnesses against him; the right to

present evidence and to testify on his own behalf; the right to the issuance of subpoenas to compel

the attendance of witnesses and the production of documents; the right to reconsideration and

court review of an adverse decision; and all other rights accorded by the California

Administrative Procedure Act and other applicable laws.

9. Respondents voluntarily, knowingly, and intelligently waive and give up each and

every right set forth above.

CULPABILITY

10. Respondents understand and agree that the charges and allegations in Accusation No.

AC-2014-38, if proven at a hearing, constitute cause for imposing discipline upon their Certified

Public Accountant Certificate and Accounting Corporation Certificate.

11. For the purpose of resolving the Accusation without the expense and uncertainty of

further proceedings, Respondents agree that, at a hearing, Complainant could establish a factual

basis for the charges in the Accusation, and that Respondents hereby give up their rights to

contest those charges.

12. Respondent Rosenthal agrees that his Certified Public Accountant Certificate Number

21708 is subject to discipline and he agrees to be bound by the CBA's Disciplinary Order as set

forth in the Disciplinary Order below.

13. Respondent Corporation agrees that its Certified Public Accountancy Corporation

Certificate Number COR 2863 is subject to discipline and agrees to be bound by the CBA's

Disciplinary Order as set forth in the Disciplinary Order below.

CONTINGENCY

14. This stipulation shall be subject to approval by the CBA. Respondents understand

and agree that counsel for Complainant and the staff of the CBA may communicate directly with

the CBA regarding this stipulation and settlement, without notice to or participation by the

Respondents. By signing the stipulation, Respondents understand and agree that they may not

withdraw their agreement or seek to rescind the stipulation prior to the time the CBA considers

and acts upon it. If the CBA fails to adopt this stipulation as its Decision and Order, the

Stipulated Settlement and Disciplinary Order shall be of no force or effect, except for this

paragraph, it shall be inadmissible in any legal action between the parties, and the CBA shall not

be disqualified from further action by having considered this matter.

15. The parties understand and agree that Portable Document Format (PDF) and facsimile

copies of this Stipulated Settlement and Disciplinary Order, including PDF and facsimile

signatures thereto, shall have the same force and effect as the originals.

16. This Stipulated Settlement and Disciplinary Order is intended by the parties to be an

integrated writing representing the complete, final, and exclusive embodiment of their agreement

It supersedes any and all prior or contemporaneous agreements, understandings, discussions,

negotiations, and commitments (written or oral). This Stipulated Settlement and Disciplinary

Order may not be altered, amended, modified, supplemented, or otherwise changed except by a

writing executed by an authorized representative of each of the parties.

16. In consideration of the foregoing admissions and stipulations, the parties agree that

the CBA may, without further notice or formal proceeding, issue and enter the following

Disciplinary Order:

DISCIPLINARY ORDER

IT IS HEREBY ORDERED that Certified Public Accountant Certificate No. 21708 issued

to Respondent Rosenthal is revoked. However, the revocation is stayed and Respondent

Rosenthal is placed on probation for three (3) years on the following terms and conditions.

Further, Corporation Certificate Number COR 2863 issued to Respondent Corporation is revoked.

However, the revocation is stayed and Respondent Corporation is placed on probation for three

(3) years on the following terms and conditions.

1 . Obey All Laws

Respondents shall obey all federal, California, other states' and local laws, including those

rules relating to the practice of public accountancy in California.

2. Cost Reimbursement

Respondents shall jointly and severally be obligated to reimburse the CBA $22,293.15 for

its investigation and prosecution costs. The payment shall be made in quarterly payments (due

with quarterly written reports), the final payment being due one year before probation is

scheduled to terminate.

3. Submit Written Reports

Respondents shall submit, within 10 days of completion of the quarter, written reports to

the CBA on a form obtained from the CBA. Respondents shall submit, under penalty of perjury,

such other written reports, declarations, and verification of actions as are required. These

declarations shall contain statements relative to Respondent's compliance with all the terms and

conditions of probation. Respondents shall immediately execute all release of information forms

as may be required by the CBA or its representatives.

4. Personal Appearances

Respondents shall, during the period of probation, appear in person at interviews/meetings

as directed by the CBA or its designated representatives, provided such notification is

accomplished in a timely manner.

5. Comply With Probation

Respondents shall fully comply with the terms and conditions of the probation imposed by

the CBA and shall cooperate fully with representatives of the CBA in its monitoring and

investigation of the Respondents’ compliance with probation terms and conditions.

6. Practice Investigation

Respondents shall be subject to, and shall permit, a practice investigation of the

Respondents’ professional practice. Such a practice investigation shall be conducted by

representatives of the CBA, provided notification of such review is accomplished in a timely

manner.

7. Comply With Citations

Respondents shall comply with all final orders resulting from citations issued by the CBA.

8. Tolling of Probation for Out-of-State Residence/Practice

In the event Respondent Rosenthal should leave California to reside or practice outside this

state, Respondent Rosenthal must notify the CBA in writing of the dates of departure and return.

Periods of non-California residency or practice outside the state shall not apply to reduction of the

probationary period, or of any suspension. No obligation imposed herein, including requirements

to file written reports, reimburse the CBA costs, and make restitution to consumers, shall be

suspended or otherwise affected by such periods of out-of-state residency or practice except at the

written direction of the CBA.

9. Violation of Probation

If Respondents violate probation in any respect, the CBA, after giving Respondents notice

and an opportunity to be heard, may revoke probation and carry out the disciplinary order that

was stayed. If an accusation or a petition to revoke probation is filed against the Respondents

during probation, the CBA shall have continuing jurisdiction until the matter is final, and the

period of probation shall be extended until the matter is final.

The CBA’s Executive Officer may issue a citation under California Code of Regulations,

Section 95, to a licensee for a violation of a term or condition contained in a decision placing that

licensee on probation.

10. Completion of Probation

Upon successful completion of probation, Respondents’ license will be fully restored,

except as set forth in the Restricted Practice Order at the end of this stipulation.

11. Restricted Practice

Respondents shall be prohibited from performing audits, reviews, compilations, or other

attestation services.

12. Ethics Continuing Education

Within six (6) months of the effective date of this Decision and Order, Respondent

Rosenthal shall complete four hours of continuing education in course subject matter pertaining to

the following: a review of nationally recognized codes of conduct emphasizing how the codes

relate to professional responsibilities; case-based instruction focusing on real-life situational

learning; ethical dilemmas facing the accounting profession; or business ethics, ethical sensitivity,

and consumer expectations. Courses must be a minimum of one hour as described in California

Code of Regulations Section 88.2. These hours of continuing education shall be in addition to the

continuing education requirements for relicensing.

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

Respondent Rosenthal shall so notify the CBA and shall cease practice until he completes said

courses, has submitted proof of same to the CBA, and has been notified by the CBA that he may

resume practice. Failure to complete the required courses within six (6) months of the effective

date of this Decision and Order shall constitute a violation of probation.

13. Regulatory Review Course

Within six (6) months of the effective date of this Decision and Order, Respondent

Rosenthal shall complete a CBA-approved course on the provisions of the California

Accountancy Act and the California Board of Accountancy Regulations specific to the practice of

public accountancy in California emphasizing the provisions applicable to current practice

situations. The course also will include an overview of historic and recent disciplinary actions

taken by the CBA, highlighting the misconduct which led to licensees being disciplined. The

course shall be a minimum of two hours. This course shall be in addition to the continuing

education requirements for relicensing.

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

respondent shall so notify the CBA and shall cease practice until Respondent Rosenthal

completes said courses, has submitted proof of same to the CBA, and has been notified by the

CBA that he may resume practice. Failure to complete the required course within six (6) months

of the effective date of this Decision and Order shall constitute a violation of probation.

14. Continuing Education Courses

Within twelve (12) months of the effective date of this Decision and Order, Respondent

Rosenthal shall complete and provide proper documentation of eight (8) hours of continuing

education in the subject area of California Individual Taxation. This shall be in addition to

continuing education requirements for relicensing.

Failure to satisfactorily complete the required courses as scheduled or failure to complete

same within twelve (12) months of the effective date of this Decision and Order shall constitute a

violation of probation.

15. Active License Status

Respondents shall at all times maintain an active license status with the CBA, including

during any period of suspension. If the license is expired at the time the CBA's decision becomes

effective, the license must be renewed within 30 days of the effective date of the decision.

IT IS HEREBY FURTHER ORDERED that:

16. Restricted Practice Order. After the completion of probation, Respondents, and

each of them, shall be permanently prohibited from engaging in and performing any audits,

reviews, compilations, or other attestation services. This condition shall continue until such time,

if ever, that Respondents, or either of them, successfully petition the CBA for the reinstatement of

the ability to perform audits, reviews, compilations, or other attestation services. Respondents,

and each of them, understand and agree that the CBA is under no obligation to reinstate

Respondents’ ability to perform audits, reviews, compilations, or other attestation services that

the CBA has made no representations concerning whether any such reinstatement might occur,

and that the decision to reinstate is within the sole discretion of the CBA.

17. Full Compliance. Respondents understand and agree that this Stipulated Settlement

and Disciplinary Order is a resolution to the charges in the Accusation attached hereto as Exhibit

A and is based upon, inter alia, Respondents’ full compliance with the Restricted Practice Order

set forth above. If Respondents, or either of them, fail to satisfy the Restricted Practice Order,

each of them agree that the CBA can file an accusation against either or both of them for

unprofessional conduct based on the failure to comply with the Restricted Practice Order as an

independent basis for disciplinary action, pursuant to Business and Professions Code section

5100. In addition, Respondents consent that the CBA may enforce the Restricted Practice Order

in any court of competent jurisdiction (including an administrative court) to enjoin them

temporarily and/or permanently from violating the Restricted Practice Order, and may seek in

such proceeding all other remedies as allowed by law.

ACCEPTANCE

I have carefully read the Stipulated Settlement and Disciplinary Order. I understand the

stipulation and the effect it will have on my Certified Public Accountancy Corporation

Certificate. I enter into this Stipulated Settlement and Disciplinary Order voluntarily,

knowingly, and intelligently, and agree to be bound by the Decision and Order of the California

Board of Accountancy.

DATED: 8 / 1 5 / 1 6 .ALLAN ROSENTHAL & ASSOCIATES ACCOUNTANCY CORPORATION by ALAN HOWARD ROSENTHAL Respondent

I have carefully read the Stipulated Settlement and Disciplinary Order. I understand the

stipulation and the effect it will have on my Certified Public Accountant Certificate. I enter into

this Stipulated Settlement and Disciplinary Order voluntarily, knowingly, and intelligently, and

agree to be bound by the Decision and Order of the California Board of A c c o u n ta n c y

8/15/16.DATED: 8 / 1 5 / 1 6 .ALAN HOWARD ROSENTHAL Respondent

ENDORSEMENT

The foregoing Stipulated Settlement and Disciplinary Order is hereby respectfully

submitted for consideration by the California Board of Accountancy.

Dated: 8 /1 5 /1 6 . Respectfully submitted,

K a m a l a D. H a r r i s Attorney General of California M a r c D. Gr e e n b a u mSupervising Deputy Attorney General

M o r g a n M a l e k Deputy Attorney General Attorneys for Complainant

LA201451149461772360.doc

Exhibit A

Accusation No. AC-2014-38

Kam a l a D. Ha r r is Attorney General of California Marc D. Gree nbaum Supervising Deputy Attorney General Morg an Malek Deputy Attorney General State Bar No. 223382

300 So. Spring Street, Suite 1702 Los Angeles, CA 90013 Telephone: (213) 897-2643 Facsimile: (213) 897-2804

Attorneys for Complainant


STATE OF CALIFORNIA



and


Respondents.

Case No. AC-2014-38

A C C U S A T I O N

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 Affairs.

2. On or about June 20, 1975, the California Board of Accountancy (CBA) issued

Certified Public Accountant Certificate Number 21708 to Allan Howard Rosenthal (Respondent

Rosenthal). The Certified Public Accountant Certificate was in full force and effect at all times

relevant to the charges brought herein and will expire on October 31, 2015, unless renewed.

3. On or about August 29, 1985, the California Board of Accountancy issued Certified

Public Accountancy Corporation Certificate Number COR 2863 to Allan Rosenthal & Associates

Accountancy Corporation (Respondent Corporation), The Certified Public Accountant Certificate

was in full force and effect at all times relevant to the charges brought herein and will expire on

August 31, 2017, unless renewed.

JURISDICTION

4. This Accusation is brought before the CBA, Department of Consumer Affairs, under

the authority of the following laws. All section references are to the Business and Professions

Code unless otherwise indicated.

STATUTORY PROVISIONS

5. Section 5076, subsection (a) of the Code provides:

“In order to renew its registration in an active status or convert to an active status, a firm, as

defined in Section 5035.1, shall have a peer review report of its accounting and auditing practice

accepted by a board-recognized peer review program no less frequently than every three years.”

6. Section 5100 of the Code provides in pertinent part:

“After notice and hearing the board may revoke, suspend, or refuse to renew any permit or

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

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

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

(b) A violation of Section 478, 498, or 499 dealing with false statements or omissions in the

application for a license, in obtaining a certificate as a certified public accountant, in obtaining

registration under this chapter, or in obtaining a permit to practice public accountancy under this

chapter.

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

different engagements, for the same or different clients, or any combination 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.”

....

(g) Willful violation of this chapter or any rule or regulation promulgated by the board

under the authority granted under this chapter.”

....

(j) Knowing preparation, publication, or dissemination of false, fraudulent, or materially

misleading financial statements, reports, or information.

7. Section 5109 of the Code provides in pertinent part:

“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

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

decision suspending or revoking the license.”

8 . Section 5156 of the Code states:

"An accountancy corporation shall not do or fail to do any act the doing of which or the

failure to do which would constitute unprofessional conduct under any statute, rule or regulation

now or hereafter in effect. In the conduct of its practice, it shall observe and be bound by such

statutes, rules and regulations to the same extent as a person holding a permit under Section 5070

of this code. The board shall have the same powers of suspension, revocation and discipline

against an accountancy corporation as are now or hereafter authorized by Section 5100 of this

code, or by any other similar statute against individual licensees, provided, however, that

proceedings against an accountancy corporation shall be conducted in accordance with Chapter 5

(commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code, and

the board shall have all the powers granted therein.

REGULATORY PROVISIONS

9. California Code of Regulations, title 16, section 40, subsection (a) provides:

“A firm performing services as defined in Section 39(a) shall have a peer review report

accepted by a Board-recognized peer review program once every three years in order to renew its

license.”

10. California Code of Regulations, title 16, section 41, subsection (a) provides:

“A firm shall enroll with a Board-recognized peer review program provider, and shall

cooperate with the Board-recognized peer review program provider with which the firm is

enrolled to arrange, schedule, and complete a peer review, in addition to taking and completing

any remedial or corrective actions prescribed by the Board-recognized peer review program

provider.”

11. California Code of Regulations, title 16, section 45 provides:

....

(b) Prior to January 1, 2014, the date for existing California licensees to report peer review

results, on the form indicated in subsection (a), shall be based on the licensee's license number

according to the following schedule: for license numbers ending with 01-33 the reporting date is

no later than July 1, 2011; for license numbers ending with 34-66 the reporting date is no later

than July 1, 2012; for license numbers ending with 67-00 the reporting date is no later than July 1,

2013.

(c) A licensee's willful making of any false, fraudulent, or misleading statement, as part of,

or in support of, his/her peer review reporting shall constitute cause for disciplinary action

pursuant to Section 5100(g) of the Accountancy Act. Failure to submit a completed Form PR-1

(Rev. 1/12) shall be grounds for non-renewal or disciplinary action pursuant to Section 5100(g) of

the Accountancy Act.


“(a) A licensee shall respond to any inquiry by the Board or its appointed representatives

within 30 days. The response shall include making available all files, working papers and other

documents requested.

....

(d) A licensee shall provide true and accurate information and responses to questions,

subpoenas, interrogatories or other requests for information or documents and not take any action

to obstruct any Board inquiry, investigation, hearing or proceeding.”


“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.”

PROFESSIONAL STANDARDS

14. The standards of practice pertinent to this Accusation and the engagements at issue

include, without limitation:

US Code, Title 26, section 7206, subsection (2)-Fraud and False Statements provides:

“Any person who willfully aids or assists in, or procures, counsels, or advises the

preparation or presentation under, or in connection with any matter arising under, the internal

revenue laws, of a return, affidavit, claim, or other document, which is fraudulent or is false as to

any material matter, whether or not such falsity or fraud is with the knowledge or consent of the

person authorized or required to present such return, affidavit, claim, or document shall be guilty

of a felony and, upon conviction thereof, shall be fined not more than $100,000 ($500,000 in the

case of a corporation), or imprisoned not more than 3 years, or both, together with the costs of

prosecution.”

IRS Circular 230 § 10.22- Diligence as to accuracy provides:

“(a) A practitioner must exercise due diligence

(1) In preparing or assisting in the preparation of, approving, and filing tax returns,

documents, affidavits, and other papers relating to Internal Revenue Service matters;”

IRS Circular 230 § 10.23-Prompt Disposition of Pending Matters provides:

“A practitioner may not unreasonably delay the prompt disposition of any matter before the

Internal Revenue Service (IRS).”

IRS Circular 230 § 10.51- Incompetence and Disreputable Conduct provides:

“(a) Incompetence ad disreputable conduct for which a practitioner may be sanctioned under

§ 10.51 includes, but is not limited to:

(4) Giving false or misleading information, or participating in anyway in the giving of false

or misleading information to the Department of Treasury or any other officer or employee thereof,

or to any tribunal authorized to pass upon Federal tax matters, in connection with any matter

pending or likely to be pending before them, knowing the information to be false or misleading.

Facts or other matters contained in the testimony, Federal tax returns, financial statements,

applications for enrollment, affidavits, declarations, and any other document or statement, written

or oral, are included in the term “information.”

2010 California Franchise Tax Booklet 540 NR provides in pertinent part:

“Nonresidents of California who received California sourced income in 2010 or moved into

or out of California in 2010, file either the Long or Short Form 540 NR, California Nonresident or

Part-Year Resident Income Tax Return. California taxes all income received while you resided in

California and the income you received from California sources while a nonresident.

2010 California Form 100 S Instructions provides in pertinent part:

“S Corporation with business income attributable to sources both within and outside of

California are required to apportion such income.”

2010 California 1040 Instructions for Schedule E provides in pertinent part:

“A passive activity is any business activity in which you did not materially participate.”

2010 IRS Instructions for Form 8879-IRS e-file Signature Authorization-provides in

pertinent part:

“Retain the completed form 8879 for 3 years from the return due date or the date the IRS

received the return, whichever is later.”

American Institute of CPAs (AICPA) Principles of Professional Conduct, Ethics

Section 56.04, Article V-Due Care-provides:

“Members should be diligent in discharging responsibilities to clients, employers, and the

public. Diligence imposes the responsibility to render services promptly and carefully, to be

thorough, and to observe applicable technical and ethical standards.”

COSTS RECOVERY

15. Section 5107, subdivision (a), of the Code provides:

“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

costs of investigation and prosecution of the case, including, but not limited to, attorney’s fees.

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

ADMINISTRATIVE PENALTY RECOVERY

16. Section 5116 of the Code provides:

(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.

....

(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.

CLIENT C.H.1

17. The CBA received a complaint from C.H. regarding Respondents handling of his

2010 tax returns. (1) Respondent Rosenthal attempted to force C.H. to commit tax fraud by

providing him with a falsified document to submit to the IRS; (2) Respondent Rosenthal was non-

responsive and unprofessional towards C.H.; (3) Respondent Rosenthal was deceptive and

unreliable; (4) Respondent Rosenthal caused the late filing of C.H.’s returns which resulted in

penalties and interest; and (5) Respondent Rosenthal neglected to file C.H.’s California tax

returns.

1 In order to protect the privacy of the taxpayer, his first and last name initials are used for the purpose of identification

FIRST CAUSE FOR DISCIPLINE

(Repeated Acts of Negligence)

18. Respondents are subject to disciplinary action under section 5100, subsection (c) of

the Code in that Respondents committed repeated negligent acts in the preparation of C.H.’s 2010

tax returns which include the following:

(a) Respondents erred when they failed to prepare the 2010 California State tax returns

for C.H, in violation of 2010 California Franchise Tax Booklet 540 NR, and 2010 California

Form 100S Instructions. Evidence shows that C.H. resided in California for at least a portion of

2010 and this information was provided to the Respondents. Part of C.H.’s income should have

been apportioned to California. Complainant refers to, and by this reference incorporates, the

allegations set forth above in paragraph 17, as though set forth fully.

(b) Respondents erred by recording $632,871 of income earned in his business as passive

income on C.H.’s 2010 individual tax returns, in violation of 2010 IRS 1040 Instructions for

Schedule E, and IRS Circular 230 Section 10.22. The income should have been recorded as

“active” income because C.H. materially participated in the business. Complainant refers to, and

by this reference incorporates, the allegations set forth above in paragraph 17, as though set forth

fully.

(c) Respondents erred by not maintaining Forms 8879 in connection with C.H.’s 2010 tax

returns for 3 years as required. On May 19, 2013, Respondent Rosenthal stated in an e-mail that

he could not find the Form 8879, in violation of 2010 IRS Instructions for Form 8879. C.H.’s

2010 tax return was filed on October 13, 2011, therefore, Respondents were required to maintain

the Forms 8879 until October 13, 2014. Complainant refers to, and by this reference incorporates,

the allegations set forth above in paragraph 17, as though set forth fully.

(d) Respondents were negligent, non-responsive and unreliable for several months

regarding C.H.’s 2010 tax returns. Respondents’ communication with C.H. stopped from May

23, 2011 through August 17, 2011. During that time, C.H.’s assistant repeatedly asked about a

payment plan and what the projected tax liability might be, Respondents failed to respond, in

violation of IRS Circular 230 section 10.23, and C.H. sought the services of another CPA.

Complainant refers to, and by this reference incorporates, the allegations set forth above in

paragraph 17, as though set forth fully.

SECOND CAUSE FOR DISCIPLINE

(Dishonesty)

19. Respondents are subject to disciplinary action under section 5100, subsection (c) of

the Code, in that Respondents were dishonest when they drafted a letter, they knew to be false, to

the IRS requesting Penalty Relief for C.H., and asked C.H to sign said documents), in violation

of IRS Circular 230 section 10.51. Said letter falsely sated that the reason C.H’s. return was late

was because his laptop was stolen.

THIRD CAUSE FOR DISCIPLINE

(Peer Review)

20. Respondents are subject to disciplinary action under section 5076, subsection (a) of

the Code, in conjunction with California Code of Regulations section 40, subsection (a), in that

Respondent Corporation performed services for which it was required to have a peer review

completed by July 2012. On October 4, 2012 the Respondents informed the CBA that they

retained a firm to perform the review. However, records show the review was never performed.

The Respondent Corporation renewed its license on October 23, 2013 without having the required

peer review completed.

FOURTH CAUSE FOR DISCIPLINE

(False Information)

21. Respondents are subject to disciplinary action under section 5100, subsection (b) of

the Code, in conjunction with California Code of Regulations section 52, subsection (d), in that

Respondents falsely reported to the CBA that they had not performed any services that required a

peer review. Complainant refers to, and by this reference incorporates, the allegations set forth

above in paragraph 20, as though set forth fully.

FIFTH CAUSE FOR DISCIPLINE

(F ailure to Report to the Board)

22. Respondents are subject to disciplinary action under California Code of Regulations

sections 45, subsections (b) and (c) and sections 41 and 52, in conjunction with section 5100,

subsection (g) of the Code, in that Respondents falsely reported to the CBA that it had not

performed any services that required a peer review. Complainant refers to, and by this reference

incorporates, the allegations set forth above in paragraph 20, as though set forth fully.

SIXTH CAUSE FOR DISCIPLINE

(Willful Violation)

23. Respondents are subject to disciplinary action under section 5100, subsection (g) and

section 5076, subsection (a) of the Code, in conjunction with California Code of Regulations

sections 40, subsection (a), section 41, section 45, subsections (b) and (c), and section 52, in that

the Respondent Corporation was required to have a peer review performed by July 1, 2012.

Respondent Corporation was out of compliance with peer review requirements as of February 14,

2014. Respondent Corporation failed to enroll in a CBA-recognized peer review program, as

required. Despite repeated correspondence from the CBA’s Peer Review Unit explaining their

reporting requirement, Respondents either responded that (a) they were not subject to the

requirement or (b) the review was in process, or (c) they did not respond to the CBA’s inquiries.

Said conduct constituted willful violation of the Accountancy Act. Complainant refers to, and by

this reference incorporates, the allegations set forth above in paragraph 20, as though set forth

fully.

SEVENTH CAUSE FOR DISCIPLINE

(Unprofessional conduct of the Firm)

24. Respondent Corporation is subject to disciplinary action under section 5156, in that

Respondent Corporation acted unprofessionally as set forth in paragraphs 17 through 23.

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 and/or suspending or otherwise imposing discipline upon Certified Public

Accountant Certificate Number 21708, issued to Allan Howard Rosenthal;

2. Revoking and/or suspending or otherwise imposing discipline upon Allan Rosenthal

& Associates Accountancy Corporation Certificate Number COR 2863, issued to Allan Rosenthal

& Associates Accountancy Corporation;

3. Ordering Allan Howard Rosenthal and Allan Rosenthal & Associates 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; and

4. Ordering Allan Howard Rosenthal and Allan Rosenthal & Associates to pay the

California Board of Accountancy an administrative penalty, pursuant to Business and Professions

Code section 5116;

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

DATED: 1 0 / 2 / 2 0 1 5 .PATTI BOWERSExecutive OfficerCalifornia Board of AccountancyDepartment of Consumer AffairsState of CaliforniaComplainant

LA201451149451731605.doc

allan howard rosenthal and allan …2. on or about june 20, 1975, the cba issued certified public...

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