• According to This Dude Who May Have Helped Screw It Up, CliftonLarsonAllen Totally Screwed Up on the Dixon Audit

    By | January 28, 2013

    Meanwhile, back at the horse ranch:

    Sam Card says that CliftonLarsonAllen continued to do an audit for the city, despite guidelines that said they should not.

    In an October deposition statement, Card said that he and his mother’s small Sterling accounting office, which became Dixon’s contracted auditor after 2005, did not do its own audit work. It only reviewed and signed off on audit work done by Clifton, which allowed one of the nation’s largest firms to keep its account.

    Clifton denies Card’s claim.

    If Card’s claim is true, a Northern Illinois University legal expert said, both firms’ licenses are in jeopardy.

    Card was one of five persons who were interviewed by the city’s attorney, Devon Bruce, in connection with Dixon’s lawsuit against the firms that audited the city’s finances.

    This is pretty big. Mainly because this amounts to Sam Card throwing CliftonLarsonAllen (fka Clifton Gunderson) under the bus for their alleged sloppy work, which may or may not have been his sloppy work too.

    [Karl] Appelquist [of Clifton] told the Cards that Clifton’s staff would do the work papers and give them to the Cards for a review and signature, according to Card’s deposition. Card said he had not heard of any other such circumstance, where one firm would sign off on another firm’s work, in his 20 years as an accountant, yet he and his mother agreed to it. He said there is no documentation of that agreement.

    Asked why Clifton would offer such a plan, Card said: “In my opinion they did not want to lose the client. … If they would have hired, say, a larger firm, the larger firm would have … could have come in and taken over some of the duties that Clifton was doing. Doing the audits. So they would … Clifton would have lost control of the audit and lost that revenue stream.”


    • Guest

      This smells really bad. Did the report of the “independent” “auditor” disclose that they were relying on the work of another CPA firm?

      Does anyone at CG want to look in their T&E system to see if Sam Card is listed as a client?

      • Dude


        I tracked dixons ‘audit’ down back when the news came out (Dixon had them online), and Sam Card didnt refer to other auditors.

        My guess, if I had to venture one, is that Rita had CG ‘compile’ the financials, and convinced Sammy that CG really did an audit, so he just had to slap an opinion on that and make a few thou the easy way.

        That, or Sam and someone at CG were in on the scam and trying to come up with some sort of plausible deniability. CG: we only did a compilation! No assurance!! Sammy: I relied on CG’s work. They really did the audit but couldnt slap an opinion on there because of independence and stuff!! How was I supposed to know?! HOW?!

        • keepin_it_real

          My guess is the former rather than the latter. I really doubt a firm of CLA’s size would run a scam for a client of that size. The fees would probably be in the range of less than $50,000 which would be incredibly stupid to risk your whole reputation for. I know partners are greedy but they aren’t this stupid.

    • The Horniest Partner

      This doesn’t look good for CLA. I realize in the government audit world a city/school dist/etc will use a separate CPA to compile its FS. That is take it from cash basis to GASB 34 accrual. But this sounds like CLA wanted to be subcontractor on the audit to keep some fees. The court filing lists several CLA correspondence with term “audit” included.

      Even if CLA was doing a compilation, a jury might find them negligent for not asking questions about an off the books bank account that hit them smack in the face (ie the bank confirm they got).

      Off topic- but wasn’t Sam Card, CPA a fictional CPA on an old CPA exam question?

      • guesty mcguesterson

        I think you have it spot on. Sounds like CG worked as subcontractor for Card, but Card was not competent to actively supervise and review the audit, so CG ended up doing nearly all of the work. So most of what Card billed Dixon is actually pass-through from CG.

        Throw in three more facts:

        1. Rita was the Comptroller at Dixon and was the one who responded to whatever audit inquiries CG came up with.
        2. CG prepared Rita’s tax returns.
        3. CG provides accounting and payroll services to Dixon, which was why they had to cease being the official auditor and make Card sign everything. (Look at the rest of the article here, some good stuff).

        It’s a big mess and will likely not end well for either firm or their licensed professionals. CLA should stop commenting publicly on this and refer comments to the general counsel.