PCAOB Sanctions Former Partner for Violations of PCAOB Rules and Standards, Including Failure To Cooperate With an Inspection

The Public Company Accounting Oversight Board (PCAOB) today announced a settled disciplinary order sanctioning former Heaton & Company, PLLC (“Firm”) partner Natalie Murphy, CPA (“Murphy”), for violating PCAOB rules and standards in connection with five issuer audits on which she served as engagement partner.  

Murphy violated PCAOB Rule 4006, Duty to Cooperate With Inspectors, by failing to cooperate with PCAOB inspection staff concerning the state of audit documentation and the timing of audit procedures. First, when PCAOB inspection staff informed Murphy of the audits selected for review, she stated that the workpaper documentation for two of the selected audits was complete and just needed to be “compiled” in the Firm’s audit software. However, a substantial portion of the workpapers were incomplete at the time. Second, Murphy obtained additional evidence and performed substantive procedures for one of the audits days before she provided the workpapers to PCAOB inspection staff, while improperly representing to PCAOB inspection staff that all audit procedures had been completed prior to issuance of the Firm’s audit report. 

Moreover, Murphy violated AS 1215, Audit Documentation, by failing to adequately document modifications and additions made to the workpapers after the documentation completion dates for the two inspected audits. She also violated AS 1215 by failing to timely assemble a complete and final set of audit documentation for the two inspected audits and three additional issuer audits.  

“The respondent failed to comply with multiple PCAOB rules and standards, leading to the sanctions imposed by the Board today. We will continue to pursue enforcement actions to address such violations and ensure that accountability is upheld at every level of the profession,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations.  

Without admitting or denying the findings, Murphy consented to the PCAOB’s order against her. The order censures Murphy, imposes a $50,000 civil money penalty on her, and bars her from being an associated person of a registered public accounting firm. After five years, she can petition the Board to terminate the bar, provided she has completed 40 hours of continuing professional education (CPE), in addition to CPE requirements in connection with any professional license she holds. 

PCAOB enforcement staff members Travis Miscia, Marcela Ciappi, and Samantha Parker conducted the investigation, supervised by C. Ian Anderson and Stephen D’Angelo.  

The PCAOB oversees auditors’ compliance with the Sarbanes-Oxley Act, provisions of the securities laws relating to auditing, professional standards, and PCAOB and SEC rules. 

Further information about the PCAOB Division of Enforcement and Investigations is available on the PCAOB website. Firms or individuals wishing to report suspected misconduct by auditors, or to self-report possible misconduct, may visit the PCAOB Tips and Referrals page.  

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About the PCAOB  

The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers registered with the Securities and Exchange Commission, including compliance reports filed pursuant to federal securities laws.