PCAOB Publishes Staff Audit Practice Alert on Improper Alteration of Audit Documents

Staff of the Public Company Accounting Oversight Board today published a Staff Audit Practice Alert reflecting PCAOB staff concerns about auditors improperly altering audit documentation in connection with a PCAOB inspection or investigation.

In the past several years, the Board has sanctioned firms and individuals for improperly deleting, adding, or altering documentation in connection with an inspection or investigation. The sanctions in those cases have included revoking firms' registrations and barring individuals from auditing for registered firms. PCAOB staff has recently seen evidence that such misconduct is continuing to occur.

"Improper alteration of audit documentation not only frustrates the Board's mission, but also undermines the public's trust that auditors are actually serving their gatekeeper function," said Claudius B. Modesti, the Director of the Division of Enforcement and Investigations. "We take matters involving this type of misconduct extremely seriously, and auditors should be aware of the significant enforcement consequences that can follow such behavior."

Recently, PCAOB enforcement staff has uncovered evidence of additional instances of similar misconduct, including evidence that registered firms and associated persons have improperly deleted, added to, or altered audit documentation in connection with Board inspections, and then made the altered documents available to PCAOB inspectors without informing the inspectors of the alterations. In certain instances, evidence indicates that documents were created shortly in advance of, or during, an inspection, backdated, and then made available to PCAOB inspectors without any disclosure of when they were actually created. These recent instances involve both domestic firms and non-U.S. firms, including members of global networks.

"PCAOB standards provide specific requirements for auditors to follow if they have legitimate reasons for making changes to audit documentation after the audit has been completed," said Martin F. Baumann, the PCAOB's Chief Auditor and Director of Professional Standards. "Auditors must follow those requirements for any changes made."

PCAOB staff urges registered firms or individuals that become aware of any improper alteration of audit documentation to report that information to the Board. They can do so by directly contacting staff in the Division of Registration and Inspections or the Division of Enforcement and Investigations, or by contacting the PCAOB Tip & Referral Center. Individuals can also report improper alteration of audit documentation to the Securities and Exchange Commission.