Following Sweep, PCAOB Sanctions Five Firms for Violating PCAOB Rules and Standards Related to Audit Committee Communications
PCAOB imposes censures, $195,000 in total fines, and remedial undertakings
The Public Company Accounting Oversight Board (PCAOB) today announced settled disciplinary orders sanctioning five audit firms for violating PCAOB rules and standards related to communications with audit committees. The firms were sanctioned as part of a sweep, which enables the PCAOB to collect information on potential violations from a number of firms at the same time. The PCAOB has been employing sweeps as part of its overall effort to strengthen enforcement.
“Audit Committees play a critical role in helping protect investors, and the PCAOB will hold firms accountable for their part in making sure audit committees are appropriately informed,” said PCAOB Chair Erica Y. Williams. “Firms must be vigilant in preserving their independence, and part of that means making sure that services performed for issuer audit clients are pre-approved by their audit committees. At the same time, required disclosures are critical to ensure audit committees have the information they need to effectively oversee the auditor’s work.”
Specifically, three firms failed to obtain audit committee pre-approval in connection with providing audit and/or non-audit services to issuer audit clients, in violation of PCAOB Rule 3520, Auditor Independence, and (for two of the three firms) PCAOB Rule 3524, Audit Committee Pre-Approval of Certain Tax Services. The firms are the following:
- BPM LLP – $50,000 civil money penalty and censure
- Plante & Moran, PLLC – $40,000 civil money penalty and censure
- S. R. Snodgrass, P.C. – $35,000 civil money penalty and censure
In addition, two firms failed to make and/or document certain communications with audit committees related to the planned participation of other firms and auditors in the audit, as required by AS 1301, Communications with Audit Committees. The firms are the following:
- Mancera, S.C. – $40,000 civil money penalty and censure
- MSPC, Certified Public Accountants and Advisors, A Professional Corporation – $30,000 civil money penalty and censure
Without admitting or denying the findings, each firm consented to their respective PCAOB’s order and disciplinary action. Each firm also consented to undertake remedial measures to establish, improve, or comply with revised policies and procedures concerning compliance with PCAOB rules and standards related to these violations.
“As these orders make clear, firms have a responsibility to ensure that they are making these required audit committee communications,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations. “These actions highlight that the PCAOB will not hesitate to bring enforcement actions against firms when they fail to do so.”
PCAOB enforcement staff members Elliott C. Mogul and Sarah C. Wang conducted the investigations. John Abell, Kyra C. Armstrong, and William F. Ryan supervised these matters
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. Strengthening enforcement is one of the PCAOB’s strategic goals. 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.
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, including compliance reports filed pursuant to federal securities laws.
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