Imposing a $400,000 Fine, PCAOB Sanctions MaloneBailey, LLP for Pervasive Quality Control Violations

The Public Company Accounting Oversight Board (PCAOB) today announced a settled disciplinary order sanctioning MaloneBailey, LLP (“the firm”) for violations of PCAOB rules and quality control standards.

From 2018 to 2021, PCAOB inspection staff conducted three inspections of the firm. During each of these inspections, the PCAOB notified the firm of significant audit deficiencies that raised concerns about the firm’s engagement performance. Despite the firm’s awareness of these deficiencies and concerns, it failed to make effective changes to improve its system of quality control.

“Effective quality control systems are critical to high-quality audits, and the PCAOB will not tolerate failures to maintain those systems and properly protect investors,” said PCAOB Chair Erica Y. Williams.

Without admitting or denying the findings, the firm settled with the PCAOB and consented to a disciplinary order that:

• Censures the firm;
• Imposes a $400,000 civil money penalty on the firm;
• Requires the firm to engage an independent consultant who will review and make recommendations concerning the firm’s quality control policies and procedures; and
• Requires the firm to conduct certain training for all audit staff.

“Today’s order should serve as a stark reminder that firms must have effective systems of quality control,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations. “If they do not, we will hold them accountable for those failures, particularly when the failures have been repeatedly identified during inspections of the firm.”

PCAOB enforcement staff members Stefan Hagerup, Christina Carroll, Jud Palardy, and Tamika Battle-Parker conducted the investigation. Kyra C. Armstrong and John Abell supervised this matter.

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.

Contact

PCAOB Office of Communications and Engagement
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