Imposing a $500,000 Fine, PCAOB Sanctions Baker Tilly US, LLP for Quality Control Violations

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

During 2018 and 2019, PCAOB inspectors identified and communicated to the Firm significant engagement deficiencies that raised concerns about the Firm’s engagement performance in certain issuer audits. Specific areas where deficiencies were found included the Firm’s testing of internal controls and accounting estimates and its execution of engagement quality reviews.

Despite the Firm’s awareness of these deficiencies and concerns, it failed to make effective changes to its engagement performance and monitoring policies and procedures to provide reasonable assurance that its personnel would comply with PCAOB standards in these areas in future audits, as evidenced by findings of similar audit deficiencies in these same areas in the 2021 and 2022 PCAOB inspections.

The PCAOB found that from 2021 to 2022, the Firm’s system of quality control failed to provide reasonable assurance that the work performed by its engagement personnel met applicable professional standards and regulatory requirements.

“Deficient quality control systems put investors at risk,” said PCAOB Chair Erica Y. Williams. “The PCAOB will hold firms accountable for failures to maintain appropriate quality control systems and protect investors.”

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

• Censures the Firm;
• Imposes a $500,000 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 training for all issuer audit staff.

“Today’s order should remind firms that an effective system of quality control is essential to the performance of quality audits,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations. “If firms fail to maintain effective systems of quality control, we will hold them accountable.”

PCAOB enforcement staff members Noah Berlin, Stefan Hagerup, Jerry Folk, Laura Voisin, and Tima Hawes conducted the investigation, supervised by William Ryan and John Abell.

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.

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