PCAOB Announces Sanctions Against Audit Partner

Washington, D.C., Oct. 13, 2011

The Public Company Accounting Oversight Board today announced that it has permanently barred a Denver-based audit partner and permanently revoked the registration of a registered public accounting firm because of the audit partner’s participation in audits while subject to a previous bar.

The Board action was based on a decision issued by the PCAOB’s Chief Hearing Officer on July 6, 2011, which became the final decision of the Board on Aug. 29, 2011.

“This decision underscores the importance of complying with PCAOB orders. The PCAOB’s disciplinary process is critical to the Board’s investor protection mandate and the significant sanctions imposed in this case bear that out,” said Claudius B. Modesti, Director of the PCAOB Division of Enforcement and Investigations.

The Chief Hearing Officer found that Samuel D. Cordovano, CPA, violated the Sarbanes-Oxley Act (Act) and PCAOB rules when he willfully became or remained associated with a registered public accounting firm after he was barred from doing so by a December 2008 PCAOB settled disciplinary order.

Under the terms of the December 2008 order, the Board barred Cordovano from association with a right to petition the PCAOB to re-associate after one year. The Chief Hearing Officer also found that Cordovano’s firm, Cordovano and Honeck, LLP (C&H), violated the Act and PCAOB rules when it permitted Cordovano to become or remain associated with the firm.

The Chief Hearing Officer found that, after being barred from association, Cordovano participated in significant activities relating to the audits of four issuer clients of his firm, including advising audit team members on important accounting and auditing issues. The decision noted that C&H “remove[d] Cordovano from overt participation in the Firm’s audits of issuers . . . while allowing Cordovano to remain involved in the audits behind the scenes.”

The Board instituted these disciplinary proceedings against Cordovano and C&H on Nov. 5, 2010, and the Chief Hearing Officer conducted an evidentiary hearing in March 2011. Because of restrictions in the Act, the Board has been prohibited from making public any information about this proceeding until after Cordovano and C&H had an opportunity to seek Securities and Exchange Commission review of the Board’s Aug. 29 action, which Cordovano and C&H did not do.

This matter was investigated by PCAOB Enforcement staff members Raphael Larson, Tina Bell and Vincent G. Heintz, and was litigated by PCAOB Enforcement staff members Maryann Wong, Vincent G. Heintz, Pamela Woodward and Alex Gorski, with assistance from Mark Adler.