PCAOB Imposes Highest Individual Penalty Ever and Bars Audit Partner for Misleading Inspectors and Investigators
Spielman Koenigsberg & Parker LLP’s registration revoked for related quality control violations; Partner and firm each fined $150,000
In settlements announced today, the Public Company Accounting Oversight Board (PCAOB) imposed the largest civil money penalty against an individual in PCAOB history. The Board imposed separate civil money penalties of $150,000 on audit partner Jonathan B. Taylor, CPA, and the New York-based firm where he is a partner, Spielman Koenigsberg & Parker LLP (“SKP”), after Taylor misled PCAOB inspectors and investigators during two PCAOB inspections and a subsequent PCAOB investigation.
In addition to censuring and permanently barring Taylor from association with a registered public accounting firm, the Board revoked SKP’s PCAOB registration and censured the firm for failing to establish and implement adequate quality control policies and procedures with respect to audits of issuers.
“The Board will take action to protect investors from bad actors and impose consequences on those who put the integrity of our capital markets at risk,” said PCAOB Chair Erica Y. Williams.
Taylor added or modified approximately 80 audit work papers before providing the improperly altered documentation to PCAOB inspectors for a 2021 inspection. He also told inspectors in two PCAOB inspections that engagement quality reviews of certain audits had been performed, as required, when he knew that was untrue.
In the PCAOB’s subsequent investigation, Taylor repeatedly provided the Board’s investigators with false and misleading information, including altered work papers, misrepresentations concerning engagement quality reviews, and false certifications concerning whether he had provided all relevant documents in the investigation.
From 2018 to 2021, SKP failed to comply with PCAOB quality control standards, including with respect to audit documentation. Among other failures, SKP’s system of quality control failed to prevent or detect Taylor’s improper alteration of work papers in connection with a PCAOB inspection. SKP also failed to obtain engagement quality reviews of issuer audits for multiple years and to timely or accurately file with the PCAOB required annual reports and audit participant reports. Taylor directly and substantially contributed to those violations.
SKP has a right to reapply for registration after five years, provided that the firm adopts policies and conducts training related to audits of issuers before filing any future registration application.
“The quality control systems at audit firms are fundamental to audit quality and regulatory compliance,” said Mark A. Adler, Acting Director of the Division of Enforcement and Investigation. “Registered firms must take care to establish and implement policies and procedures directed to meaningful monitoring and robust compliance with regulatory requirements.”
Strengthening enforcement is one of the four key goals that the Board has identified in its draft strategic plan. To advance this goal, the Board in 2022 has increased average penalties, pursued enforcement actions involving certain types of violations for the first time, and taken steps to proactively seek out wrongdoing by increasing the use of sweeps against firms where there may be a violation of PCAOB standards or rules.
PCAOB enforcement staff members Michelle Jaconski, George P. Choundas, and Thomas Barry conducted the investigation, supervised by C. Ian Anderson and Raymond Hamm.
The PCAOB oversees auditors’ compliance with the Sarbanes-Oxley Act, provisions of the securities laws relating to auditing, professional standards, and PCAOB and Securities and Exchange Commission 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.
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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