PCAOB Sanctions Blue & Co., LLC for Auditor Independence and Quality Control Violations
PCAOB imposes $75,000 fine, requires firm to review and certify its auditor independence policies
The Public Company Accounting Oversight Board (PCAOB) today announced a settled disciplinary order sanctioning Blue & Co., LLC (“Blue”) for auditor independence violations during six audits of three issuer employee benefit plans.
“Auditor independence is essential to an audit firm’s credibility with investors, and the PCAOB will strictly enforce independence rules to keep investors protected,” said PCAOB Chair Erica Y. Williams.
The PCAOB found that Blue violated PCAOB auditor independence rules and auditing standards during its 2018 and 2019 audits of three employee benefit plans. Specifically, the firm allowed one of its partners to serve as the engagement partner for those audits immediately after the same individual had served as the engagement quality reviewer or engagement partner during Blue’s 2013-2017 audits of the same three employee benefit plans. Under auditor independence rules, “lead” and “concurring” partners are required to rotate off an engagement after a total of five years in either role and, upon rotation, must be off the engagement for five years.
The PCAOB also found that Blue violated PCAOB quality control standards – lapses that contributed to the partner rotation violations. During the time it was conducting the 2018 and 2019 employee benefit plan audits, the firm failed to implement and monitor adequate policies and procedures to reasonably ensure that its personnel would comply with applicable auditor independence requirements.
“Investors rely on registered firms and their associated persons to maintain their objectivity by complying with auditor independence requirements,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations. “In this case, the firm's quality control shortcomings contributed to partner rotation violations in six issuer audits across two years.”
Without admitting or denying the findings, Blue settled with the PCAOB and consented to a disciplinary order that censures Blue, imposes a $75,000 civil money penalty, and requires the firm to review and certify its auditor independence policies and procedures. In issuing these sanctions, the Board considered Blue’s extraordinary cooperation, which consisted of self-reporting its independence violations and taking prompt remedial action. Absent this extraordinary cooperation, the civil money penalty imposed would have been significantly larger, and the Board may have imposed additional sanctions.
PCAOB enforcement staff members Michelle Jaconski, Samuel C. McCoubrey, and Thomas Barry conducted the investigation. C. Ian Anderson and Raymond J. Hamm 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.
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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