PCAOB Sanctions Engagement Partner and EQR Partner for Failures in Auditing Financial Statements and Internal Controls
Barred an engagement partner for five years and fined him $125,000; barred an engagement quality review (EQR) partner for two years and fined him $40,000; required both to complete additional training prior to petitioning the Board to terminate their bars
The Public Company Accounting Oversight Board (PCAOB) today announced a
settled disciplinary order sanctioning Marcelo de los Santos Anaya (“de los Santos”) and Martín Rodríguez Martínez (“Rodríguez”) for violations of PCAOB rules and standards in connections with the 2018 and 2019 audits of Grupo Simec, S.A.B. de C.V. (“Simec”).
De los Santos, who served as the engagement partner for both audits, repeatedly failed to exercise due professional care and to obtain sufficient appropriate audit evidence to support the opinions he authorized on Simec’s financial statements and internal control over financial reporting (ICFR). For example, de los Santos failed to plan and perform the audits in accordance with PCAOB auditing standards, instead referencing International Standards on Auditing in his procedures. De los Santos also failed to adequately evaluate the presentation of Simec’s financial statements and to test the consolidation of its subsidiaries’ operations into those financial statements. With respect to Simec’s ICFR, de los Santos failed to conduct fundamental audit procedures, including testing controls over numerous significant accounts and evaluating the severity of identified control deficiencies.
“This order demonstrates that the PCAOB will impose significant sanctions against auditors who fail to perform basic elements of audits,” said PCAOB Chair Erica Y. Williams. “We will continue to work diligently to identify and address such violations so that we can ensure investors are protected.”
Rodríguez served as the EQR partner for both Simec audits. However, he failed to identify or properly address the many significant deficiencies in the engagement team’s testing summarized above. For instance, Rodríguez provided concurring approval of the issuance of an unqualified ICFR opinion for 2019 despite reviewing audit documentation that demonstrated the engagement team failed to evaluate (1) whether Simec had remediated material weaknesses disclosed in the company’s 2018 Form 20-F and (2) the severity of identified control deficiencies in the current year.
“Engagement quality reviews provide an important check on the work of engagement teams,” said Robert E. Rice, PCAOB Director of Enforcement and Investigations. “When those reviews ignore obvious deficiencies in audit work and rubberstamp the issuance of clean audit opinions, they put investors at risk.”
Without admitting or denying the findings, de los Santos and Rodríguez consented to the PCAOB’s order against them. With respect to de los Santos, the order imposes a five-year bar and $125,000 civil money penalty. And with respect to Rodríguez, the order imposes a two-year bar and $40,000 civil money penalty. The order also requires both respondents to complete additional continuing professional education prior to petitioning the Board to terminate their bars.
PCAOB enforcement staff members George Choundas, Brett Collings, Zachary Springfield, and Thomas Barry conducted the investigation, supervised by C. Ian Anderson and Stephen D’Angelo.
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 registered with the Securities and Exchange Commission, including compliance reports filed pursuant to federal securities laws.
PCAOB Office of Communications and Engagement