PCAOB Sanctions Firm and Partner for Numerous Violations of Standards Related to Documentation and Quality Control
PCAOB fines parties $50,000, imposes two-year suspensions, and requires quality control improvements
The Public Company Accounting Oversight Board (PCAOB) today announced a settled disciplinary order sanctioning Alvarez & Associates, Inc., Certified Public Accountants (“the firm”) and Vicente Alvarez, CPA (“Alvarez”) for violations of PCAOB rules and standards in connection with 43 audits and reviews (collectively, “audits”) of 39 broker-dealers. The PCAOB also found that Alvarez, the majority owner of the firm and engagement partner on the audits, directly and substantially contributed to the firm’s violations.
Specifically, the PCAOB found the following:
The firm violated PCAOB quality control standards, and Alvarez contributed to those violations, by failing to establish an appropriate system of quality control to ensure firm personnel complied with professional standards.
In nine audits, the firm failed to document concurring approval of issuance from an engagement quality reviewer, in violation of AS 1220, Engagement Quality Review.
The firm and Alvarez failed to assemble a complete and final set of audit documentation in 43 audits in a timely manner, in violation of AS 1215, Audit Documentation.
In 25 audits, the firm’s engagement teams modified audit documentation after the document completion date, without indicating the date the changes were made, who made the changes, and the reasons for the modifications, also in violation of AS 1215.
“You simply cannot have high audit quality without sound quality control,” said Mark A. Adler, Acting Director of the PCAOB’s Division of Enforcement and Investigations. “In this case, the failures not only reduced audit quality, they also hindered the PCAOB’s review of the engagements. In keeping with the PCAOB’s strategic goal of strengthening enforcement, we will continue to hold firms and individuals accountable for such violations.”
Without admitting or denying the findings, the firm and Alvarez settled with the PCAOB and consented to a disciplinary order. The order suspends the firm’s registration and Alvarez from being an associated person of a PCAOB-registered firm for a period of two years. It also imposes a $50,000 civil money penalty on the firm and Alvarez jointly and severally. The firm is required to undertake certain remedial measures to establish quality control policies and procedures to give the firm reasonable assurance that its PCAOB audits are conducted in accordance with applicable professional standards. Alvarez also is required to complete 40 hours of continuing professional education, in addition to hours required to maintain any professional license.
PCAOB enforcement staff members Kathy Zucca, Arnold Ramos, and Tiffany Johnson conducted the investigation. Kyra Armstrong and Raymond 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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