PCAOB Sanctions Five Broker-Dealer Audit Firms for Independence Violations and Grants Sixth Firm Extraordinary Cooperation Credit to Avoid Discipline

WASHINGTON, Mar. 15, 2016

The Public Company Accounting Oversight Board today announced settled disciplinary orders sanctioning five audit firms for violating independence requirements in connection with audits of brokers and dealers. The Board also determined not to sanction a sixth audit firm based on the firm's extraordinary cooperation with the PCAOB, including its self-reporting and voluntary remedial actions.

"The PCAOB has a responsibility to serve the investing public by promoting high quality, independent audits," said James R. Doty, PCAOB Chairman. "These orders reflect the Board's continued commitment to enforcing basic independence requirements that are critical to transparency, investor protection and the public interest."

The five firms prepared financial statements that they also audited for broker-dealer clients. One of the five firms also maintained and prepared the client's accounting records.

Under rules of the Securities and Exchange Commission, maintenance and preparation of accounting records and preparation of the financial statements filed with the SEC are non-audit services that impair the auditor's independence from the audit client. SEC independence rules have long applied to audits of broker-dealers, and include restrictions on providing bookkeeping and other non-audit services related to the financial statements.

All five sanctioned firms agreed to orders imposing a censure, a $2,500 civil money penalty, and remedial measures. The five firms are:

The Board also determined not to commence a disciplinary action against a sixth firm because of that firm's extraordinary cooperation with the PCAOB — specifically, the firm's timely and voluntary self-reporting to the PCAOB Tip Line after discovering that it had impaired its independence, as well as timely, voluntary, and meaningful remedial actions.

The Board has set out guidance concerning how extraordinary cooperation may be considered in determining the outcome of a Board investigation in its Policy Statement Regarding Credit for Extraordinary Cooperation in Connection with Board Investigations, (Apr. 24, 2013). According to the policy statement, extraordinary cooperation is voluntary and timely action beyond compliance with legal or regulatory obligations. Cooperation that could result in credit includes self-reporting violations before the conduct comes to the attention of the Board or another regulator.

"The reaction of the firm that discovered its own violation of relevant independence standards is precisely what the Board's extraordinary cooperation policy contemplated and, in this instance, the firm received the maximum benefit: no discipline by the Board," said Claudius B. Modesti, PCAOB Director of Enforcement and Investigations.

Respondents each consented to the respective orders without admitting or denying the Board's findings. The investigations that resulted in the settlements announced today originated with information obtained through the PCAOB inspection program.

The PCAOB investigations were conducted by PCAOB Enforcement staff members C. Ian Anderson, George P. Choundas, Stephen M. D'Angelo, David C. Woll, Jr. and Thomas Barry. The PCAOB thanks the SEC for its assistance.

The PCAOB oversees auditors' compliance with the Sarbanes-Oxley Act, professional standards, and PCAOB and SEC rules, including independence rules. Further information about the PCAOB Division of Enforcement and Investigations may be found on the PCAOB website. Suspected misconduct by auditors, including by firms or individuals who wish to self-report, can be reported to the PCAOB Tip & Referral Center.