PCAOB Sanctions Five Firms and Seven Individuals for Audit Failures, Violations of Engagement Quality Review Rules, or Noncooperation with an Investigation
PCAOB also obtains admissions to some or all of the facts, findings, and violations from four of the firms and six of the individuals
The Public Company Accounting Oversight Board today announced sanctions in settled disciplinary orders against five audit firms and seven individuals for audit failures, violations of engagement quality review (EQR) rules, or for noncooperation with a Board investigation.
The PCAOB also obtained admissions to some or all of the facts, findings, and violations from four of the firms and six of the individuals.
"The PCAOB's requirements for engagement quality reviews provide safeguards against unsupported audit opinions, while the requirements for cooperation with investigations support the Board's oversight mandate," said James R. Doty, PCAOB Chairman. "Both protect investors and audit firms should take the requirements seriously."
According to the orders, some of the firms permitted companies to issue their audit reports without obtaining approval from engagement quality reviewers. In some instances, firms had multiple violations of the EQR standard and failed to obtain sufficient appropriate audit evidence to support their audit opinions.
One firm and an associated individual violated the provision of the EQR standard that requires an engagement quality reviewer from the same firm to be a partner or in an equivalent position. Another firm violated the Securities Exchange Act of 1934 by knowingly failing to resign or to report that a company it audited had filed incorrect financial statements.
In another matter that did not involve engagement quality reviews, a firm and three associated individuals failed to cooperate with a Board investigation by refusing to provide sworn testimony or documents.
"Obtaining admissions from auditors who engage in misconduct enhances their accountability," said Claudius B. Modesti, PCAOB Director of Enforcement and Investigations. "These orders demonstrate that the PCAOB will continue to seek admissions of wrongdoing where appropriate."
The audit firms and associated individuals named in the orders released today, as well as the violations that they settled, can be found in the attachment here.
The investigations that resulted in the settlements announced today originated with information obtained through the PCAOB inspection program. PCAOB Enforcement staff members David Florenzo, Stefan Hagerup, Noah Berlin, Christina Carroll, Michael Davis, Tina Bell, Ke Xu, James Welch, Pamela Woodward, Tima Hawes, and Marques Jenkins conducted the investigations, which were supervised by Kyra Armstrong and Raymond Hamm.
The PCAOB oversees auditors' compliance with the Sarbanes-Oxley Act, professional standards, and PCAOB and Securities and Exchange Commission rules. Further information about the PCAOB Division of Enforcement and Investigations may be found on the PCAOB website. Suspected misconduct by auditors can be reported to the PCAOB Tip & Referral Center.