PCAOB Sanctions Four Audit Firms for Violating PCAOB Rules and Standards Related to Audit Committee Communications

The Public Company Accounting Oversight Board (PCAOB) today announced settled disciplinary orders sanctioning four audit firms for violating PCAOB rules and standards related to communications that firms are required to make to audit committees. The firms were sanctioned as part of a sweep, which enables the PCAOB to collect information on potential violations from several firms at the same time.

The four orders announced today result from a continuing PCAOB sweep that led to previous sanctions on five firms in July 2023 and three firms in November 2023. Starting in 2022, the PCAOB expanded its use of sweeps as part of its strategic goal of strengthening enforcement. 

“Engaged and informed audit committees play a key role in promoting audit quality and protecting investors, and they must be kept informed in accordance with our standards,” said PCAOB Chair Erica Y. Williams. “Sweeps are a valuable tool in our enforcement toolbox to ensure there are consequences for putting investors at risk.”

Each firm failed to make certain required communications with audit committees, as required by AS 1301, Communications with Audit Committees. The firms are the following:

• Baker Tilly US, LLP – $80,000 civil money penalty and censure
• Grant Thornton Bharat LLP (India) – $40,000 civil money penalty and censure
• Mazars USA LLP – $60,000 civil money penalty and censure
• SW Audit (Australia) – $60,000 civil money penalty and censure

Three of these firms also violated additional PCAOB rules and standards:

• Baker Tilly US, LLP failed to document pre-approval of statutory audit services, in violation of AS 1215, Audit Documentation.
• Grant Thornton Bharat LLP failed to ensure that an issuer client’s audit committee received a copy of management’s representation letter, in violation of AS 1301 and AS 2805, Management Representations.
• SW Audit failed to satisfy independence requirements in violation of PCAOB Rule 3520, Auditor Independence, and PCAOB Rule 3524, Audit Committee Pre-Approval of Certain Tax Services, by failing to obtain audit committee pre-approval of tax compliance and other services and by engaging an issuer audit client pursuant to an indemnification agreement. SW Audit also violated PCAOB quality control standards in failing to maintain effective policies and procedures with respect to independence and audit documentation.

Without admitting or denying the findings, each firm consented to its respective PCAOB order and civil money penalty. Each firm also consented to comply with revised policies and procedures concerning adherence to PCAOB rules and standards related to these violations.

“This latest round of enforcement actions demonstrates the PCAOB’s continued commitment to holding firms accountable for failing to make required communications to issuer audit committees,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations.

PCAOB enforcement staff members Elliott C. Mogul, Sarah C. Wang, Travis Miscia, Sina Mansouri, Jarai Ings, Pooja Patel, and Natalia Garcia Baerga conducted the investigations. John Abell, Kyra C. Armstrong, and William F. Ryan supervised these matters.

The PCAOB oversees auditors’ compliance with the Sarbanes-Oxley Act, provisions of the securities laws relating to auditing and professional standards, and PCAOB and SEC rules. Strengthening enforcement is one of the PCAOB’s strategic goals. 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.