PCAOB Sanctions Gries & Associates for Deficient Audit Work That Preceded Multiple Financial Restatements

The Public Company Accounting Oversight Board (PCAOB) today announced a settled disciplinary order sanctioning Gries & Associates, LLC (“the firm”) and Blaze Gries, CPA (“Gries”) for violations of PCAOB rules and standards.

When conducting the fiscal year 2021 audit of Tingo, Inc. (“Tingo”), the firm and Gries failed to respond appropriately to warning signs that Tingo’s financial statements materially misstated billions of dollars of goodwill and tens of millions of dollars of stock-based compensation expense. In the wake of the deficient audit work by the firm and Gries, Tingo underwent multiple restatements of its 2021 financial statements.

“Auditors must respond appropriately when they encounter warning signs,” said PCAOB Chair Erica Y. Williams, "The PCAOB will not hesitate to take action when investors are put at risk.”

The PCAOB found that the firm and Gries failed to evaluate Tingo’s basis for accounting for a significant business combination as an acquisition, as opposed to a reverse acquisition, even though they saw public filings and emails from Tingo management that called the combination a “reverse acquisition” and “reverse merger.” The firm and Gries failed to appropriately respond to these and other red flags warning that Tingo erroneously accounted for the combination. Four months after the firm released its audit report, Tingo restated its 2021 financial statements to correct the error, resulting in removal of roughly $3.6 billion of goodwill from the company’s previously reported total assets of $6.5 billion, a 56% reduction in assets.

During the same audit, the firm and Gries also failed to resolve warning signs that Tingo had erroneously reported the entirety of the $220 million in stock compensation it had issued in 2021 as an expense in 2021, rather than amortizing the expense over the years in which the stock was scheduled to vest. Not only did the firm and Gries fail to obtain sufficient evidence that the stock actually had been issued, they also relied on management representations that the vesting period was only one year, while failing to resolve contradictory disclosures in Tingo’s Form 10-K that identified the vesting period as two years. Eight months after the firm released its original audit report, Tingo again restated its 2021 financials, which included the deferral of $66 million in stock compensation expense from 2021 to future years.

In addition, the firm failed to timely file Form APs, Auditor Reporting of Certain Audit Participants, due in 2022 for ten audit reports associated with eight issuer audit clients, one of which was Tingo.

“Today’s order should serve as a reminder that auditing in compliance with PCAOB standards requires auditors to approach the work with a questioning mind and a critical assessment of audit evidence,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations. “The PCAOB will hold auditors accountable for significant failures to act with due professional care and professional skepticism.”

The firm and Gries settled with the PCAOB, without admitting or denying the findings, and consented to a disciplinary order imposing the following sanctions:

• The firm’s PCAOB registration is revoked, and the firm may reapply for registration after one year;
• Gries is barred from associating with a registered public accounting firm, and he may petition for termination of the bar after one year;
• The firm and Gries are jointly and severally responsible for paying a civil money penalty in the amount of $65,000; and
• Gries must complete, prior to filing any petition to terminate his bar, 24 hours of continuing professional education and training.

PCAOB enforcement staff members Thomas McCann, Anthony Mealey, and K Lynn Dunston conducted the investigation. Kyra C. Armstrong and John Abell 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.

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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.

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