PCAOB Sanctions K G Somani & Co. LLP and Engagement Partner for Violations of Audit and Quality Control Standards
PCAOB imposes $175,000 in total fines, requires firm to engage an independent consultant, and suspends engagement partner
The Public Company Accounting Oversight Board (PCAOB) today announced a settled disciplinary order sanctioning India-based K G Somani & Co. LLP (“KGS”) and its engagement partner Anuj Somani (“Somani”) for violations of various PCAOB rules and standards.
Specifically, the PCAOB found the following:
- Somani violated PCAOB audit standards during a 2020 issuer audit because he failed to perform all necessary audit procedures prior to the release of KGS’s audit report, failed to adequately document the audit work, and failed to properly supervise the engagement team.
- KGS violated PCAOB quality control standards because, during the time it was conducting the 2020 issuer audit, the firm failed to have policies and procedures relating to performing audits under PCAOB standards or monitoring of its quality control system.
“When auditors fall short in performance, documentation, supervision, and quality control, they are putting investors at risk, and the PCAOB will take action,” said PCAOB Chair Erica Y. Williams.
Without admitting or denying the findings, KGS and Somani settled with the PCAOB and consented to a disciplinary order. The order censures KGS and Somani and requires KGS to engage an independent consultant to review and make recommendations for the improvement of KGS’s quality control policies and procedures. It also suspends Somani from associating with a registered public accounting firm for one year and restricts his activities for an additional year following the end of his suspension. Finally, the order imposes a $125,000 civil money penalty on KGS and a $50,000 civil money penalty on Somani.
“Registered firms and their associated persons, wherever located, must comply with the PCAOB’s audit and quality control standards to protect investors,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations. “In this case, not only did the firm’s quality control system fall short, the resulting audit failures by the firm and its engagement partner spanned the performance, documentation, and supervision of the firm’s audit work.”
PCAOB enforcement staff members Samuel C. McCoubrey, Tony Chen, Brett Collings, and Johnathon Dobbs conducted the investigation. C. Ian Anderson and Raymond J. 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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