PCAOB Sanctions K.R. Margetson Ltd. and Keith R. Margetson for Violating PCAOB Audit and Quality Control Standards

The Public Company Accounting Oversight Board (PCAOB) today announced a settled disciplinary order sanctioning Canada-based K.R. Margetson Ltd. (the “firm”) and Keith R. Margetson (“Margetson”), the sole partner of the firm, for violations of various PCAOB rules and standards.

Specifically, the firm failed to improve its system of quality control despite being put on notice over the course of several PCAOB inspections of quality control deficiencies. The PCAOB found that the firm violated PCAOB quality control standards because its quality control policies and procedures failed to provide reasonable assurance that (1) the work performed by engagement personnel would meet applicable professional standards and regulatory requirements and (2) it would only undertake engagements that the firm could reasonably expect to complete with professional competence.

The firm’s quality control defects contributed to violations of audit standards by Margetson and his firm during the 2020 audit of Madison Technologies Inc., as they failed to perform adequate procedures and obtain sufficient audit evidence in determining the valuation of an acquired license agreement.

Margetson directly and substantially contributed to the firm’s quality control violations.

“Firms put investors at risk when they take on audits that they aren’t equipped to complete to the highest standards,” said PCAOB Chair Erica Y. Williams. “The PCAOB will aggressively enforce its quality control and audit standards to ensure that investors are protected.”

Without admitting or denying the findings, Margetson and the firm settled with the PCAOB and consented to a disciplinary order. The order censures Margetson and his firm, imposes a $30,000 civil money penalty, revokes the firm’s registration, with the option to reapply after one year from the date of the order, and requires the firm to undertake certain remedial measures to improve its system of quality control before applying for re-registration. The order also bars Margetson from being an associated person of a registered public accounting firm, with the option to file for Board consent to associate after one year, and limits Margetson’s activities for one year following the termination of his bar.

“This order demonstrates the need for registered firms not only to maintain robust and effective quality control policies and procedures, but also to implement meaningful corrective action to improve their systems of quality control when informed by PCAOB inspectors of deficiencies,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations. “In this case, the violations of the firm and its partner resulted from their failures to make those necessary improvements.”

PCAOB enforcement staff members Benjamin Reed, Jerry Folk, and Sam McCoubrey conducted the investigation, supervised by Ian Anderson.

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, including compliance reports filed pursuant to federal securities laws.

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