PCAOB Sanctions Three Auditors for Failures Relating to Audit Evidence, Skepticism, and Other Violations

The Public Company Accounting Oversight Board (PCAOB) today announced three settled disciplinary orders sanctioning two former Liggett & Webb, P.A. (“Liggett & Webb”) partners, Jessica Etania, CPA and Arpita Joshi, CPA, and engagement quality reviewer Robert Garick, CPA (collectively, “Respondents”). The PCAOB found that the Respondents each violated PCAOB rules and standards while serving as either engagement partner or engagement quality reviewer on Liggett & Webb’s audits of the 2019 and 2020 financial statements of Innovative Food Holdings, Inc. (“Innovative Food”) or Liggett & Webb’s audits of the 2019 and 2020 financial statements of Luvu Brands, Inc. (“Luvu”).

“Obtaining sufficient audit evidence and exercising due professional care and professional skepticism are fundamental to auditing. The PCAOB will take action to ensure there are consequences for putting investors at risk,” said PCAOB Chair Erica Y. Williams.

Among other violations, the PCAOB found the following:

• Etania and Joshi, the engagement partners on the Innovative Food audits, (1) failed to obtain sufficient appropriate audit evidence to support the issuance of Liggett & Webb’s Innovative Food opinions and (2) failed to evaluate whether Innovative Food’s revenue was properly valued and presented fairly in Innovative Food’s financial statements.
• Etania, the engagement partner on the Luvu audits, failed to evaluate whether Luvu’s revenue was presented fairly in Luvu’s financial statements.
• Joshi and Garick – while serving as engagement quality reviewers on the 2020 Luvu audit and 2020 Innovative Food audit, respectively – failed to exercise due professional care and professional skepticism, and therefore lacked an appropriate basis to provide their concurring approvals of issuance of Liggett & Webb’s audit reports.

“This case highlights our division’s commitment to pursue cases that hold auditors accountable for failing to conduct compliant audits, particularly when the failures involve multiple audits,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations.

Without admitting or denying the findings, the Respondents consented to the PCAOB’s orders, which:

• Censure the Respondents;
• Impose $55,000 and $45,000 civil money penalties on Etania and Joshi, respectively;
• Bar Etania and Joshi from being associated persons of a registered public accounting firm with a right to petition the Board for consent to associate with a registered firm after two years; and
• Impose on Garick a $30,000 civil money penalty and a one-year practice limitation.

PCAOB enforcement staff members David Florenzo, Robyn Baggetta, Laura Voisin, and Thomas Barry conducted the investigation, supervised by Kyra Armstrong and John Abell.

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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