PCAOB Sanctions Two Firms and One Individual for Auditor Independence Violations

The Public Company Accounting Oversight Board today announced the settlement of disciplinary proceedings against Marcum LLP and Marcum Bernstein & Pinchuk LLP, as well as Alfonse Gregory Giugliano, CPA.  This is the first time the Board has: (1) sanctioned a registered public accounting firm for publicly advocating its audit clients as investment opportunities—a violation of auditor independence requirements; (2) sanctioned an annually inspected firm’s head of independence for substantially contributing to the firm’s independence violations; and (3) mandated the retention of an independent consultant.

The matters concern auditor independence violations over multiple years in connection with the firms’ annual Microcap Conference and China Conference, which were designed to bring together investors and companies looking for investment. In addition to violating independence requirements, both firms violated quality control standards by failing to appropriately design, implement, and monitor their independence policies and procedures. 

From 2012 through 2015, Marcum LLP and two senior partners made public statements advocating the investment potential of the companies presenting at its annual Microcap Conference, 62 of which were the firm’s issuer audit clients.  Similarly, in 2013 and 2014, Marcum Bernstein & Pinchuk LLP advocated the investment potential of the companies participating in its China Conference, seven of which were the firm’s issuer audit clients.  Giugliano is the senior partner who was responsible for Marcum LLP’s independence policies and procedures.  He approved Marcum LLP’s conference without performing any substantial independence analysis. 

In the settled orders, the PCAOB censures and imposes monetary penalties on each firm and Giugliano.  The civil money penalties imposed are $450,000 for Marcum LLP, $50,000 for Marcum Bernstein & Pinchuk LLP, and $25,000 for Alfonse Gregory Giugliano, CPA.  In addition, the PCAOB requires Marcum LLP to engage an independent consultant to review its policies, procedures, staffing, and training with respect to meeting and maintaining auditor independence, and also requires Marcum Bernstein & Pinchuk LLP to undertake a review of the same areas.

The PCAOB oversees auditors' compliance with applicable laws, rules, and standards.  For more information on our enforcement matters, please visit our website.  Our Tip & Referral Center is also available for firms or individuals to report suspected misconduct by auditors, or to self-report possible misconduct.