PCAOB Sanctions Two Firms for Failing To Comply With PCAOB Reporting Requirements

The Public Company Accounting Oversight Board (PCAOB) today announced settled disciplinary orders sanctioning two audit firms, KKM CPA Associates PLLC (“KKM”) and BDO Chartered Accountants & Advisors (“BDO UAE”), for violating PCAOB rules and standards related to required reporting.

“When registered firms fail to comply with reporting requirements, it deprives investors of important information about those firms,” said PCAOB Chair Erica Y. Williams.

Pursuant to PCAOB Rule 2200, Annual Reports, firms registered with the PCAOB are required to file annual reports on Form 2 that disclose, among other things, each issuer for which a firm issued any audit reports during a reporting period. Despite having audited an issuer during the 2022 annual reporting period, KKM failed to list that engagement in its Form 2 for the applicable period and instead indicated that it had not audited any issuers.

PCAOB Rule 2203, Special Reports, requires registered firms to file a Form 3 disclosing certain reportable events listed in that form within 30 days of the occurrence of those events. Two such events are the initiation of various disciplinary proceedings involving a firm and its personnel, as well as the conclusion of such proceedings. BDO UAE and a former partner of the firm were respondents in a disciplinary proceeding brought by the Auditors Disciplinary Board of the United Arab Emirates Ministry of Economy. However, BDO UAE failed to report the initiation and conclusion of that proceeding until roughly nine months after it ended.

KKM’s violation was identified as part of a sweep, which the PCAOB routinely uses to collect information on potential violations from several firms at the same time. Similarly, BDO UAE’s violation was identified through regular monitoring the PCAOB conducts of registered firms’ compliance with the requirement to timely report the events listed in Form 3.

“We will continue to employ sweeps to identify violations of PCAOB reporting requirements and hold firms accountable for failing to properly disclose information that they are obliged to report,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations.

Without admitting or denying the findings, KKM and BDO UAE consented to their respective orders, which censure both firms, impose civil money penalties of $25,000 on KKM and $20,000 on BDO UAE, and require both firms to undertake remedial measures to improve their policies and procedures concerning compliance with PCAOB reporting.

PCAOB enforcement staff members Robyn Baggetta and Jarai Ings conducted the investigation into KKM, supervised by Melissa Handrigan and Kyra Armstrong. PCAOB enforcement staff member Brett Collings conducted the investigation into BDO UAE, supervised by C. 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 registered with the Securities and Exchange Commission, including compliance reports filed pursuant to federal securities laws.

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