PCAOB Sanctions 7 Audit Firms and Individuals
For violations of the Engagement Quality Review standard and other requirements
|Tuesday, July 28, 2015|
By Michael Cohn, Editor-In-Chief, AccountingToday.Com
The Public Company Accounting Oversight Board has disciplined seven audit firms and seven auditors who worked at the firms for violations of the Engagement Quality Review standard and other requirements.
In five of the seven cases, the firms permitted their clients to use their audit reports without having an engagement quality reviewer provide a concurring approval of issuance of the report, according to the PCAOB. Two of the seven firms and two individuals associated with them violated the "cooling off" provision of Auditing Standard No. 7, which provides that the engagement quality reviewer cannot be an individual who served as the engagement partner on either of the two preceding audits for that issuer. In these two cases, the individual served as engagement quality reviewer immediately following an audit in which the individual had served as engagement partner.
In some cases, the auditors engaged in multiple violations of the engagement quality review standard, according to the PCAOB. Some of the auditors also violated other requirements. For example, in one case an individual served as lead partner on an audit for six consecutive years, in violation of independence requirements limiting such service to five consecutive years.
“PCAOB rules require engagement quality reviews, which serve as important safeguards against erroneous or insufficiently supported audit opinions,” said PCAOB Chairman James R. Doty in a statement. “Investors rightly expect the PCAOB to hold accountable auditors who fail to adhere to these requirements.”
The firms and individuals who consented to the PCAOB’s orders and the disciplinary actions for each included:
The settling firms and individuals neither admitted nor denied the findings. In determining appropriate sanctions in these cases, the PCAOB considered, among other factors, the settling firms’ and individuals’ willingness to resolve these matters early in the investigative process.
“Today’s settlements underscore the importance of performing engagement quality reviews in order to maintain audit quality," said PCAOB director of enforcement and investigations Claudius B. Modesti. "This requirement must be taken seriously by auditors."