PCAOB Sanctions Audit Firm and Owner for Violating Quality Control Standards

The Public Company Accounting Oversight Board ("PCAOB") sanctioned an audit firm and its owner for multiple violations of PCAOB rules and standards related to inadequate audit evidence, failure in engagement quality reviews and non-compliance with reporting requirements and quality control standards.

According to the Order, the audit firm and its owner "failed to obtain sufficient appropriate audit evidence in [connection with] testing the valuation of an intangible asset." The PCAOB also found that the audit firm failed to make certain required communications to an audit committee, including as to accounting policies and practices, critical accounting estimates and the results of the audit firm’s evaluation of the quality of the issuer’s financial reporting. The PCAOB found that the audit firm and its owner failed to (i) obtain engagement quality reviews for any of the issuer audits, (ii) assemble a complete set of audit documentation for one audit, (iii) properly add late information to the work papers for two audits and (iv) file Form 2s and Form APs (some of which contained inaccurate information) by the applicable deadlines.

As a result, the PCAOB: (i) revoked the firm's registration, (ii) censured the owner; (iii) imposed a $200,000 civil money penalty and (iv) required certain remedial measures.