Accounting Firm Settles SEC Charges for SPAC Audit Failures

A public accounting firm settled SEC charges for systemic quality control failures and professional standards violations for audit work performed on special purpose acquisition companies ("SPACs").

In a consent Order, the SEC found that that the accounting firm failed to conduct certain audits in accordance with Public Company Accounting Oversight Board ("PCAOB") professional standards and that the "nature of these professional standard violations—including their volume and range—reflects deficiencies relevant to and impacting [the firm's] entire public company audit practice." The SEC stated that the firm's "quality control and audit standard failures permeated most stages of engagement work—from client acceptance to risk assessments, audit committee communications, audit documentation, assembly and retention of audit documentation, engagement quality reviews, technical consultations, due professional care, and engagement partner supervision and review."

The SEC found that the accounting firm had (i) insufficient policies and procedures, (ii) failed to monitor the effectiveness of its policies and (iii) failed to communicate the policies to engagement teams and violated Regulation S-X Rule 2-02(b)(1) ("Accountants' reports and attestation reports").

To settle the charges, the accounting firm agreed to (i) cease and desist from further regulatory violations, (ii) a censure, (iii) comply with the undertakings set forth in the Administrative Proceeding and (iv) pay a civil money penalty of $10 million.

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