Monday, December 26, 2011

PCAOB Settles Two Disciplinary Proceedings involving Audit Firms

An audit firm and engagement partner that failed to plan, perform or supervise the audit of a company’s financial statement in accordance with PCAOB auditing standards had its registration revoked for at least two years and the engagement partner was barred from the industry for at least two years. The audit firm and engagement partner settled the disciplinary proceeding without either admitting or denying the Board’s findings. In the Matter of Bentleys Brisbane Partnership, PCAOB Release No. 105-2011-007 (Dec. 20, 2011)

The PCAOB said that a network member firm that was not registered with the Board purportedly performed the audit and the audit firm performed a limited review of the work papers. Yet, the audit firm still expessed an unqualified opinion in its audit report on the company’s financial statements filed with the SEC.

The firm also violated PCAOB rules and quality control standards by failing to develop policies and procedures to provide it with reasonable assurance that the work performed by its engagement personnel met applicable PCAOB auditing standards and to provide reasonable assurance that the firm undertook only those engagements that the firm could reasonably expect to complete with professional competence. The PCAOB found that the engagement partner substantially contributed to those quality control violations.

Thus, the Board found that the audit firm neither performed the audit nor ensured that the audit by the network firm was performed in accordance with PCAOB standards. The firm performed no audit procedures, and collected no evidential matter. They never visited the company, nor did they perform any fieldwork in the audit; noted the Board, and they prepared no work papers relating to the audit. Their audit procedures were limited to the engagement partner’s review of work papers provided by the network firm.

PCAOB Censures Audit Firm for Failing to Timely File Annual Report and Pay Fee

In another proceeding, the PCAOB censured and imposed a fine on a public accounting firm that failed to timely file an annual report and timely pay an annual fee in both 2010 and 2011. Without either admitting or denying the Board’s findings, the firm settled the disciplinary proceeding. The PCAOB noted that Section 102(d) of the Sarbanes-Oxley Act and PCAOB Rule 2200 require that each registered public accounting firm must file with the Board an annual report on Form 2 by June 30 of each year. In addition, pursuant to Section 102(f) of the Act and PCAOB Rule 2202, each registered public accounting firm must pay an annual fee to the Board on or before July 31. On November 18, 2011, the audit firm filed its annual reports for 2010 and 2011, noted the Board, and on December 2, 2011, the audit firm paid its annual fees for 2010 and 2011. In the Matter of Reuben E. Price & CO., PCAOB Release No. 105-2011-008, December 20, 2011.

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