On July 28, the Public Company Accounting Oversight Board announced settled disciplinary orders sanctioning five audit firms for violating the Board’s rules related to communications with audit committees. Three of the firms failed to obtain audit committee pre-approval in connection with providing audit or non-audit services to public company audit clients, in violation of the PCAOB’s auditor independence rule. These firms, the sanctions to which they consented, and the nature of the violations are:
BPM LLP – $50,000 civil money penalty and censure. The PCAOB’s order alleges that BPM failed to obtain pre-approval from the audit committee to provide tax compliance services to an audit client.
Plante & Moran, PLLC – $40,000 civil money penalty and censure. The PCAOB’s order alleges that Plante & Moran failed to obtain pre-approval from the audit committee of one audit client to provide services in connection with the filing of comfort letters related to SEC registration statements. The order also alleges that Plante & Moran failed to obtain pre-approval from the audit committee of another audit client to provide tax return preparation services for two employees of the audit client.
The other two firms failed to make and/or to document required audit committee communications, including communications concerning other accounting firms, in addition to the principal auditor, that were participating in the audit. (SEC Chief Accountant Munter recently emphasized the importance of audit committee oversight of the participation of other firms. See SEC Chief Accountant Discusses Audit Committee Oversight of Other Auditors, April 2023 Update.) These firms, the sanctions to which they consented, and the nature of the violations are:
Mancera, S.C. – $40,000 civil money penalty and censure. The PCAOB’s order alleges that Mancera failed to inform an audit committee of the name, location, and planned responsibilities of nine other firms that would be participating in the audit.
MSPC, Certified Public Accountants and Advisors, A Professional Corporation – $30,000 civil money penalty and censure. The PCAOB’s order alleges that MSPC failed to communicate significant risks the firm had identified associated with revenue recognition and override of controls. The firm is also alleged to have failed to document in the work papers communications to the audit committee regarding the participation in the audit of another firm.
The press release announcing these cases includes this statement from PCAOB Chair Erica Williams:
“Audit Committees play a critical role in helping protect investors, and the PCAOB will hold firms accountable for their part in making sure audit committees are appropriately informed. * * * Firms must be vigilant in preserving their independence, and part of that means making sure that services performed for issuer audit clients are pre-approved by their audit committees. At the same time, required disclosures are critical to ensure audit committees have the information they need to effectively oversee the auditor’s work.”