Auditor Lied About PCAOB Registration and Disregarded Auditing Standards
The SEC has commenced enforcement proceedings against an audit partner who falsely claimed his firm was registered with the PCAOB and failed to conduct audits in accordance with PCAOB standards.
According to the SEC, the respondent outright lied to his public company client about his PCAOB registration. In order to secure the engagement, the respondent misrepresented his experience with public companies and then attempted to register with the PCAOB. His application was ultimately rejected for failing to deliver requested information. The SEC also accuses the auditor of ignoring professional standards including audit planning, professional skepticism, and quality reviews. As a result, the public company was forced to file an 8-K to notify shareholders that they could not rely on the financial statements included on Forms 10-Q and 10-K. An SEC enforcement official commented, “As gatekeepers, auditors perform a critical role in maintaining investor confidence in issuers’ financial statements. Registration with the PCAOB and compliance with PCAOB auditing standards are essential to this gatekeeping function.”
Investment firms need to hire PCAOB-registered auditors for funds and surprise custody exams, a requirement that ensures a degree of integrity and competence. If the firm you are considering is not well-known and/or quotes an unusually low fee, don’t rely solely on their word that they are registered. If you are on the audit side, don’t assume you have the skills and knowledge to perform public company or fund work. Nobody wants their experts to “fake it until they make it.”
Click here to read full Order Instituting Proceedings.