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Who watches the watchmen? In the world of auditing, it’s the Public Company Accounting Oversight Board (PCAOB), and it’s been on a tear lately, announcing sanctions against 13 different firms between July 28 and August 8.
Enforcement actions have been trending upward since Erica Williams was appointed chair of the PCAOB in November 2021, bringing a message of renewed attention to misbehavior. The 47 enforcement actions brought by the PCAOB in 2022 noticeably exceed the average of 38 per year between 2017 and 2019. According to a February Cornerstone Research report, the PCAOB “increased its enforcement activity sharply in 2022, disclosing the most enforcement actions in five years, and handing down the highest monetary penalties since its establishment in 2002.”
Eight of the enforcement actions come from two separate sweeps by the PCAOB. “The PCAOB has been employing sweeps as part of its overall effort to strengthen enforcement,” the organization said in a July 28 release, explaining that a sweep “enables the PCAOB to collect information on potential violations from a number of firms at the same time.”
Three of the sanctioned firms are listed as Top 100 firms in Accounting Today: Blue & Co., which was fined $75,000 and censured for violations including allowing an auditor to serve in a role with a client for longer than the allowed five years; BPM, which was censured and fined $50,000 for failing to obtain audit committee preapproval to handle a client’s tax matters; and Plante Moran, which was censured and fined $40,000 for violations including providing tax return preparation services to two employees of a client company, without getting permission from the client’s audit committee to do so.
The largest fine of the 13 totaled $175,000, for KG Somani & Co. and one of its partners, Anuj Somani. He received a one-year suspension from associating with a registered public accounting firm, and will be allowed to perform limited activities the year after that; the firm was also censured.
The PCAOB said Somani didn’t actually complete all the necessary work before issuing an audit opinion in 2020, and instead “continued to perform audit procedures, ultimately creating dozens of work papers after the audit opinion had been issued and included in a Form 10-K.”
Another six-figure fine, for $150,000, went to RAM Associates & Co. LLC and its owner, for a laundry list of violations in 2018 and 2019. RAM also lost its registration, and the firm’s owner and managing partner, Parameswara K. Ramachandran, is barred from associating with a registered public accounting firm; both can apply for reinstatement after two years. Among the violations were failures to obtain sufficient evidence for a valuation, assemble appropriate audit documentation, or communicate fully with a client’s audit committee.