PCAOB Sanctions Four Audit Firms for Violating Audit Committee Communication Standards

PCAOB Sanctions Four Audit Firms for Violating Audit Committee Communication Standards

The Public Company Accounting Oversight Board (PCAOB) has issued settled disciplinary orders, imposing sanctions on four audit firms for breaching PCAOB rules and standards related to communications with audit committees. The disciplinary actions are part of an ongoing sweep by the PCAOB, allowing it to address potential violations across multiple firms simultaneously.

The PCAOB initiated the sweep as part of its strategic enforcement efforts aimed at strengthening regulatory oversight. The current sanctions follow previous actions in July 2023 against five firms and in November 2023 against three firms, signaling the PCAOB's unwavering commitment to upholding audit quality and protecting investors.

PCAOB Chair Erica Y. Williams emphasized the crucial role of informed and engaged audit committees in safeguarding investor interests. "Sweeps are a valuable tool in our enforcement toolbox to ensure there are consequences for putting investors at risk," she stated.

The four audit firms facing sanctions and their respective penalties are as follows:

  1. Baker Tilly US, LLP: A civil money penalty of $80,000 and censure.
  2. Grant Thornton Bharat LLP (India): A civil money penalty of $40,000 and censure.
  3. Mazars USA LLP: A civil money penalty of $60,000 and censure.
  4. SW Audit (Australia): A civil money penalty of $60,000 and censure.

Each firm was found to have failed in making required communications with audit committees, a violation of AS 1301, Communications with Audit Committees.

Additionally, three of the firms were found to have violated other PCAOB rules and standards:

  1. Baker Tilly US, LLP: Failed to document pre-approval of statutory audit services, violating AS 1215, Audit Documentation.
  2. Grant Thornton Bharat LLP: Failed to ensure an issuer client’s audit committee received a copy of management’s representation letter, violating AS 1301 and AS 2805, Management Representations.
  3. SW Audit: Failed to satisfy independence requirements in violation of PCAOB Rule 3520, Auditor Independence, and PCAOB Rule 3524, Audit Committee Pre-Approval of Certain Tax Services. SW Audit also breached PCAOB quality control standards concerning independence and audit documentation.

Without admitting or denying the findings, each firm consented to its respective PCAOB order and civil money penalty. Additionally, they agreed to comply with revised policies and procedures to ensure adherence to PCAOB rules and standards related to the identified violations.

Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations, commented on the enforcement actions, emphasizing the PCAOB's commitment to holding firms accountable for lapses in required communications with issuer audit committees.

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