PCAOB Sanctions K G Somani & Co. LLP for Audit Violations
In a recent development, the Public Company Accounting Oversight Board (PCAOB) has announced a settled disciplinary order against India-based K G Somani & Co. LLP (KGS) and its engagement partner Anuj Somani. The sanctions stem from violations of various PCAOB rules and standards during a 2020 issuer audit. The disciplinary action underscores the PCAOB's commitment to upholding audit quality and protecting investor interests.
The PCAOB's findings point to specific violations committed by Anuj Somani during the 2020 issuer audit. Somani failed to carry out essential audit procedures before the release of KGS's audit report. Additionally, he inadequately documented the audit work and neglected to properly supervise the engagement team. These shortcomings not only put investors at risk but also undermine the integrity of the audit process.
KGS, the India-based firm conducting the issuer audit, was also found to be in violation of PCAOB quality control standards. The firm lacked policies and procedures related to performing audits under PCAOB standards or effectively monitoring its quality control system. Such deficiencies undermine the foundation of audit quality and accountability.
PCAOB Chair Erica Y. Williams emphasized the importance of auditors adhering to stringent standards to safeguard investor confidence. "When auditors fall short in performance, documentation, supervision, and quality control, they are putting investors at risk, and the PCAOB will take action," stated Williams.
KGS and Anuj Somani have settled with the PCAOB without admitting or denying the findings. The disciplinary order censures both entities and outlines several measures for remediation and accountability. KGS is required to enlist an independent consultant to assess and propose improvements to its quality control policies and procedures. Anuj Somani is facing suspension from associating with a registered public accounting firm for one year, followed by activity restrictions for an additional year after the suspension's conclusion. The order also imposes civil money penalties of $125,000 on KGS and $50,000 on Anuj Somani.
Robert E. Rice, Director of the PCAOB's Division of Enforcement and Investigations, stressed the obligation of registered firms and their associated individuals to uphold audit and quality control standards, regardless of their geographical location. "In this case, not only did the firm's quality control system fall short, the resulting audit failures by the firm and its engagement partner spanned the performance, documentation, and supervision of the firm's audit work," noted Rice.
The disciplinary action was the result of an investigation conducted by PCAOB enforcement staff members Samuel C. McCoubrey, Tony Chen, Brett Collings, and Johnathon Dobbs. C. Ian Anderson and Raymond J. Hamm supervised the matter.
The PCAOB plays a critical role in ensuring auditors' compliance with auditing and professional standards, protecting the integrity of financial reporting and upholding investor trust. Further information about the PCAOB Division of Enforcement and Investigations can be accessed on the official PCAOB website.