SEC Charges Former National Office Partner at Marcum for Quality Control Failures
The Securities and Exchange Commission (SEC) has taken action against Alfonse Gregory Giugliano, CPA, the former National Assurance Services Leader at Marcum LLP, a prominent public accounting firm. Giugliano has been charged with failing to adequately address and rectify a multitude of deficiencies in Marcum's quality control system, a role critical to maintaining the integrity of the audit process.
This action follows the SEC's previous charges against Marcum LLP, which included allegations related to quality control deficiencies, particularly in connection with the firm's audit work for numerous special purpose acquisition companies (SPACs).
According to the SEC's order, Giugliano was responsible for overseeing quality control within Marcum's public company practice, encompassing the development and enforcement of quality control policies, procedures, and monitoring mechanisms. He also had direct or indirect supervision over all personnel involved in quality control functions.
The order highlights that Marcum's rapid expansion in its public company practice exposed significant shortcomings within its quality control processes. Despite being aware of deficiencies identified during inspections conducted by the Public Company Accounting Oversight Board (PCAOB) and Marcum's internal assessments, Giugliano allegedly failed to adequately address and rectify these issues. Consequently, these quality control failures led to violations of audit standards and quality control practices across Marcum's audit work. Key areas affected included client acceptance, engagement partner supervision and review, audit documentation, and technical consultations.
Under Giugliano's leadership, Marcum also fell short in monitoring the effectiveness of many policies and procedures. Additionally, there were shortcomings in effectively communicating these policies and procedures to the relevant personnel, exacerbating the quality control deficiencies.
The SEC's order underscores the critical importance of adhering to PCAOB audit and quality control standards, which serve as the bedrock of the auditor's gatekeeping function. Carolyn Welshhans, Associate Director of the Division of Enforcement at the SEC, emphasized that individuals responsible for overseeing audit firms' quality control systems, including national partners, must fulfill these crucial obligations.
As part of the settlement, Giugliano neither admits nor denies the SEC's findings but consents to cease and desist from any violations or future violations of Rule 2-02(b) of Regulation S-X. He has also agreed to pay a civil penalty of $75,000, along with accepting censure and committing to specific undertakings over a three-year period. These undertakings include refraining from holding leadership, management, oversight, or supervisory positions at any registered public accounting firm.
The SEC's actions in this case reaffirm the significance of maintaining robust quality control measures within accounting firms to ensure the accuracy and reliability of financial reporting and auditing processes.