PCAOB fines Baker Tilly $500K over QC violations

The Public Company Accounting Oversight Board levied a $500,000 fine on Baker Tilly US LLP for violating its rules and quality control standards. 

In a settled disciplinary order, the PCAOB said that in 2018 and 2019, its inspectors found significant engagement deficiencies that raised concerns about Baker Tilly’s engagement performance in certain issuer audits. Specific deficiencies were found in the Chicago-based Top 10 Firm’s testing of internal controls and accounting estimates and its execution of engagement quality reviews.

Even though the firm was made aware of these deficiencies and concerns, it failed to make effective changes to its engagement performance and monitoring policies and procedures to provide reasonable assurance that its personnel would comply with PCAOB standards in these areas in future audits. The PCAOB saw similar audit deficiencies in those same areas during its 2021 and 2022 inspections.

The PCAOB found that from 2021 to 2022, Baker Tilly’s system of quality control failed to provide reasonable assurance that the work performed by its engagement personnel met applicable professional standards and regulatory requirements.

“Deficient quality control systems put investors at risk,” said PCAOB chair Erica Williams in a statement Tuesday. “The PCAOB will hold firms accountable for failures to maintain appropriate quality control systems and protect investors.”

Without admitting or denying the findings, Baker Tilly settled with the PCAOB and consented to a disciplinary order censuring the firm; imposing a $500,000 civil penalty; requiring Baker Tilly to engage an independent consultant who will review and make recommendations concerning the firm’s quality control policies and procedures; and requiring the firm to do training for all of its issuer audit staff.

“Baker Tilly is committed to executing high-quality audits,” the firm said in a statement emailed to Accounting Today. “We entered into an agreement with the PCAOB to resolve these matters and are working with our clients and engagement teams to avoid potential issues in the future. We are confident these steps, along with the investments we continue to make in our audit processes, will further enhance our audit quality.” 

The PCAOB has been cracking down on auditing firms and adopting tougher new standards that are meeting resistance among some of the largest firms. 

“Today’s order should remind firms that an effective system of quality control is essential to the performance of quality audits,” said Robert E. Rice, director of the PCAOB’s Division of Enforcement and Investigations, in a statement. “If firms fail to maintain effective systems of quality control, we will hold them accountable.”