The Public Company Accounting Oversight Board levied sanctions and penalties Tuesday against four auditing firms, including Baker Tilly US, Mazars USA, as well as an affiliate in India of Grant Thornton and an Australian firm, SW Audit.
The firms received the sanctions as part of an overall sweep that allows the PCAOB to collect information on potential violations from several firms at the same time.
Each firm hit with sanctions and penalties Tuesday failed to make certain required communications with audit committees, as required by AS 1301, Communications with Audit Committees, according to the PCAOB. The firms are the following:
Three of the firms also violated other PCAOB rules and standards:
Baker Tilly US, LLP failed to document pre-approval of statutory audit services, in violation of AS 1215, Audit Documentation.
Grant Thornton Bharat LLP failed to ensure that an issuer client’s audit committee received a copy of management’s representation letter, in violation of AS 1301 and AS 2805, Management Representations.
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, by failing to obtain audit committee pre-approval of tax compliance and other services and by engaging an issuer audit client pursuant to an indemnification agreement. SW Audit also violated PCAOB quality control standards in failing to maintain effective policies and procedures with respect to independence and audit documentation.
“Engaged and informed audit committees play a key role in promoting audit quality and protecting investors, and they must be kept informed in accordance with our standards” said PCAOB chair Erica Williams in a statement. “Sweeps are a valuable tool in our enforcement toolbox to ensure there are consequences for putting investors at risk.”
“This latest round of enforcement actions demonstrates the PCAOB’s continued commitment to holding firms accountable for failing to make required communications to issuer audit committees,” said Robert E. Rice, director of the PCAOB’s Division of Enforcement and Investigations, in a statement.
Accounting Today reached out to attorneys and media contacts for the firms. “Baker Tilly is committed to executing high-quality audits,” responded a Baker Tilly spokesperson in an email. “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 that these steps, along with the investments we continue to make in our audit processes, will further enhance our audit quality.”
The others did not immediately respond to requests for comment.
Without admitting or denying the findings, each firm consented to its own PCAOB order and civil money penalty. Each firm also consented to comply with revised policies and procedures concerning adherence to the PCAOB rules and standards related to these violations.
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