Recently called out over its lack of enforcement activity, the Public Company Accounting Oversight Board imposed a set of sanctions on two firms and eight individuals.
Deloitte Korea and two of its associated persons and BDO Mexico and six of its associated persons were each penalized for altering audit documentation in anticipation of PCAOB inspections, as well as for related quality-control violations concerning integrity and audit documentation.
The enforcement is just the second the PCAOB issued a press release on since October 2018. Prior to the five orders voted on Oct. 31, however, the PCAOB had 22 total settled disciplinary orders.
In the matter of both Deloitte Korea and BDO Mexico, the PCAOB said it “recognized the firms’ extraordinary cooperation,” in imposing the sanctions, including the conducting of internal investigations and sharing of factual results of those internal investigations with Board staff.
Deloitte Korea also self-reported misconduct and undertook personnel- and policy-related remediation, the PCAOB said. As a result, the affiliate was fined $350,000—a number the PCAOB said would have been “significantly larger” without such cooperation.
“The integrity of the PCAOB inspections process is crucial to our ability to execute our statutory mandate,” said PCAOB Chairman William Duhnke in a release. “We will continue to hold firms and their associated persons accountable if we uncover an attempt to manipulate that process through altering documentation. These two matters also underscore the importance of the Board’s extraordinary cooperation policy, which allows us to more effectively and efficiently investigate misconduct.”
In the Deloitte Korea matter, two former partners of the firm—Seul Hyang Wee and Hyun Seung Lee—were sanctioned for their role in overseeing an engagement team that backdated work papers and altered hardcopy work papers after anticipating its largest issuer audit would be selected for PCAOB inspection in 2014. Both Wee and Lee were aware of engagement team efforts to alter hardcopy work papers but did not disclose that information to PCAOB inspections staff.
In the BDO Mexico matter, six partners of the firm—Ignacio García Pareras, Juan Martín Gudiño Casillas, Luis Raúl Michel Domínguez, Juan Francisco Olvera Díaz, Carlos Rivas Ramos, and Bernardo Soto Peñafiel—were sanctioned for participating in the improper alteration of audit documentation. The Board also found that four of those partners—Gudiño, Michel, Olvera, and Soto—provided misleading information to PCAOB inspectors during the Board’s 2017 inspection of the firm.
BDO Mexico was fined $500,000, and Gudiño, Michel, Olvera, and Soto were each barred from being an associated person of a registered public accounting firm. García and Rivas received suspensions.
A government watchdog group, the Project on Government Oversight (POGO), criticized the PCAOB in September as “doing a feeble job” protecting investors by using a light hand to discipline auditors. This year’s other enforcement, against Marcum and its former auditor independence leader over independence violations, was handed out in September.
The PCAOB has faced more criticism in Washington in recent weeks, with a pair of senators calling out its overseer, the Securities and Exchange Commission, as showing “questionable judgment and an alarming lack of transparency” regarding a whistleblower report alleging “a sense of fear” at the audit regulator around termination driven by retaliation.
Editor’s Note: Compliance Week reported that the PCAOB has announced only two enforcement actions since October 2018. However, there have been 27 settled cases in 2019 alone. The PCAOB said it only issues press releases on major cases.
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