Accounting firm Citrin Cooperman was fined $200,000 by the Public Company Accounting Oversight Board for failing to meet PCAOB standards during its 2016 and 2017 year-end audits at an unnamed broker-dealer.
The PCAOB’s sanctions, announced Wednesday, included penalties totaling $55,000 assessed against three of the firm’s partners involved in the audit engagement. Joseph Puglisi, engagement partner on both audits, agreed to pay $25,000 and was suspended one year from associating with a registered public accounting firm, while engagement quality reviewers Mark Schniebolk and John Cavallone were each fined $15,000, censured, and prohibited from acting as quality reviewers for one year.
Citrin Cooperman was censured and further ordered to undertake and certify improvements to its system of quality control. Puglisi, Schniebolk, and Cavallone will each also be required to complete 20 hours of professional education or training regarding the audits and examinations of broker-dealers.
Citrin Cooperman and the three partners neither admitted nor denied the PCAOB’s findings.
The details: The New York-based broker-dealer that Citrin Cooperman audited is registered with the Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA). It provides order management and clearing services to institutions and professional traders, the PCAOB stated in its order.
During audits at the broker-dealer for the fiscal years ended 2016 and 2017, Puglisi failed to sufficiently evaluate whether the unnamed firm was maintaining effective internal controls over compliance with the SEC’s Customer Protection Rule and whether it complied with the rule’s reserve requirements, according to the PCAOB. The rule requires broker-dealers to safeguard both the cash and securities of their customers; the unnamed firm had assets of $232 million in 2016 and $196 million in 2017, the PCAOB noted.
Specific failures by Puglisi alleged by the PCAOB included not identifying controls for compliance were operating effectively, not testing the information technology controls of the broker dealer’s internal system for determining reserves, and misevaluating red flags raised by FINRA examinations the firm had not maintained adequate documentation for customer accounts.
These alleged failures violated PCAOB standards regarding obtaining sufficient appropriate audit evidence to support an opinion.
Schniebolk and Cavallone also violated PCAOB standards by failing to perform their engagement quality reviews with due professional care when they did not appropriately evaluate the conclusions reached by Puglisi, according to the regulator. Citrin Cooperman was faulted for failing to provide Puglisi with sufficient support and resources and ensuring his work met applicable professional standards and regulatory requirements.
“Citrin Cooperman remains committed to adherence with professional standards and has agreed to undertake an assessment of its system of quality control related to the firm’s audits and examinations of broker-dealers and enhance its policies accordingly,” the firm said through a spokeswoman. “Citrin Cooperman appreciates the work of the PCAOB and is pleased to have resolved this matter.”