Marcum sanctioned by PCAOB for promoting audit clients as investment opportunities

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The Public Company Accounting Oversight Board imposed a total of $525,000 in sanctions against Marcum LLP and its affiliated firm, Marcum Bernstein & Pinchuk LLP, along with one of its partners, for publicly advocating some of their audit clients as investment opportunities at investor conferences in violation of auditor independence requirements.

The auditor independence violations occurred from 2012 through 2015 in connection with the firms’ annual Microcap Conference and their China Conference, which aimed to bring together investors and companies looking for investment. At the conferences, Marcum LLP and two of its senior partners made public statements advocating the investment potential of the companies presenting at the annual Microcap Conference, 62 of which were audit clients of Marcum. In 2013 and 2014, Marcum Bernstein & Pinchuk advocated the investment potential of the companies participating in the firm’s China Conference, seven of which were audit clients.

Marcum Bernstein & Pinchuk specializes in providing audit, accounting and consulting services to Chinese companies listed on the U.S. capital markets. Marcum merged with Bernstein & Pinchuk in late 2010.

In addition to violating independence requirements, the PCAOB said Tuesday that both firms violated quality control standards by failing to appropriately design, implement and monitor their independence policies and procedures. Alfonse Gregory Giugliano, the senior partner who was responsible for Marcum’s independence policies and procedures, approved the firm’s conference without performing any substantial independence analysis, according to the PCAOB. He was sanctioned by the board and ordered to pay a $25,000 civil penalty, while Marcum paid a $450,000 penalty and Marcum Bernstein & Pinchuk a $50,000 penalty.

“Marcum consented to the order without admitting or denying the order’s findings,” the firm said in a statement. “The order emphasizes the PCAOB’s focus on preserving the independence of public accounting firms. Marcum recognizes the importance of auditor independence and the role the PCAOB plays in regulating the accounting profession and is committed to providing services to its clients at the highest levels of integrity, consistent with all applicable laws, regulations and professional standards, including auditor independence. Marcum agreed to voluntarily settle with the PCAOB rather than engage in protracted litigation with one of its primary regulators. Independence and audit quality remain our top priority. As we look forward, we will continue to challenge ourselves to drive continuous improvements in our audit quality, built on a foundation of independence.”

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