Washington (May 12, 2004) -- The Public Company Accounting Oversight Board, which must give its okay to accounting firms that want to audit public companies, has issued its first rejection.

In its nine-page notice, the PCAOB said it disapproved the application of Scottsdale, Ariz.-based James C. Marshall PC because the firm failed to respond "adequately and appropriately to identified deficiencies in its audit work."

According to the PCAOB notice, in 2001, Marshall, which was then a member of the SEC Practice Section of the American Institute of CPAs, received its second adverse peer review. The firm later agreed to, among other things, have a concurring reviewer perform pre-issuance and post-issuance reviews of all of its SEC engagements. However, the PCAOB said the firm issued seven audit reports between 2002 and 2003 without having reviews performed by a concurring reviewer in accordance with its agreement with the AICPA. The AICPA later expelled Marshall from membership and his appeal of the decision was denied.

"Marshall has demonstrated an unwillingness or inability to comply with reasonable requirements, imposed by a professional body responsible for reviewing Marshall’s audit work, to take corrective steps concerning deficiencies in Marshall’s audit work," the board said. In addition, the PCAOB said the firm violated a board rule by failing to disclose in its registration application information the disciplinary proceedings instituted against it by the AICPA.

"Marshall has demonstrated a lack of candor with the board and a failure to give sufficient attention or care to fundamental requirements of the board’s rules," the notice said.

As of May 10, the PCAOB had approved the registration applications of 840 accounting firms, with another 176 applications pending.

-- WebCPA staff

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