The Public Company Accounting Oversight Board imposed sanctions on three audit firms, along with engagement partners at two of the firms, for violating independence requirements while auditing broker-dealer clients.
Two of the firms and two engagement partners admitted to the violations, a first for the PCAOB.
The three firms were Berkow, Schechter & Company LLP of Stamford, Conn., Roth & Company PC of Des Moines, Iowa, and Jackson, Howell & Associates, PLLC of Cordova, Tenn.
In the case of Berkow Schechter, the firm continued to prepare financial statements and accounting records for a broker-dealer auditing client despite PCAOB warnings. The firm will pay a $15,000 civil penalty and cannot accept new broker-dealer audit clients for one year. The firm’s founder, Neil H. Berkow, who served as engagement partner for the audits, has been censured by the PCAOB and will pay a $5,000 civil penalty. He has also been barred for one year from association with a PCAOB-registered public accounting firm.
Roth & Company maintained and prepared accounting records and financial statements for a broker-dealer audit client. The firm agreed to pay a $20,000 civil penalty and cannot accept new broker-dealer audit clients for one year. Jerome A. Carlson, a shareholder at the firm who was the engagement partner for the audit, has been censured by the PCAOB and will pay a $10,000 civil penalty. He has also been barred for one year from association with a PCAOB-registered public accounting firm.
Before the enforcement actions, both firms and their engagement partners had received PCAOB inspection findings alerting them that their conduct impaired their independence, but they nevertheless continued to prepare their clients' financial statements. Both firms and partners admitted to the facts, findings and violations in the PCAOB’s orders. The orders represent the first instances in which the PCAOB has obtained admissions from auditors who violated independence requirements in their audits of broker-dealers.
However, the third firm, Jackson, Howell & Associates, consented to the PCAOB order without admitting or denying the PCAOB's findings and will pay a $2,500 civil penalty. The firm was accused of maintaining and preparing accounting records and preparing financial statements for a broker-dealer audit client.
“It remains central to the mission of the PCAOB to promote high quality and fully independent audits of broker-dealers to protect investors,” said PCAOB director of enforcement and investigations Claudius B. Modesti in a statement. “These disciplinary orders reflect both the importance of maintaining auditor independence and the consequences to firms and individuals who fail to do so.”
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