The Public Company Accounting Oversight Board sanctioned three auditors from a Florida accounting firm, Liggett & Webb, for violations involving audit evidence, professional skepticism and other matters, imposing a total of $130,000 in fines.
The sanctions involved two former partners with the firm, Jessica Etania and Arpita Joshi, along with engagement quality reviewer Robert Garick. The PCAOB found they each violated PCAOB rules and standards while serving as either engagement partner or engagement quality reviewer on Liggett & Webb's audits of the 2019 and 2020 financial statements of Innovative Food Holdings, Inc. or Liggett & Webb's audits of the 2019 and 2020 financial statements of Luvu Brands, Inc.
In 2020, Liggett & Webb's New York office merged with Melzer & Associates CPAs to form Liggett Melzer & Joshi CPAs, where Joshi is still listed as a partner on the website. Attorneys for Joshi and Garick declined to comment on the case, as did partner Jim Liggett. An attorney for Etania did not immediately respond to a request for comment, nor did Joshi.
The PCAOB said Etania and Joshi, the engagement partners on the Innovative Food audits, failed to obtain sufficient appropriate audit evidence to support the issuance of Liggett & Webb's Innovative Food opinions and failed to evaluate whether Innovative Food's revenue was properly valued and presented fairly in Innovative Food's financial statements.
Etania, who was the engagement partner on the Luvu audits, failed to evaluate whether Luvu's revenue was presented fairly in Luvu's financial statements, according to the PCAOB's order.
Joshi and Garick, while serving as engagement quality reviewers on the 2020 Luvu audit and 2020 Innovative Food audit, respectively, failed to exercise due professional care and professional skepticism, and therefore lacked an appropriate basis to provide their concurring approvals of issuance of Liggett & Webb's audit reports, according to the PCAOB.
"Obtaining sufficient audit evidence and exercising due professional care and professional skepticism are fundamental to auditing," said PCAOB Chair Erica Williams in a statement Tuesday. "The PCAOB will take action to ensure there are consequences for putting investors at risk."
Without admitting or denying the findings, the auditors consented to the PCAOB's orders imposing $55,000 and $45,000 in civil penalties on Etania and Joshi, respectively. The PCAOB also barred Etania and Joshi from being associated persons of a registered public accounting firm with a right to petition the PCAOB for consent to associate with a registered firm after two years; and imposing on Garick a $30,000 civil penalty and a one-year practice limitation.
"This case highlights our division's commitment to pursue cases that hold auditors accountable for failing to conduct compliant audits, particularly when the failures involve multiple audits," Robert E. Rice, director of the PCAOB's Division of Enforcement and Investigations, said in a statement.
