The Public Company Accounting Oversight Board sanctioned CPA firm Michael Coglianese for quality review failures for 17 audit and attestation engagements.
One of the standards violated was AS 1220, Engagement Quality Review. The board found that the firm failed to employ a qualified individual as the engagement quality reviewer for these engagements.
PCAOB standards require that an engagement quality reviewer "must be a partner or another individual in an equivalent position." However, the firm assigned a senior manager to serve in this role on the 17 engagements. Further, an engagement quality reviewer needs to be able to conduct an objective evaluation of the engagement team's work. But at the time of the engagements, the senior manager reported to the person serving as the engagement partner of the 17 engagements, had his compensation set by the engagement partner, and had his performance evaluated by the engagement partner.
"Engagement quality reviews protect investors by providing an important safeguard against erroneous or insufficiently supported audit opinions. When firms bypass these safeguards — by assigning individuals who do not meet the qualifications of the standard — they jeopardize investor trust and the integrity of our capital markets," PCAOB chair Erica Williams said in a statement. "The PCAOB will hold auditors accountable when they violate our rules and standards in this area."
The PCAOB also found that the firm's system of quality control failed to provide reasonable assurance that engagement teams performed audit and attestations in accordance with standards and regulations.
"A statement in an audit report that the audit was performed in accordance with PCAOB standards is a representation to the investing public that should never be taken lightly, and serious consequences can follow when an auditor fails to meet that commitment," Robert Rice, director of the PCAOB's division of enforcement and investigations, said in a statement.
Without admitting or denying the findings, the firm consented to the PCAOB's order, which censures the firm, imposes a $50,000 civil money penalty and requires the firm to perform remedial undertakings to improve its system of quality control.
