Securities Regulation Daily Wrap Up, PCAOB NEWS AND SPEECHES—PCAOB sanctions two firms, reinstates CPA, (Dec 27, 2017)
The PCAOB on December 19, 2017 issued an order instituting disciplinary proceedings against registered public accounting firm Edward Richardson, Jr., CPA and its owner of the same name in which it censured the firm and Richardson, revoked the firm’s registration, and barred Richardson from being an associated person of a registered public accounting firm. The Board found that the respondents violated its rules and standards in connection with seven broker-dealer audits during a period in which the SEC had initiated proceedings against them for similar violations. The respondents admitted to the facts, findings, and violations outlined in the order (Release No. 105-2017-053).
The firm repeatedly failed to comply with the engagement quality review standard in each audit and attestation engagement despite a pending SEC litigation against them for failures to obtain engagement quality reviews for other broker-dealer clients (Release No. 34-80918, June 14, 2017). The firm also failed to disclose reportable events on Form 3 as required.
According to the order, the SEC issued a cease-and-desist order against the respondents on June 14, 2017, and denied them the privilege of appearing or practicing before the Commission with the right to request reinstatement after seven years. The SEC also fined the respondents $35,000. They agreed to settle the SEC’s charges without admitting or denying the findings. While in litigation with the SEC, the firm again failed to obtain engagement quality reviews for seven audit and attestation engagements from April through May 2017, and improperly issued unqualified audit reports. The respondents did not report the SEC proceeding on Form 3 as required.
Stevenson & Company CPAs. In a separate order issued on the same date, the PCAOB censured Stevenson & Company CPAs, Raydell Stevenson, and Wesley Hufford for violations in connection with two issuer audits. The respondents were censured, the firm’s registration was revoked, and the two engagement partners were barred from associating with a registered public accounting firm. The firm was also ordered to pay $10,000 to settle the proceedings, which respondents did without admitting or denying the findings (Release No. 105-2017-049).
The Board found that respondents did not obtain sufficient audit evidence and failed to exercise due care and professional skepticism in connection with the two issuer audits. They also failed to comply with the standard on engagement quality reviews. Despite being aware of a significant engagement deficiency in each of their audits, the Board said that Stevenson and Hufford provided concurring approvals of issuance of the audit opinion. The firm may reapply for admission, and the engagement partners may petition the Board to associate with a public registered accounting firm, two years from the date of the order.
In a third order, the PCAOB granted Ted Madsen’s petition to associate with Madsen & Associates CPA’s, Inc. (Release No. 105-2017-048). Madsen had been barred from associating with a registered public accounting firm in 2015 for failing to comply with PCAOB rules and auditing standards in connection with the audit of the financial statements of two issuers. Madsen and his firm hired Hong Kong-based engagement team members who performed most of the audit work, which Madsen failed to properly supervise. He consented to the Board’s order without admitting or denying the findings.
The Board found that Madsen had met the PCAOB’s requirements and it terminated the bar subject to a number of undertakings over the next year. His work must be supervised by management of an unaffiliated firm for one year, except for work he does on behalf of Madsen & Associates, which will be supervised by David Madsen. All of his supervisors must be provided with a copy of the Board’s order granting Madsen’s petition to terminate the bar. Finally, Madsen must provide a certification to the PCAOB’s Division of Enforcement within 30 days of the one-year period identifying his compliance with the undertakings.
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