After doing a quick Google search, it looks like the PCAOB hasn’t punished a public accounting firm for failures in its audits of brokers and dealers since 2016. But top 25 firm Citrin Cooperman broke that drought yesterday after being fined $200,000 by a disappointed PCAOB for violating standards related to broker-dealer audits. And three Citrin Cooperman partners were fined a total of $55,000 for their roles in the firm’s subpar auditing.
Here’s what the PCAOB had to say on Wednesday:
The Public Company Accounting Oversight Board (PCAOB) today announced that it has sanctioned Citrin Cooperman & Company, LLP (“Citrin Cooperman”) and three of its partners (Joseph Puglisi, Mark Schniebolk, and John Cavallone) for violations of PCAOB rules and standards in connection with the December 31, 2016 and December 31, 2017 audits and examinations of a broker-dealer that holds customer assets.
The PCAOB found that Citrin’s engagement and quality review partners failed to adhere to PCAOB standards over multiple years. The PCAOB found that Puglisi, as engagement partner on both the 2016 and 2017 engagements, failed to sufficiently evaluate whether the broker-dealer (1) maintained effective internal controls over compliance with the Securities and Exchange Commission’s Customer Protection Rule and (2) complied with the reserve requirements of the Customer Protection Rule.
The Board also found that Puglisi failed to perform sufficient audit procedures to test the related supplemental information accompanying the broker-dealer’s financial statements. The Board determined that Schniebolk and Cavallone, as the 2016 and 2017 engagement quality reviewers, respectively, failed to appropriately evaluate the conclusions reached by Puglisi and the engagement team and to perform their reviews with due professional care.
The PCAOB also sanctioned Citrin Cooperman for failing to establish and implement appropriate quality control policies and procedures to provide it with reasonable assurance that work performed by its engagement personnel would comply with PCAOB standards and regulatory requirements. The Board further found that Citrin Cooperman did not take the necessary steps, after learning of deficiencies identified through the Board’s inspection of the firm’s 2016 audit and examination of the broker-dealer, to ensure that work was assigned to personnel having the degree of technical training and proficiency required in the circumstances.
“Firms must take into consideration the results of the Board’s inspection process and ensure that their systems of quality control prevent deficiencies from reoccurring,” said PCAOB Chair Erica Y. Williams.
As a result, Citrin Cooperman was censured, fined $200,000, and was ordered to undertake and certify improvements to its system of quality control. Puglisi was fined $25,000, suspended for one year from being an associated person of a registered public accounting firm, followed by a one-year limitation from serving as an engagement partner or engagement quality reviewer on a similar engagement. Schniebolk and Cavallone each received a censure, a one-year limitation from serving as an engagement quality reviewer, and a $15,000 fine. The PCAOB also ordered Puglisi, Schniebolk, and Cavallone to complete an additional 20 hours of continuing professional education related to the audits and examinations of broker-dealers under PCAOB standards.