Yo dawg, I heard you like fines.
The diligent paper-pushers at the PCAOB (the “P” stands for both paper and pushing) have sanctioned CohnReznick for failing to report key information on PCAOB Form 3 within the required timeframe. PCAOB Rule 2203, Special Reports requires any registered public accounting firm to file a special report on Form 3 to report information to the Board no later than thirty days after the occurrence of the event. In this case, the event was actually four reportable events regarding two disciplinary proceedings brought by the SEC against the firm and partners Stephen M. Wyss (engagement partner), Stephen H. Jackson (engagement quality review partner), and Robert G. Hilbert (Managing Partner of Assurance and National Director of Accounting). You can read about that here.
TL;DR the firm was sanctioned for deficiencies in its system of quality controls that led to audit failures in connection with a quarterly review and year-end audit of one client and a year-end audit of another client, resulting in a $1.9 million penalty for the firm. In one case, Wyss, Jackson, and Hilbert were confronted with indications that the client’s goodwill impairment test was not supported by sufficient evidence, but they still accepted the company’s conclusion that goodwill was not impaired even though appropriate additional audit procedures had not been performed. Separately but related, the two clients were charged by the SEC for filing fraudulent financial statements prior to their bankruptcies.
The SEC order was issued on June 8, 2022, CohnReznick did not file a Form 3 until December 12, 2022.
Tuesday’s press release makes it crystal clear that the PCAOB is sick of this shit. “As part of the Board’s efforts to strengthen enforcement, it has increased its vigilance concerning firms’ failures to disclose required events on Form 3, or to do so by the applicable deadline,” it reads.
“Registered firms must report qualifying events on Form 3 on a timely basis so that such information is available to investors and can be used as part of the Board’s oversight of those firms,” said Robert E. Rice, PCAOB Director of Enforcement and Investigations.
CohnReznick, without admitting or denying the findings, settled with the PCAOB and consented to a disciplinary order that censures the firm and imposes a $20,000 civil money penalty. The order also requires the firm to comply with its PCAOB reporting policies and procedures, including those pertaining to providing reasonable assurance that reportable events are reported on the applicable PCAOB form in a timely and complete manner.
The penalties will continue until compliance improves!