The PCAOB added six audit firms—three international, including a KPMG affiliate, and three in the U.S., including Grant Thornton—to its 2022 naughty list on Dec. 22 for not making required disclosures on Form 3.
If a PCAOB-registered accounting firm is a defendant or respondent in an administrative or disciplinary proceeding that was initiated by another regulator, that firm has to let the PCAOB know by filing Form 3, Special Report, within 30 days after the event. The firm also has to let the PCAOB know that it knows the disciplinary proceeding has been concluded.
These six firms must have forgotten to do that or something and, as a result, were fined and censured by the PCAOB:
- KPMG Samjong Accounting Corp. – $30,000 civil money penalty and censure
- BDO RCS Auditores Independentes – $30,000 civil money penalty and censure
- Grant Thornton Auditores Independentes Ltd. – $20,000 civil money penalty and censure
- Grant Thornton LLP – $40,000 civil money penalty and censure
- MaloneBailey LLP– $25,000 civil money penalty and censure
- KCCW Accountancy Corp.– $20,000 civil money penalty and censure
In the case of the Purple Rose of Chicago, which got the largest fine of the six firms, it didn’t disclose three reportable events to the PCAOB regarding two disciplinary proceedings brought against GT by the Utah Division of Occupational and Professional Licensing of the Department of Commerce and the Pennsylvania Board of Accountancy.
The PCAOB said:
In December 2016, the Utah DOPL simultaneously initiated and concluded disciplinary proceedings against Grant Thornton (“Utah Proceeding”). The Utah Proceeding concerned conduct that resulted in sanctions imposed on the firm by the U.S. Securities and Exchange Commission in a 2015 order. The initiation and conclusion of the Utah Proceeding each constituted a reportable event under Form 3, but Grant Thornton failed to file a Form 3 reporting those events until May 8, 2020.
Additionally, in January 2020, the Pennsylvania Board initiated disciplinary proceedings against Grant Thornton (“Pennsylvania Proceeding”). The Pennsylvania Proceeding concerned conduct that resulted in sanctions imposed on the firm by a 2017 PCAOB order. The initiation of the Pennsylvania Proceeding constituted a reportable event under Form 3, but Grant Thornton failed to file a Form 3 reporting it until May 8, 2020.
In its May 8, 2020 Form 3, Grant Thornton also belatedly disclosed that it had obtained twelve new, replacement, or additional licenses in eleven jurisdictions. Those changes in Grant Thornton’s licensing status constituted reportable events under Form 3, but Grant Thornton failed to disclose them to the board on a timely basis.
GT told the PCAOB that it has established and implemented several changes to its policies and procedures so this sort of thing will never happen again.
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Big deal. What harm is there to investors from filing or not filing a Form 3? Now let the PCAOB investigate the Big Four’s major bank audits. Right! This is more PCAOB make work to avoid doing anything substantive.