The PCAOB has made it painfully clear that they are done pussyfooting around and sick of auditors not doing their jobs. Chair Erica Williams said in September the Board plans to use every tool at their disposal to bring the hammer down on naughty auditors and it seems that’s exactly what they’re doing. Wanna alter work papers and then double down when you’re caught? You’re gonna get wrecked.
Yesterday, the PCAOB announced a settlement in which audit partner Jonathan B. Taylor of Spielman Koenigsberg & Parker LLP was hit with the largest civil money penalty against an individual in PCAOB history ($150,000). We’re guessing no one really cares about this but thought it worth documenting as the words “largest civil money penalty against an individual in PCAOB history” are likely to appear in many, many PCAOB press releases to come. Maybe a year from now we’ll look back fondly on the time when a record penalty was a measly $150k.
Taylor’s crime? He misled PCAOB inspectors and investigators during two PCAOB inspections and a subsequent investigation.
Taylor added or modified approximately 80 audit work papers before providing the improperly altered documentation to PCAOB inspectors for a 2021 inspection. He also told inspectors in two PCAOB inspections that engagement quality reviews of certain audits had been performed, as required, when he knew that was untrue.
In the PCAOB’s subsequent investigation, Taylor repeatedly provided the Board’s investigators with false and misleading information, including altered work papers, misrepresentations concerning engagement quality reviews, and false certifications concerning whether he had provided all relevant documents in the investigation.
From 2018 to 2021, SKP failed to comply with PCAOB quality control standards, including with respect to audit documentation. Among other failures, SKP’s system of quality control failed to prevent or detect Taylor’s improper alteration of work papers in connection with a PCAOB inspection. SKP also failed to obtain engagement quality reviews of issuer audits for multiple years and to timely or accurately file with the PCAOB required annual reports and audit participant reports. Taylor directly and substantially contributed to those violations.
SKP will be out of the audit game for five years, after which they can reapply for registration provided the firm adopts policies and conducts training related to audits of issuers.
“The Board will take action to protect investors from bad actors and impose consequences on those who put the integrity of our capital markets at risk,” said PCAOB Chair Erica Y. Williams.
At the bottom of the press release the PCAOB reminds auditors that strengthening enforcement is one of the four key goals that the Board has identified in its draft strategic plan. “To advance this goal, the Board in 2022 has increased average penalties, pursued enforcement actions involving certain types of violations for the first time, and taken steps to proactively seek out wrongdoing by increasing the use of sweeps against firms where there may be a violation of PCAOB standards or rules,” it reads.
Bonus Glassdoor review of this firm:
Well if there wasn’t room for upward mobility before there certainly won’t be any now.
The order for your reading pleasure: