2017 was a banner year for the Public Company Accounting Oversight Board when it came to enforcement actions against accountants. For the Securities and Exchange Commission, not so much.
The PCAOB finalized 35 enforcement actions involving “accountants”—otherwise known as CPAs employed by SEC registrants, auditors, and audit firms—last year, up from 28 in 2016, according to a new report from Cornerstone Research. The 35 final actions were the most in PCAOB history, surpassing the 33 registered in 2015.
For the most part, the increase is due to the PCAOB cracking the whip more on auditors and audit firms of brokers and dealers, the report states. Audit firms still don’t have their shit together when it comes to broker-dealer audits, as the PCAOB found deficiencies in 68 of the 75 firms and in 96 of the 116 audits and related attestation engagements inspected last year.
Here’s another nugget from the Cornerstone Research report: “In 2017, the number of finalized PCAOB actions involving auditors and an audit firm was more than double the 2012-2016 average” of 19.
While the SEC actually had more final enforcement actions (40) against accountants in 2017 than the PCAOB, the number of regulatory actions dropped 20% from 2016’s 51, and the 40 final actions were the lowest since 2014 (36).
Why such a drop? The report says:
The SEC finalized only 13 actions related to the performance of audits of issuers and brokers and dealers compared to 26 in each of the previous two years—a primary reason for the overall decline in 2017.
Some other tidbits from the report:
- In 2017, the number of final SEC actions involving only individuals was 24% more than the 2012-16 average.
- At 49, the total number of respondents (individuals and firms) in SEC actions finalized in 2017 was slightly below the 2012-16 average of 51.
The SEC just hired a new chief accountant for its Division of Enforcement, so maybe 2018 will be a rebound year for sanctions-slapping on accountants.