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September 24, 2023

The PCAOB Is Sick and Tired of Not Being Told About Firms’ Past Disciplinary Hearings

RSM US isn’t the only firm that has been lazy about disclosing to the PCAOB that they’ve been involved in a non-PCAOB disciplinary proceeding. In fact, RSM’s affiliate in Hong Kong and Deloitte’s affiliate in Colombia are also guilty of taking too damn long to send the PCAOB the proper paperwork. And now both firms have been fined.

If a PCAOB-registered accounting firm is a defendant or respondent in an administrative or disciplinary proceeding that was initiated by another regulator, it has to let the PCAOB know about this by filing Form 3, Special Report, within 30 days after the event. The firm also has to let the PCAOB know that the disciplinary proceeding has been wrapped up.

The PCAOB fined RSM Hong Kong $10,000 last month for not filing Form 3s (or is it Forms 3?) until two and a half years after it was involved in two disciplinary proceedings by the Hong Kong Institute of Certified Public Accountants between October and November 2014.

Both proceedings revolved around an unmodified auditor’s report RSM Hong Kong (then known as RSM Nelson Wheeler) issued on Oct. 28, 2009, on the financial statements of Heng Tai Consumables Group Ltd. and its subsidiaries for the year ended June 30, 2009.

The HKICPA said it received a referral from the Financial Reporting Council in Hong Kong in November 2012 regarding Heng Tai Consumables’ treatment of an available-for-sale (AFS) financial asset, which had suffered significant decline in fair value. The FRC decided that RSM issuing an unmodified auditor’s report was inappropriate.

In September 2015, the disciplinary committee of the HKICPA found that RSM and the engagement partner, Stephen Wong Tak Man, failed or neglected to observe, maintain, or otherwise apply a professional standard issued by the HKICPA, namely Hong Kong Accounting Standard 39, Financial Instruments: Recognition and Measurement, which requires an entity to recognize an impairment loss in profit or loss for an AFS financial asset when objective evidence of impairment exists.

RSM and Wong were each ordered to pay a penalty of HK$10,000 and jointly pay costs and expenses of the disciplinary proceedings of the HKICPA totaling HK$95,401.

Now on to Deloitte & Touche Ltda. in Colombia, which was fined $15,000 by the PCAOB last month for not filing a Form 3 for each of the seven—yes, seven—separate disciplinary hearings it was involved in until between six months and two years after the proceedings had commenced.

The seven hearings, which happened between August 2014 and October 2016, were initiated by the Junta Central de Contadores.

Sorry, I’m not going to go through all seven incidents, but they all involved providing professional services to Colombian companies that weren’t issuers, according to the PCAOB. If you have extra time on your hands, you can find all the Form 3s (or Forms 3) right here.

Deloitte also got in trouble for failing to tell the PCAOB that five of the seven disciplinary proceedings had concluded.

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