Withum Gets Marcum’d By the PCAOB

The Public Company Accounting Oversight Board (PCAOB) announced today it sanctioned WithumSmith+Brown for violations of PCAOB rules and quality control standards related to those goddamn SPACs to the tune of $2 million. Not quite as costly as Marcum’s gargantuan SPAC penalties but Withum earned a good lecturing about “growth at any cost” regardless.

Said the PCAOB press release:

From January 2020 through December 2021, WithumSmith+Brown, PC accepted a substantial number of special purpose acquisition company (SPAC) audit clients, resulting in a dramatic increase in its issuer audit practice and putting a significant strain on its quality control system. In 2021, for example, the firm’s issuer audit practice increased almost 500%, from approximately 80 audit reports to almost 450. Yet the number of partners assigned to these audits increased by only 50% (from 15 to 23). The firm’s quality control system failed to provide reasonable assurance that its personnel complied with applicable professional standards and regulatory requirements, including those related to appropriately staffing issuer audits.

The PCAOB found that the firm’s system of quality control failed to provide reasonable assurance that the firm would:

• Undertake only those issuer engagements that the firm could reasonably expect to be completed with professional competence and appropriately consider the risks associated with providing professional services in the particular circumstances;
• Ensure that partner workloads were manageable to allow sufficient time for engagement partners to discharge their responsibilities with professional competence and due care;
• Ensure that personnel were consulting with individuals within or outside the firm, when appropriate, when dealing with complex issues;
• Perform sufficient procedures to test estimates, including sufficiently evaluating the reasonableness of certain significant assumptions underlying the estimate;
• Make all required communications to issuer audit committees;
• Perform sufficient procedures to determine whether certain matters were critical audit matters;
• Perform sufficient procedures to test journal entries; and
• Timely and accurately file Form APs.

Withum settled with the PCAOB without admitting or denying the findings and will have to bring in an independent consultant who will no doubt tell them to stop taking on more work than their overworked audit partners can handle. The firm will also have to conduct “certain training” for all audit staff so yay, more tedious WBLs.

“Growth must not come at the expense of quality. The PCAOB will hold firms accountable for upholding quality control systems that protect investors,” said PCAOB Chair Erica Y. Williams.

Audit partners should note the PCAOB included this note at the bottom of the press release:

Firms or individuals wishing to report suspected misconduct by auditors, or to self-report possible misconduct, may visit the PCAOB Tips and Referrals page.

The PCAOB does not provide monetary awards for tips or referrals. Only the warm fuzzy feeling that comes from making audit partners’ lives worse than they already are.

Imposing $2 Million in Fines, PCAOB Sanctions WithumSmith+Brown, PC for Pervasive Quality Control Violations Involving SPAC Audits [PCAOB]