According to the Board, the individuals and firms failed to comply with PCAOB rules and audit standards in conducting multiple issuer audits.
In four separate matters, the PCAOB has imposed a variety of sanctions on multiple accountants and, in two cases, their respective firms. According to the board, among other things, the accountants failed to exercise due care and professional skepticism in conducting audits and failed to plan and perform sufficient audit procedures. The accountants also failed to obtain sufficient appropriate audit evidence on certain matters, including valuation, recording, and inventory, the PCAOB found.
Gregory & Associates and Alan D. Gregory. The PCAOB alleged that Gregory as the sole proprietor of his firm violated Board rules and auditing standards in connection with four audits of two issuers’ consolidated financial statements. During audits of one of the issuers, the accountant failed to exercise due professional care and professional skepticism and failed to plan and perform procedures to obtain sufficient audit evidence in the area of inventory, the Board stated. In addition, during all of the audits, he identified revenue as a significant risk but failed during three of the audits to obtain sufficient audit evidence with respect to the issuers’ stated revenue. He also lacked a reasonable basis to evaluate whether revenue was recognized in conformity with GAAP, according to the PCAOB. In addition, Gregory and his firm failed to adopt measures to ensure coordination of their activities with those of a Danish auditor of the same company or to inquire as to that statutory auditor’s reputation and standing or independence.
Without admitting or denying the PCAOB’s findings, the accountant and his firm agreed to censure and to pay a $15,000 civil penalty. The Board also revoked the firm's registration and barred Gregory from associating with a registered public accounting with the right to reapply after two years.
Thomas Kober. According to the PCAOB, in a 2015 audit, Kober violated PCAOB rules and standards in his audit work related to an issuer’s acquisition of a business. On the date of the acquisition, the issuer recognized approximately $2 million in goodwill and then determined that it was fully impaired. Among other things, the Board alleged, the accountant failed to appropriately evaluate whether the issuer’s accounting for the business acquisition was in conformity with GAAP and also failed to obtain sufficient appropriate audit evidence about whether its revenue was properly valued and recorded. In addition, Kober failed to ensure that the issuer’s related-party transactions were properly identified and disclosed in financial statements, the PCAOB found.
Without admitting or denying the Board’s findings, Kober agreed to censure and to a bar from associating with a registered public accounting firm with the right to petition for reinstatement after two years.
Cameron Terry. The PCAOB alleged that, during a 2016 audit of the financial statements of a truck manufacturing and repair company, Terry obtained contradictory evidence about whether the company’s liabilities included a loan from a third party. After management told him that the loan funds were not received until after the fiscal year, Terry proposed an audit adjustment to eliminate the loan without obtaining corroborating evidence; restated financial statements were later filed, the Board noted. According to the PCAOB, Terry also failed to obtain sufficient evidence concerning the company’s notes payable and relied on management’s representations rather than engaging in confirmation efforts.
Without admitting or denying the PCAOB’s findings, Terry agreed to censure and a one-year suspension from associating with a registered public accounting firm. The Board also imposed a $10,000 civil penalty and required him to complete 20 hours of additional continuing professional education.
Thayer O’Neal Company and Thomas M. O'Neal. According to the PCAOB, O’Neal failed to obtain sufficient audit evidence and exercise due care in connection with a 2015 audit of the financial statements of a construction company. He planned to, but did not, substantively test the actual costs that the company charged on each contract to ensure proper valuation and recording, the Board alleged. Specifically, he did not perform any audit procedures to test the accuracy and completeness or processes concerning recording, allocation, and classification of costs recorded in the general ledger, the PCAOB stated. In addition, the accountant failed to obtain sufficient audit evidence that the company’s method used to estimate revenue was in conformity with GAAP. The accountant also knew, or was reckless in not knowing, that he was contributing to the firm’s failure to have a partner or equivalent perform the engagement quality review.
Without admitting or denying the PCAOB’s findings, Terry and his firm agreed to censure. The firm also consented to pay a $15,000 civil penalty, and Terry agreed to a bar from associating with a registered public accounting firm, with the reapply after two years. However, before petitioning for Board consent to associate, Terry must complete 40 hours of professional education relating to the audits of financial statements under PCAOB standards.
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