PCAOB Faults Company Audits & Takes Disciplinary Action
The Public Company Accounting Oversight Board (PCAOB) has issued an order revoking the registration of a Los Angeles accounting firm after finding serious faults in past audits. The sole shareholder was also barred “from being an associated person of a registered public accounting firm,” according to Yahoo Asia News. The registration of another firm and its principal shareholder was also revoked.
The PCAOB found that the accounting firm Kenny H. Lee CPA Group Inc. did not conform to PCAOB rules and audit standards in two audits for wireless phones maker Axesstel Inc. and trade logistics group GSL Holdings Inc. The PCAOB also barred the sole shareholder, Kwang Ho Lee, from practicing as a CPA. Settlement offers have been submitted by Kenny H. Lee CPA Group and Kwang Ho Lee without admitting or denying any misconduct.
The PCAOB revoked the registration of the Texas accounting firm, Clyde Bailey PC, and barred its principal shareholder, Clyde Bailey, for procedural errors found in their audits of four small companies in 2004 and 2005. The audited companies were Endevco Inc., Call Now Inc., Image Innovations Holdings Inc., and Health Discovery Corporation.
The PCAOB also found inadequacies in past audits conducted by Ernst & Young and PricewaterhouseCoopers according to Newsday. Eight past audits performed by Ernst & Young and thirty by PricewaterhouseCoopers were faulted for failing to obtain “sufficient competent evidential matter” to support their opinions on their clients’ financial statements. The audits were also faulted for failure to handle errors in their clients’ application of Generally Accepted Accounting Procedures (GAAP) standards.
Reuters reported that although some of the errors “appeared likely to be material” to financial statements by the clients, “the deficiencies also included failures by the firm to perform, or to perform sufficiently, certain necessary audit procedures,” according to the PCAOB report regarding both Ernst & Young and PricewaterhouseCoopers. Similar problems were found in audits conducted by BDO Seidman.
Newsday.com reported that a spokesman for Ernst & Young, Charlie Perkins, said in an interview, “We constantly re-examine and strengthen our audit processes, and we will continue to work closely with the PCAOB to resolve any issues it identifies.”