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Julia Irvine 30 Mar 2017 01:48pm

Member firms of four of Big Five fined

The Public Company Accounting Oversight Board (PCAOB) is cracking down on registered audit firms based outside the US that fail to comply with its rules

It announced yesterday that it had fined six members of four of the largest global accountancy firms, including PwC’s Spanish and Argentinian practices, KPMG’s Brazilian firm, Grant Thornton’s Colombian and Korean members and EY’s Spanish firm.

It also fined Nexia Samduk, Nexia International’s Korean member firm.

All seven firms had fallen foul of the US audit watchdog’s Rule 2203, which requires any firm to inform the board of disciplinary or legal proceedings against it or its partners relating to their work.

The firm in question needs to fill and send in a Form 3 within 30 days of becoming aware of the institution of the proceedings and also when they are concluded.

The firms were fined as follows:

  • PricewaterhouseCoopers Auditores (Spain) took over a year to report the start of five disciplinary proceedings and in another case failed to file a Form 3 at the start and took more than two years to file one at the conclusion. Fined $15,000 (£12,000).

  • Price Waterhouse & Co (Argentina) took months and in one case almost two years to file a Form 3 in respect of the start of four disciplinary proceedings against partners; it also failed to file the form in four other disciplinary cases until more than two years after becoming aware of the conclusion. Fined $25,000.

  • KPMG Auditores Independentes (Brazil) failed to report the institution of three proceedings against the firm or certain partners until between one and three years after they were started; it also failed to report the conclusion of one of the three and the conclusion of another proceeding for more than a year. Fined $15,000.

  • Grant Thornton Fast & ABS Auditores y Consultores Ltda (Colombia) failed to inform the PCAOB that it had become a respondent in two separate disciplinary proceedings, in one case for three years and in the other for two years. Fined $10,000.

  • Grant Thornton Daejoo (Korea) failed to inform the board that it had become involved in seven separate disciplinary proceedings for months and in one case for over a year. Fined $10,000.

  • Ernst & Young (Spain) took more than four years to file a Form 3 about the initiation of two disciplinary proceedings against the firm and another year in one case and three months in the other to report the conclusion of the proceedings. Fined $10,000.

  • Nexia Samduk (Korea) missed the 30-day deadline by months in each of six disciplinary proceedings against the firm. Fined $10,000.

The firms, all of whom accepted the sanctions without admitting or denying the charges, were also censured for their failings.

Non-US firms which audit companies listed on US stock exchanges are required to register with the PCAOB and comply with its rules, as well as those of the Securities and Exchange Commission (SEC) and the Sarbanes-Oxley Act. They also have to comply with professional standards.

Under the registration terms, non-US firms have to submit to PCAOB inspections just as their US peers do.

In order to carry out the inspections, the board has negotiated formal cooperative arrangements with foreign audit regulators. It currently has agreements in place with 23 countries, including the UK, and continues to seek access to other jurisdictions.

There are currently 908 non-US firms registered with the board.

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