backOn September 26, 2023, without admitting or denying the findings, BDO USA, P.C. and two of its partners, Kevin Olvera and Michael Musick, settled with the PCAOB and consented to a disciplinary order in connection with the 2017 audit of an issuer.
According to the PCAOB, BDO and two of its partners—who served as focused consulting reviewer and engagement quality reviewer on the 2017 audit—violated PCAOB rules and audit standards.
According to the settled order, BDO and the focused consulting reviewer failed to appropriately evaluate the reasonableness of three separate significant accounting estimates that had been identified as presenting significant risks of material misstatement. Additionally, the PCAOB alleges that this occurred notwithstanding red flags that indicated the need for additional evidence or further evaluation, along with the PCAOB’s 2016 inspection of the firm, which previously identified deficiencies in the procedures performed to test one of the same estimates. The PCAOB also alleges that the engagement quality reviewer failed to exercise due professional care by not evaluating the sufficiency of the engagement team’s responses and evidence in significant areas.
The PCAOB imposed civil money penalties on the firm ($2,000,000), the focused consulting reviewer ($35,000), and the engagement quality reviewer ($25,000), and censured all three parties. The order also requires both partners to complete twenty hours of continuing professional education and limits the focused consulting reviewer’s activities in connection with any audit for one year.