News & Insights

Auditor Liability Bulletin

January 26, 2024

PCAOB Permanently Sanctions Audit Firm and Partners for Audit and Quality Control Violations

On January 24, 2024, the PCAOB announced a settled disciplinary order sanctioning Jack Shama (the “Firm”) and its sole proprietor and only partner, Jack Shama, for “numerous and repeated violations of various PCAOB rules and standards in connection with multiple audits. During the audits, Shama and his Firm performed limited or no audit procedures on several significant accounts and transactions.”

The PCAOB found that for nine audits of financial statements for various companies for years ending 2020-2022, the Firm (i) issued unqualified audit opinions without exercising due professional care and skepticism; (ii) failed to obtain sufficient audit evidence to support the opinions by performing limited or no procedures concerning accounts that were significant to each issuer’s financial statements (such as failing to properly test good will, which represented 53% of one issuer’s assets);  (iii) failed to assemble and retain audit documentation by failing to document completion dates and making additions to audit documentation several months after the relevant completion dates; (iv) failed to have any engagement quality review; and (v) violated quality control standards by failing to properly design and implement quality control procedures.

Without admitting or denying the findings, the Firm and partner agreed to a censure, permanent revocation of the firm’s registration, and a permanent bar for the partner.

A copy of the announcement and link to the order can be found here.