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

On November 15, 2023, the PCAOB issued a settled order sanctioning Somerset CPAs, P.C. and its partners Douglas Fahrnow, Rebecca Quintana, and Edward McGuire in connection with multiple issuer audits. The PCAOB alleged that the partners failed to comply with PCAOB rules and audit standards while serving as either the engagement partner or engagement quality review partner on four audits of three issuers. Specifically, the PCAOB alleged that Fahrnow failed to perform sufficient procedures to evaluate whether the amounts recorded as revenue by an issuer based on terminated contracts were in conformity with generally accepted accounting principles, failed to perform sufficient procedures to test the same issuer’s accounts receivable, and failed to exercise due care with respect to his engagement quality reviews of two other issuer audits. The PCAOB also alleged that Quintana failed to perform sufficient procedures to test goodwill impairment while serving as the engagement partner on two separate issuer audits, and that McGuire failed to exercise due care and professional skepticism while serving as engagement quality review partner on an issuer audit, and further failed to maintain his objectivity as engagement quality reviewer by preparing substantive work papers on behalf of the engagement team. Finally, the PCAOB alleged that Somerset failed to maintain a system of quality control sufficient to give the firm reasonable assurance that its engagement teams performed issuer audits and reviews in accordance with applicable professional standards.

The respondents agreed to settle the matter without admitting or denying the PCAOB’s allegations. The PCAOB censured the firm and partners, imposed civil monetary penalties of $100,000 on the firm, $60,000 on Fahrnow, $40,000 on Quintana, and $30,000 on McGuire, barred Fahrnow and Quintana from associating with a PCAOB-registered accounting firm for a period of two years, and barred McGuire from associating with a PCAOB registered accounting firm for a period of one year.

The PCAOB’s press release is available here, and the settled order is available here.