News & Insights

Auditor Liability Bulletin

May 24, 2024

PCAOB Sanctions U.S. Audit Firm for Quality Control Violations

On May 21, 2024, the PCAOB announced a settled disciplinary order with MaloneBailey, LLP for alleged violations of PCAOB quality control standards.

The PCAOB alleged that the firm failed to make effective changes to improve its system of quality control in response to PCAOB inspectors repeatedly raising significant deficiencies in various audit areas, including auditing accounting estimates, testing revenue, audit committee communications, and EQRs.  The PCAOB also alleged deficiencies in the firm’s internal inspection procedures, including that the firm’s internal inspections failed to identify significant audit deficiencies that were later identified by PCAOB inspectors and that the firm failed to take sufficient or timely corrective actions in response to numerous audit deficiencies identified through its internal inspections.

The firm settled with the PCAOB without admitting or denying the PCAOB’s findings.  The PCAOB imposed a $400,000 civil money penalty and censured the firm.  The order also requires the firm to engage an independent consultant to review and make recommendations concerning the firm’s quality control policies and procedures and that the firm conduct training for all audit staff on changes to the firm’s policies and procedures that result from the independent consultant’s recommendations.

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