On October 24, 2023, without admitting or denying the findings, a Canadian accounting firm, Smythe LLP, settled with the PCAOB and consented to a disciplinary order for alleged violations of PCAOB rules and quality control standards in connection with four audits of issuer clients.

According to the PCAOB, the firm used the work of two public accounting firms not registered with the PCAOB, PKF Audisur SRL and PricewaterhouseCoopers Malta Ltd., in a substantial role capacity in four issuer audits.  In particular, the PCAOB alleges the firm failed to evaluate the professional reputation of the unregistered firms with due professional care by failing to consider that the firms were not registered with the PCAOB.  The firm knew that the unregistered firms performed more than 20% of total audit hours or incurred more than 20% of the total audit fees, which is the threshold for constituting “substantial role participation” requiring Board registration.  Furthermore, the PCAOB alleges that the firm failed to (i) adequately plan the audits, (ii) coordinate its activities with the unregistered firms, (iii) perform an adequate analysis to determine whether it could serve as principal auditor in certain audits, and (iv) establish and implement quality control policies and procedures concerning the use of the work of other accounting firms.

The PCAOB imposed a $175,000 civil money penalty and censured the firm.  The Order also requires the firm to conduct a review and evaluation of its quality control policies and procedures, and to report its findings to the PCAOB’s Director of the Division of Enforcement.

The PCAOB press release is available here, and the Order is available here.