Nearly half of all PCAOB enforcement actions were disclosed in Q4
LOS ANGELES, Feb. 22, 2023 /PRNewswire-PRWeb/ -- The Public Company Accounting Oversight Board (PCAOB) increased its enforcement activity sharply in 2022, disclosing the most enforcement actions in five years, and handing down the highest monetary penalties since its establishment in 2002, according to a new report released today by Cornerstone Research.
The report, PCAOB Enforcement Activity—2022 Year in Review, found that in 2022, the PCAOB disclosed 29 disciplinary actions involving the performance of an audit and/or a firm's system of quality control, up 61% from 2021 and the most since 2017. Nearly half of those actions were disclosed in the fourth quarter. Monetary penalties in 2022 totaled close to $10.5 million, almost ten times more than in the previous year, with $8.8 million tied to Q4 actions.
"The sharp increase in the number of enforcement actions was primarily driven by 15 actions involving non-U.S. respondents," said Elaine Harwood, a report coauthor, senior vice president, and head of the accounting practice at Cornerstone Research. "The non-U.S. actions involved 19 auditors and audit firms in seven countries outside the U.S."
For the first time in PCAOB history, enforcement activity in 2022 involved more non-U.S. respondents than U.S. respondents. The percentage of actions involving non-U.S. respondents—52%—was double the 2017–2021 average. Since 2017, the PCAOB has brought actions involving respondents in 17 countries outside the United States.
"The record penalties were consistent with statements made by Chair Erica Williams that the PCAOB would not be limited to the levels of penalties in past years," said Alison Forman, a Cornerstone Research principal and report coauthor. "Penalties totaling $7.9 million were imposed on the 10 actions disclosed in December alone."
Of the PCAOB's 29 disclosed actions in 2022, there were 26 individual and 17 firm respondents. More than 75% of the actions involving firm respondents contained allegations related to the firm's system of quality control, up from approximately two-thirds in 2020 and 2021.
Key Trends
- The number of unique actions was more than 40% higher than in 2021 and over 20% higher than the 2017–2021 average.
- Monetary penalties were imposed on all firm respondents and all but two individual respondents. Nearly 90% of the total penalties were imposed on non-U.S. respondents.
- The PCAOB considered firm respondents' extraordinary cooperation when imposing sanctions on four firms in 2022.
- Nearly 30% of 2022 actions involved alleged violations of the Engagement Quality Review standard, down nearly 40% from 2021 and 70% in 2020.
- No actions in 2022 alleged auditor independence violations.
Last year marked the 20th anniversary of the establishment of the PCAOB, created by the Sarbanes-Oxley Act of 2002 in the wake of accounting scandals that shook the U.S. economy.
EDITOR'S NOTE: The PCAOB data contained in this report have traditionally been reported as part of Cornerstone Research's Accounting and Auditing Enforcement Activity. This year marks the first time the PCAOB data have been segmented into a separate report.
About Cornerstone Research
Cornerstone Research provides economic and financial consulting and expert testimony in all phases of litigation and regulatory matters. The firm supports clients with rigorous, objective analysis. Working with an extensive network of leading academics, former regulators, and industry specialists, Cornerstone Research identifies the most qualified experts for every case.
Founded in 1989, Cornerstone Research has always been guided by its core values: commitment to clients, experts, and staff, and to delivering consistently high-quality service. The firm has over 700 staff and offices in Boston, Chicago, London, Los Angeles, New York, San Francisco, Silicon Valley, and Washington.
Media Contact
Liz Sobe, Cornerstone Research, 617.927-3176, [email protected]
SOURCE Cornerstone Research
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