Accounting
PCAOB crackdown shifting to focus on auditing firms
The Public Company Accounting Oversight Board has been cracking down on firms and auditors alike, according to a new report.
The
The study came out even as the PCAOB announced
“There was a notable shift in the types of respondents in 2023 auditing actions,” said Jean-Philippe Poissant, who co-authored the report and is co-head of Cornerstone Research’s accounting practice, in a statement. “In the past, two-thirds of respondents were individuals. Yet in 2023, two-thirds of respondents were firms. This shift was the result of a substantial jump in the number of auditing actions that only involved firms.”
The great majority — 79% — of the auditing actions in 2023 included alleged violations of auditing standards. Some 60% of those actions included additional allegations related to ethics and independence standards, quality control standards, or both. For the first time, the PCAOB included allegations related to critical audit matters, or CAMs, in enforcement actions, with three actions including such allegations.
Of the $19.7 million in total monetary penalties in 2023, $18.8 million were imposed on firms, nearly twice the $9.5 million imposed on firms in 2022. Some 15% of the firm respondents were required to obtain an independent consultant.
Many of the penalties involve firms outside the U.S., as in the cases today involving Big Four affiliates in the Netherlands, Indonesia and the Philippines.
“More than two-thirds of the PCAOB’s record-setting monetary penalties were imposed on non-U.S. respondents in 2023, even though non-U.S. respondents accounted for less than half of the auditing actions during the year,” said Russell Molter, a principal at Cornerstone Research and report co-author, in a statement.
The number of respondents in auditing actions totaled 53, a 23% increase over 2022, according to the report. The PCAOB settled four actions involving three China-based firms after securing access to inspect and investigate Chinese firms in 2022.
For the second year in a row, there were no enforcement actions related to a company’s disclosure of a material weakness in internal control. In contrast, SEC enforcement actions that referred to an announced restatement and/or material weakness in internal control reached their highest levels in recent years.
Violations of quality control standards were alleged in more than half of the actions involving firm respondents. Nearly 80% of the total monetary penalties in 2023 were assessed on just six defendants. The proportion of individual respondents who were barred increased from 64% in 2022 to 85% in 2023.
Enforcement activity appears to be on course for another record-setting year in 2024.
“This board set a goal to strengthen PCAOB enforcement, and we are doing just that,” said Williams during Wednesday’s press conference. “As of today, the PCAOB has imposed $34 million in penalties this year alone, and it’s only April. We set a record in 2022. We broke that record in 2023, and we are breaking it again today.”
DSB Rock Island merges with fellow Minnesota firm Meuwissen, Flygare, Kadrlik and Associates; Smith + Howard adds Richmond-based consultancy Fahrenheit Advisors; Reynolds, Bone & Griesbeck adds fellow Memphis firm Scott and Pohlman; and GBQ expands its credit union practice with Lillie & Co.
AI-specialized accounting platform company
“We’re putting every dollar back into the platform and team – to invest in ML research, to continue to bring the most cutting-edge AI to accounting firms, and to open additional slots for firms,” said Matt Harpe, Basis co-founder, in an email.
Basis, which emerged from stealth
“This technology is a new paradigm for accounting. Learning to work with your computer, not just on it, might be an even bigger shift than going from paper to digital. Over the last year, as accountants have experienced what’s possible with the most cutting-edge AI, we’ve seen more and more firms decide that AI must become the top strategic priority. We’re excited to continue to equip firms with AI that actually works,” said Mitch Troyanovsky, Basis co-founder in an email.
Basis sells exclusively to accountants versus selling directly to businesses or building ‘new’ accounting firms, and is tailored specifically for use by expert accountants. Basis focuses on building agents that understand, and can operate on, accounting broadly instead of isolating only a specific task. This allows Basis to work across clients and workflows without losing context, and to quickly take on new workflows, said Basis. Accountants onboard Basis to engagements and assign it core workflows for one-time or ongoing execution
“Accounting is a massive industry, and Basis is clearly leading on the AI side. This is one of the few AI agents that’s already deployed and working. Matt and Mitch have put together the best NYC team in the applied AI space,” said Vinod Khosla, founder of Khosla Ventures, who also co-founded Sun Microsystems.
Platform Accounting Group has added two more accounting firms, based in Indiana and Illinois, bringing the total firms that have joined the Utah-based company this year to 12.
Platform Accounting Group, founded in 2015, invests in and acquires small accounting firms, and announced it
Midwest Advisors, formerly known as Philip+Rae & Associates, is headquartered in Naperville, Illinois, and has provided fractional CFO roles, controllership and back-office accounting operations for more than 30 years. Additionally, the firm offers tax preparation, accounting and auditing, financial planning, estate planning, payroll services, small business consulting, bookkeeping, back-office accounting, small business consulting and more.
In operation for 30 years, Indianapolis-based Crossroads Advisors, formerly Peachin Schwartz + Weingardt, serves high-net-worth individuals, closely-held businesses and not-for-profit organizations. The firm supports clients throughout their life cycle, from the startup phase to mature businesses seeking an exit or succession strategy.
“Because of my experience and time there, I deeply value the tight-knit community and small-town feel of the Midwest,” said Reyes Florez, CEO of Platform Accounting Group, in a statement. “We are thrilled these firms, who like us, prioritize relationships and roots, are joining our group and will be able to invest even further in their clients and communities.”
Platform Accounting Group has nearly 1,000 employees across 12 states and expects to add a few more accounting firms in January, the company said.
Stocks making the biggest moves premarket: MU, LW, DRI
Bank of England holds rates but vote split surprises markets
Artificial Intelligence and Machine Learning: Transforming the Future
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
Are American progressives making themselves sad?
U.S. Beneficial Ownership Information Registry Now Accepting Reports
-
Finance1 week agoStocks making the biggest moves after hours: ORCL, AI, MTN, PL
-
Accounting1 week agoReplacing mortgage deduction may boost homeownership
-
Personal Finance1 week agoThe Fed cut interest rates but some credit card APRs haven’t gone down
-
Accounting1 week agoIt’s time to get your WISP in order
-
Accounting1 week agoPCAOB staff report outlines 2025 inspection priorities
-
Accounting1 week agoBig changes expected at SEC under new chair Paul Atkins
-
Accounting1 week agoCanada pressured to respond to Trump’s tax cut regime
-
Leaders1 week agoRishi Sunak, The politic and the Successful Businessman