Connect with us

Accounting

PCAOB sanctions Raines & Fischer for deceiving inspection staff

Published

on

The Public Company Accounting Oversight Board today announced settled disciplinary orders sanctioning Raines & Fischer and three of its partners — William Fischer, Brian Uhlman and Steven Sarrel — for attempting to deceive PCAOB inspection staff and other violations.

Firm personnel improperly created and modified workpapers after document completion dates and in anticipation of PCAOB inspections in 2020 and 2022, violating PCAOB Rule 4006, Duty to Cooperate with Inspectors, and AS 1215, Audit Documentation. The personnel concealed the altered workpapers before they were provided to inspectors, taking steps such as changing computer clocks and printing documents to PDF. 

“Attempting to deceive the PCAOB’s inspection staff undermines investor protection,” PCAOB Chair Erica Williams said in a statement. “To protect investors and safeguard the integrity of the inspection process, the PCAOB will continue to pursue disciplinary action against firms and individuals that fail to cooperate with inspections.”

PCAOB logo - office - NEW 2022

Sarrel and Uhlman also violated Rule 4006. Sarrel was responsible for the alteration of workpapers prior to the 2020 inspection of a broker-dealer engagement for which he was engagement partner. Uhlman was responsible for the alteration of workpapers prior to the 2022 inspection of two broker-dealer engagements for which he was engagement partner. Neither partners informed the inspectors of the alterations, despite participating in meetings with PCAOB staff during the inspections.

Fischer was the firm’s managing partner and in charge of its audit department and quality control during this period. He took no action, despite being aware in both instances of the alterations, and failed to prevent the altered workpapers from being provided to PCAOB staff.

The PCAOB found that Raines & Fischer’s quality control system was deficient. The firm also violated documentation standards by failing to assemble for retention complete and final sets of workpapers for four broker-dealer engagements in addition to the three subject to inspection. The firm also repeatedly violated PCAOB Rule 2201 by falling to timely file its Form 2 for four consecutive years.

Uhlman additionally failed to comply with audit and attestation standards related to the audit and examination of carrying a broker-dealer. During that engagement, he failed to test key internal controls over compliance and supplemental information included in the schedules supporting the broker-dealer’s financial statements.

Fischer also violated AS 1220, Engagement Quality Review, by falling to perform adequate engagement quality reviews for seven broker-dealer engagements. He also violated PCAOB Rule 3502, Responsibility Not to Knowingly or Recklessly Contribute to Violations, by contributing to the firm’s noncooperation for both inspections and its violations of rules and standards.

“These respondents were responsible for a host of audit and attestation deficiencies and compounded those violations with their attempts to conceal the shortcomings in their work from the PCAOB’s inspectors. That misconduct warrants the strong sanctions imposed in the orders issued by the Board today,” Robert Rice, director of the PCAOB’s Division of Enforcement and Investigations, said in a statement.

The sanction is the latest in a long line of increased enforcement efforts by the PCAOB, most recently including revoking a firm’s registration and barring its sole partner for audit quality and control failures on Tuesday. In November, it sanctioned five firms for reporting violations. In September, it settled sanctions against four firms for failing to make required communications with audit committees, as well as one firm for violating reporting requirements. The board previously sanctioned Baker Tilly, Grant Thornton Bharat, Mazars and SW Audit in February, as well as three firms in November 2023 and five firms in July 2023.

Without admitting or denying the findings, all four respondents consented to their respective orders:

  • Censure each respondent;
  • Permanently revoke the Firm’s registration;
  • Bar Uhlman from associating with a PCAOB-registered firm with a right to petition the Board to terminate the bar after five years (and requiring additional CPE requirements prior to petitioning);
  • Bar Fischer and Sarrel from associating with a registered firm with the right to petition to terminate the bars after three years; and,
  • Impose civil money penalties of $200,000 on the Firm, $125,000 on Uhlman, $75,000 on Fischer, and $65,000 on Sarrel.

Continue Reading

Accounting

IAASB tweaks standards on working with outside experts

Published

on

The International Auditing and Assurance Standards Board is proposing to tailor some of its standards to align with recent additions to the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants when it comes to using the work of an external expert.

The proposed narrow-scope amendments involve minor changes to several IAASB standards:

  • ISA 620, Using the Work of an Auditor’s Expert;
  • ISRE 2400 (Revised), Engagements to Review Historical Financial Statements;
  • ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information;
  • ISRS 4400 (Revised), Agreed-upon Procedures Engagements.

The IAASB is asking for comments via a digital response template that can be found on the IAASB website by July 24, 2025.

In December 2023, the IESBA approved an exposure draft for proposed revisions to the IESBA’s Code of Ethics related to using the work of an external expert. The proposals included three new sections to the Code of Ethics, including provisions for professional accountants in public practice; professional accountants in business and sustainability assurance practitioners. The IESBA approved the provisions on using the work of an external expert at its December 2024 meeting, establishing an ethical framework to guide accountants and sustainability assurance practitioners in evaluating whether an external expert has the necessary competence, capabilities and objectivity to use their work, as well as provisions on applying the Ethics Code’s conceptual framework when using the work of an outside expert.  

Continue Reading

Accounting

Tariffs will hit low-income Americans harder than richest, report says

Published

on

President Donald Trump’s tariffs would effectively cause a tax increase for low-income families that is more than three times higher than what wealthier Americans would pay, according to an analysis from the Institute on Taxation and Economic Policy.

The report from the progressive think tank outlined the outcomes for Americans of all backgrounds if the tariffs currently in effect remain in place next year. Those making $28,600 or less would have to spend 6.2% more of their income due to higher prices, while the richest Americans with income of at least $914,900 are expected to spend 1.7% more. Middle-income families making between $55,100 and $94,100 would pay 5% more of their earnings. 

Trump has imposed the steepest U.S. duties in more than a century, including a 145% tariff on many products from China, a 25% rate on most imports from Canada and Mexico, duties on some sectors such as steel and aluminum and a baseline 10% tariff on the rest of the country’s trading partners. He suspended higher, customized tariffs on most countries for 90 days.

Economists have warned that costs from tariff increases would ultimately be passed on to U.S. consumers. And while prices will rise for everyone, lower-income families are expected to lose a larger portion of their budgets because they tend to spend more of their earnings on goods, including food and other necessities, compared to wealthier individuals.

Food prices could rise by 2.6% in the short run due to tariffs, according to an estimate from the Yale Budget Lab. Among all goods impacted, consumers are expected to face the steepest price hikes for clothing at 64%, the report showed. 

The Yale Budget Lab projected that the tariffs would result in a loss of $4,700 a year on average for American households.

Continue Reading

Accounting

At Schellman, AI reshapes a firm’s staffing needs

Published

on

Artificial intelligence is just getting started in the accounting world, but it is already helping firms like technology specialist Schellman do more things with fewer people, allowing the firm to scale back hiring and reduce headcount in certain areas through natural attrition. 

Schellman CEO Avani Desai said there have definitely been some shifts in headcount at the Top 100 Firm, though she stressed it was nothing dramatic, as it mostly reflects natural attrition combined with being more selective with hiring. She said the firm has already made an internal decision to not reduce headcount in force, as that just indicates they didn’t hire properly the first time. 

“It hasn’t been about reducing roles but evolving how we do work, so there wasn’t one specific date where we ‘started’ the reduction. It’s been more case by case. We’ve held back on refilling certain roles when we saw opportunities to streamline, especially with the use of new technologies like AI,” she said. 

One area where the firm has found such opportunities has been in the testing of certain cybersecurity controls, particularly within the SOC framework. The firm examined all the controls it tests on the service side and asked which ones require human judgment or deep expertise. The answer was a lot of them. But for the ones that don’t, AI algorithms have been able to significantly lighten the load. 

“[If] we don’t refill a role, it’s because the need actually has changed, or the process has improved so significantly [that] the workload is lighter or shared across the smarter system. So that’s what’s happening,” said Desai. 

Outside of client services like SOC control testing and reporting, the firm has found efficiencies in administrative functions as well as certain internal operational processes. On the latter point, Desai noted that Schellman’s engineers, including the chief information officer, have been using AI to help develop code, which means they’re not relying as much on outside expertise on the internal service delivery side of things. There are still people in the development process, but their roles are changing: They’re writing less code, and doing more reviewing of code before it gets pushed into production, saving time and creating efficiencies. 

“The best way for me to say this is, to us, this has been intentional. We paused hiring in a few areas where we saw overlaps, where technology was really working,” said Desai.

However, even in an age awash with AI, Schellman acknowledges there are certain jobs that need a human, at least for now. For example, the firm does assessments for the FedRAMP program, which is needed for cloud service providers to contract with certain government agencies. These assessments, even in the most stable of times, can be long and complex engagements, to say nothing of the less predictable nature of the current government. As such, it does not make as much sense to reduce human staff in this area. 

“The way it is right now for us to do FedRAMP engagements, it’s a very manual process. There’s a lot of back and forth between us and a third party, the government, and we don’t see a lot of overall application or technology help… We’re in the federal space and you can imagine, [with] what’s going on right now, there’s a big changing market condition for clients and their pricing pressure,” said Desai. 

As Schellman reduces staff levels in some places, it is increasing them in others. Desai said the firm is actively hiring in certain areas. In particular, it’s adding staff in technical cybersecurity (e.g., penetration testers), the aforementioned FedRAMP engagements, AI assessment (in line with recently becoming an ISO 42001 certification body) and in some client-facing roles like marketing and sales. 

“So, to me, this isn’t about doing more with less … It’s about doing more of the right things with the right people,” said Desai. 

While these moves have resulted in savings, she said that was never really the point, so whatever the firm has saved from staffing efficiencies it has reinvested in its tech stack to build its service line further. When asked for an example, she said the firm would like to focus more on penetration testing by building a SaaS tool for it. While Schellman has a proof of concept developed, she noted it would take a lot of money and time to deploy a full solution — both of which the firm now has more of because of its efficiency moves. 

“What is the ‘why’ behind these decisions? The ‘why’ for us isn’t what I think you traditionally see, which is ‘We need to get profitability high. We need to have less people do more things.’ That’s not what it is like,” said Desai. “I want to be able to focus on quality. And the only way I think I can focus on quality is if my people are not focusing on things that don’t matter … I feel like I’m in a much better place because the smart people that I’ve hired are working on the riskiest and most complicated things.”

Continue Reading

Trending