Skip to main content

Auditing

PCAOB Fines Florida-Based Firm L&L CPAs $75,000 for Auditing Blunders

The firm and three people were sanctioned for violations related to quality control, auditing failures, and missing Form AP deadlines.

The Public Company Accounting Oversight Board (PCAOB) doled out $150,000 worth of total fines to a Plantation, FL-based CPA firm on June 10 for violations related to quality control, auditing failures, and missing Form AP deadlines.

The audit regulator handed L&L CPAs and its president Weixuan Tracy Luo a joint fine of $75,000, engagement partner Andy Chow a civil money penalty of $50,000, and engagement quality reviewer Robert Kinzer a $25,000 fine, according to the settled disciplinary order.

In addition, the firm and the three individuals were all censured, Chow was barred from being an associated person of a registered public accounting firm with a right to seek board consent to terminate the bar after one year and completing 50 hours of continuing professional education (CPE), and Kinzer must complete 50 hours of CPE and limitations were placed on his activities for one year.

Thanks for reading CPA Practice Advisor!

Subscribe for free to get personalized daily content, newsletters, continuing education, podcasts, whitepapers and more...

Need more information? Read the FAQ's

The order sanctions L&L for having insufficient quality control policies and procedures related to reporting critical audit matters and for failing to file Form APs—which disclose who led specific audits for the firm and whether any other firms were involved in those audits—in a timely manner.

In addition, Luo was punished for contributing to L&L’s quality control violations and Chow and Kinzer for violating PCAOB rules and standards on the audit of the financial statements of paper product manufacturer Sugarmade Inc. for the fiscal year ended June 30, 2021.

“Critical audit matters are meant to inform investors and others about significant matters in the audit and how they were addressed,” PCAOB Chair Erica Williams said in a statement. “The PCAOB expects all firms to develop appropriate policies and procedures so that this important information is timely and accurately reported.”

Specifically, the PCAOB found the following:

  • L&L failed to establish quality control policies and procedures to provide reasonable assurance that its personnel would comply with PCAOB requirements for identifying and communicating critical audit matters. L&L also failed to timely file Form APs for two audits.
  • Luo directly and substantially contributed to L&L’s quality control violations.
  • For the Sugarmade audit, engagement partner Chow failed to obtain sufficient appropriate audit evidence to support the existence, valuation, presentation, and disclosure of a purported intangible asset that represented more than 50 percent of Sugarmade’s total assets, and he failed to accurately describe in the audit report how the engagement team addressed a critical audit matter.
  • Kinzer failed to perform his engagement quality review of the Sugarmade audit with due professional care and in accordance with PCAOB standards.

“Firms must have quality control systems in place to ensure compliance with PCAOB rules and standards, and firm personnel must conduct audits with due professional care and professional skepticism, particularly when auditing high-risk accounts and evaluating potential CAMs,” said Robert Rice, PCAOB director of enforcement and investigations. “This case is another example of the PCAOB holding firms and auditors accountable for violations of core PCAOB rules and standards.”