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PCAOB Busts Two Audit Firms for Not Complying With Reporting Rules

KKM CPA Associates in New York and the BDO affiliate firm in the United Arab Emirates were fined $25,000 and $20,000, respectively.

Garden City, NY-based KKM CPA Associates and the BDO affiliate firm in the United Arab Emirates were fined $25,000 and $20,000, respectively, by the Public Company Accounting Oversight Board (PCAOB) on June 18 for not following U.S. auditing reporting requirements.

“When registered firms fail to comply with reporting requirements, it deprives investors of important information about those firms,” PCAOB Chair Erica Williams said in a statement.

According to PCAOB Rule 2200, Annual Reports, PCAOB-registered firms are required to file annual reports on Form 2 that disclose, among other things, each issuer for which a firm issued any audit reports during a reporting period. Despite having audited an issuer during the 2022 annual reporting period, KKM failed to list that engagement in its Form 2 for the applicable period and instead indicated that it had not audited any issuers, the audit regulator said in the disciplinary order.

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PCAOB Rule 2203, Special Reports, requires registered firms to file a Form 3 disclosing certain reportable events listed in that form within 30 days of the occurrence of those events. Two such events are the initiation of various disciplinary proceedings involving a firm and its personnel, as well as the conclusion of such proceedings.

BDO Chartered Accountants & Advisors and a former partner of the firm were respondents in a disciplinary proceeding brought by the Auditors Disciplinary Board of the United Arab Emirates Ministry of Economy. The firm was accused of violating local laws regulating the audit profession in connection with audit work the firm performed for a non-issuer client. However, BDO Chartered Accountants & Advisors failed to report the initiation and conclusion of that proceeding until roughly nine months after it ended, according to the PCAOB disciplinary order. The proceeding resulted in a monetary penalty given to BDO Chartered Accountants & Advisors.

KKM’s violation was identified as part of a sweep, which the PCAOB routinely uses to collect information on potential violations from several firms at the same time. BDO’s violation was identified through regular monitoring the PCAOB conducts of registered firms’ compliance with the requirement to timely report the events listed in Form 3, the audit regulator said.

In addition to fining both firms, the PCAOB censured KKM and BDO Chartered Accountants & Advisors and required them to undertake remedial measures to improve their policies and procedures concerning compliance with reporting requirements.

“We will continue to employ sweeps to identify violations of PCAOB reporting requirements and hold firms accountable for failing to properly disclose information that they are obliged to report,” said Robert Rice, director of PCAOB enforcement and investigations.