The Public Company Accounting Oversight Board has barred a CPA and fined the accounting firm where she formerly worked as an audit partner $50,000 for failing to follow U.S. auditing rules and standards in connection with the audits of several public companies.
During the relevant time period, Jennifer Crofoot, CPA, was an audit partner at Spokane, WA-based Fruci & Associates II and the engagement partner for the four audits in question.
A disciplinary order for Crofoot, which was issued on Dec. 18, states:
This matter concerns Crofoot’s violations of PCAOB rules and standards in connection with her role as engagement partner on the Firm’s audits of Clean Vision for the fiscal year ended December 31, 2023, Hammer Fiber Optics for the fiscal year ended July 31, 2023, LeeWay Services, Inc. for the fiscal year ended December 31, 2022, and Zeuus, Inc. for the fiscal year ended September 30, 2023.
Specifically, Crofoot authorized the issuance of an audit report containing an unqualified opinion in each of the Issuer Audits without having performed adequate or, in some instances, any procedures on material accounts, and without having received concurring approval of issuance from an engagement quality reviewer, as required by PCAOB standards.
Accordingly, in performing the Issuer Audits, Crofoot failed to exercise due professional care and professional skepticism, failed to obtain sufficient appropriate audit evidence to support the Firm’s audit opinions, and violated PCAOB audit documentation standards.
The sanctions levied against Crofoot include:
- Censure;
- Bars her from being an associated person of a registered public accounting firm, with the ability to petition for PCAOB consent to associate with a registered public accounting firm after three years from the date of the order; and
- Requires her to complete 40 hours of continuing professional education relating to PCAOB auditing standards, in addition to any CPE required in connection with any professional license, before filing any petition for board consent to associate with a registered public accounting firm.
The PCAOB said it determined to accept Crofoot’s offer of settlement, which doesn’t require her to pay a civil money penalty, after considering her financial resources. Based on her conduct, the audit regulator would have imposed a civil money penalty of $50,000 on her in this settlement, if it hadn’t taken her financial resources into consideration, according to the order.
According to the PCAOB, Crofoot was fired by Fruci after her misconduct was discovered.
The Fruci disciplinary order shows the firm was in the PCAOB’s crosshairs for failing to comply with the board’s quality control standards in connection with the four audits, including with respect to audit documentation and engagement performance.
The order states:
From at least 2023 to 2024, the Firm’s QC policies did not include sufficient procedures to provide reasonable assurance that Firm personnel would comply with AS 1215, Audit Documentation. Although the Firm had adopted certain QC policies and procedures for engagement performance, it failed to implement a sufficient system to provide reasonable assurance (i) that, for all issuer audits, a final set of audit documentation would be assembled for retention within 45 days of the release of the audit report (documentation completion date), and (ii) that Firm personnel would be prevented from improperly altering workpapers or making additions to the audit file after the documentation completion date.
Accordingly, the Firm failed to establish and implement sufficient policies and procedures to provide it with reasonable assurance that engagement personnel would comply with AS 1215, Audit Documentation, in violation of QC §§ 20.17 and .18.
These QC deficiencies allowed Crofoot to (i) evade the documentation requirements of PCAOB standards in the Issuer Audits, and (ii) continue to make changes to and backdate the work papers in certain of the Issuer Audits after the release of the respective audit reports and well after the relevant documentation completion dates.
PCAOB standards require that an EQR be performed on all audits. A firm’s QC system for its accounting and auditing practice should encompass procedures to ensure the performance of an EQR pursuant to AS 1220.14 In addition, a firm may grant permission to a client to use the audit report only after an engagement quality reviewer provides concurring approval of issuance of the report.
The Firm’s QC policies did not include sufficient procedures to provide reasonable assurance that an EQR would be performed on all of the Firm’s issuer engagements. Although the Firm had certain QC policies and procedures related to EQRs, it did not implement sufficient procedures to provide reasonable assurance (i) that an engagement quality reviewer would be assigned to each issuer audit engagement, or (ii) that the auditor’s report did not get released until after the EQR review was completed and concurring approval was obtained.
The deficiencies in the Firm’s policies and procedures related to EQRs are illustrated by Crofoot’s authorization of the issuance of audit reports for the Issuer Audits in which an EQR was not performed.
Accordingly, the Firm failed to establish and implement sufficient policies and procedures to provide it with reasonable assurance with respect to the performance of EQRs, in violation of QC § 20.17.
The PCAOB doled out the following sanctions against Fruci:
- Censure;
- $50,000 civil money penalty; and
- Requires the firm to undertake certain remedial actions.
According to the PCAOB, the fine would’ve been significantly larger and additional sanctions would have been given to Fruci if it wasn’t for the firm’s “extraordinary cooperation in this matter.”
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