The Public Company Accounting Oversight Board (PCAOB) has imposed fines and penalties on top 100 audit firm Haynie & Co. and several of its partners of more than $590,000 for audit failures and violations of PCAOB’s rules and standards.
The PCAOB found that the individual audit partners involved each violated PCAOB rules and standards while serving as either engagement partner or engagement quality review partner on Haynie’s audit of the 2019 financial statements of George Risk Industries and Investview Inc. The PCAOB also found that Haynie violated PCAOB rules and standards on these 2019 audits, as well as PCAOB quality control standards.
“The PCAOB means business when it comes to enforcing our standards to meet our mission of protecting investors,” said PCAOB Chair Erica Y. Williams. “Where audit deficiencies reflect a deeper failure of a firm’s quality control system, the PCAOB will take action to impose accountability at both the firm level and the engagement team level.”
Specifically, the PCAOB’s findings include the following:
- Holman and Avis — the engagement partners on the George Risk and Investview audits, respectively — failed to exercise due professional care and professional skepticism, failed to obtain sufficient appropriate audit evidence to support Haynie’s opinions, and failed to evaluate whether the financial statements were presented in conformity with the applicable financial reporting framework. With respect to George Risk’s investments, Holman was aware of deficiencies in his testing approach identified during the PCAOB’s inspection of Haynie’s audit of George Risk’s 2017 financial statements. Despite this awareness, he followed a similar deficient testing approach during the 2019 George Risk audit.
- Hrabova and Fleischman, while serving as engagement quality review partners on the 2019 George Risk and Investview audits, respectively, failed to exercise due professional care and professional skepticism. Therefore, they lacked an appropriate basis to provide their concurring approvals of issuance of Haynie’s audit reports.
The PCAOB further determined that Haynie violated PCAOB QC standards because it failed to (1) effectively implement policies and procedures to provide reasonable assurance that the work performed by engagement personnel met applicable professional standards and regulatory requirements; and (2) establish policies and procedures to provide reasonable assurance that Haynie’s quality control policies and procedures were suitably designed and were being effectively applied, and that its system of quality control was effective.
“The multitude of audit deficiencies in this case demonstrates that, where a firm’s quality control system is lacking, audit quality suffers,” said Robert E. Rice, Director of the PCAOB’s Division of Enforcement and Investigations.
Without admitting or denying the findings, the firm and its partners consented to the PCAOB’s orders, which do the following:
- Censure the Respondents;
- Impose on Holman and Avis $65,000 civil money penalties each and two-year bars from being associated persons of a registered public accounting firm;
- Impose on Hrabova and Fleischman $30,000 civil money penalties each and one-year practice limitations;
- Impose on Haynie a $400,000 civil money penalty; and
- Require Haynie to engage an independent consultant.
PCAOB enforcement staff members David Florenzo, Lindsay Kelemen, Laura Voisin, and Tima Hawes conducted the investigation, supervised by Kyra Armstrong and John Abell.
The PCAOB oversees auditors’ compliance with the Sarbanes-Oxley Act, provisions of the securities laws relating to auditing, professional standards, and PCAOB and SEC rules. 