On February 24, 2022, the Public Company Accounting Oversight Board (PCAOB or Board) entered an Order Instituting Disciplinary Proceedings, Making Findings, and Imposing Sanctions on PricewaterhouseCoopers LLP (PwC or the Firm) by which the Board:
(1) censured PwC;
(2) imposed a $750,000 civil money penalty on the Firm; and
(3) required the Firm to undertake certain remedial actions as described in the Order.
Sanctions were based on the PCAOB's findings that PwC Canada violated PCAOB rules and quality control standards over several years in connection with the Firm’s internal training program.
A summary of the findings from the Board's Order follow:
"From at least 2016 until early 2020, PwC Canada violated PCAOB rules and quality control standards related to integrity and personnel management by failing to establish appropriate policies and procedures for administering and overseeing internal training tests, including tests designed to help the Firm’s audit professionals satisfy the requirements for maintaining their accounting certifications. Those quality control failures prevented the Firm from identifying that more than 1,200 Firm professionals were involved in improper answer sharing—either by providing or receiving answers—in connection with tests for mandatory internal training courses covering topics that included auditing, accounting, and professional independence. More than 1,100 of these professionals were from the Firm’s Assurance practice.
After discovering the training-related misconduct in January 2020, PwC Canada reported the matter to the PCAOB and began implementing remedial policies and procedures, which the PCAOB considered in determining the sanctions."
The quality control standards cited in the Order were:
QC sec. 20.09 - Policies and procedures should provide the firm with reasonable assurance that personnel maintain independence (in fact and in appearance) in all required circumstances, perform all professional responsibilities with integrity, and maintain objectivity in discharging professional responsibilities.
QC sec. 20.13 - Among other things, policies and procedures should provide the firm with reasonable assurance that work is assigned to personnel having technical training and proficiency required in the circumstances and personnel participate in general and industry-specific continuing professional education (CPE) and other professional development activities that enable them to fulfill responsibilities assigned, and satisfy applicable CPE requirements of the AICPA and regulatory agencies.
QC sec. 30.02 - Monitoring is one of the five elements of quality control, which provides that a CPA firm should establish policies and procedures to provide the firm with reasonable assurance that the policies and procedures relating to each of the other elements of quality control are suitably designed and are being effectively applied. Among other things, monitoring involves an ongoing consideration and evaluation of the effectiveness of professional development activities and compliance with the firm's policies and procedures.
QC sec. 40.02 - Among other things, personnel participate in general and industry-specific CPE and other professional development activities that enable them to fulfill responsibilities assigned, and satisfy applicable CPE requirements of the AICPA, and regulatory agencies.
One takeaway from the Order: it is not enough to track completion of your firm's personnel CPE; your firm should have policies and procedures that provide reasonable assurance that personnel are actually taking the training and passing any required examinations and the firm should actively monitor these policies and procedures.
Click here to read the Order.