Canadian Audit Firm Fined $60,000 By the PCAOB for Quality Control Failures

The Public Company Accounting Oversight Board (PCAOB) fined Vancouver-based accounting firm De Visser Gray $60,000 on June 18 for failing to comply with U.S. auditing rules and quality control standards from April 2019 through January 2024.

According to the PCAOB, De Visser Gray’s system of quality control failed to provide reasonable assurance that the firm and its personnel would:

Comply with applicable PCAOB professional standards and regulatory requirements;
Perform sufficient procedures to determine whether certain matters were critical audit matters;
Comply with independence-related pre-approval requirements before providing tax services to an audit client;
Make all required audit committee communications; and
Timely file Form APs.

“No matter where they are located, PCAOB-registered firms must follow PCAOB rules and standards,” PCAOB Chair Erica Williams said in a statement. “Failing to do so puts the investing public at risk and will not be tolerated.”

In one instance, PCAOB staff noted during an inspection of De Visser Gray in 2019 that the firm had obtained its audit methodology and audit practice materials from external service providers, and that the guidance used was only in accordance with Canadian auditing standards (CAS), not PCAOB auditing standards.

Of the two audits reviewed by PCAOB inspectors, one had deficiencies related to long-lived assets, according to De Visser Gray’s 2019 PCAOB inspection report.

The same thing happened again during a 2022 inspection of the firm, when PCAOB staff informed the firm once again of its findings regarding significant deficiencies in its quality control system related to its use of an external service provider and its audit practice materials.

The PCAOB said in its disciplinary order:

Specifically, PCAOB inspection staff informed the Firm that certain of this guidance, including Professional Engagement Guide (“PEG”) audit programs, was only in accordance with CAS, rather than PCAOB auditing standards and rules. In addition, it noted that the Firm had not established policies and procedures to ensure that when engagement teams use the PEG audit programs on issuer audit work, they will address the requirements in PCAOB standards that were not addressed in the PEG audit programs. As a result, for certain audits, the Firm used audit methodology that failed to consider the requirements of PCAOB standards.

Despite being on notice of these deficiencies, the Firm continued to use the audit methodology and audit practice materials that were not compliant with PCAOB auditing standards and other regulatory requirements.

De Visser Gray therefore failed to establish policies and procedures sufficient to provide it with reasonable assurance that the work performed by the Firm and its engagement personnel complied with applicable professional standards and regulatory requirements, in violation of QC § 20.

Of the three De Visser Gray audits inspectors reviewed in 2022, two had deficiencies for an error rate of 67%.

In addition to paying the $60,000 fine, the PCAOB is requiring De Visser Gray to establish and/or revise its quality control policies and procedures to provide reasonable assurance that the work performed by engagement personnel meets all applicable audit requirements. The firm is also required to train its staff on certain PCAOB rules and standards.

“Firms must have quality control systems in place to ensure compliance with our standards,” said Robert Rice, PCAOB director of enforcement and investigations. “If they do not, we will hold them accountable for those failures.”