During the fourth quarter of 2024, the Public Company Accounting Oversight Board (PCAOB) imposed more than $715,000 in fines to audit firms and individuals, bringing total penalties for the year to $37.4 million—the highest one-year total in its history, the PCAOB said in its quarterly recap for Q4 of 2024.
The PCAOB said it settled 51 disciplinary orders in 2024. The audit regulator disclosed 46 total enforcement actions in 2023, 37 of which related to the performance of an audit, up more than 28% from 2022, according to a Cornerstone Research study released last April. Twenty-nine of the 37 auditing actions were revealed during the second half of 2023, matching the total number of auditing actions for all of 2022.
With that $37.4 million in fines, the PCAOB broke its previous record high of $20 million in total fines levied to audit firms and individual auditors in 2023.
The blockbuster fine of 2024 was the $25 million penalty the PCAOB gave KPMG in the Netherlands last April for systemic internal exam cheating over a five-year period. It’s the largest fine the PCAOB has ever doled out.
The PCAOB found that widespread improper answer sharing occurred in the firm’s internal training program and that KPMG Netherlands lied to the PCAOB about its knowledge of the rampant cheating.
The firm’s former head of assurance, Marc Hogeboom, received a permanent bar and a $150,000 fine from the PCAOB.
“The growth and breadth of exam cheating in this case was enabled by the firm’s failure to take appropriate steps to monitor, investigate, and identify the potential misconduct,” PCAOB Chair Erica Williams said in a speech at the Ninth Annual Baruch Auditing Conference last month. “The PCAOB does not and will not tolerate unethical behavior—or any other behaviors that erode trust and threaten the investor confidence our system relies on. The cases we investigate and ultimately decide to enforce involve complex and serious matters: from audit failures in cases involving financial statement fraud to taking on client work that firms can’t complete to altering workpapers to not performing sufficient work before signing audit opinions—the list goes on.”
The PCAOB also nailed Big Four accounting firm PwC US with a $2.75 million fine last March for quality-control violations related to auditor independence.
PwC’s quality-control policies and procedures were found to be deficient because “they didn’t provide reasonable assurance that the firm’s personnel would timely consult with qualified individuals or refer to authoritative literature or other sources when dealing with certain complex, unusual, or unfamiliar independence issues,” the PCAOB said in the disciplinary order for PwC.
“All of these actions not only put audit quality in question, these actions put investors at risk,” Williams said at the Baruch Auditing Conference. “Which is why, after examining the facts and circumstances of every case, this board has revoked firms’ registrations, barred individuals, required functional changes to a firm’s supervisory structure, required firms to retain an independent monitor to drive improvements and best protect investors, and issued fines—including more than $35 million this year. All of the actions taken by this board send the message loud and clear: If you put investors at risk, you will be held accountable.”
Since Williams took the helm in 2022, the PCAOB has been its most active in years, imposing higher fines against firms and individual auditors, inspecting China-based audits for the first time, and advancing ambitious but controversial new rules, the Wall Street Journal noted in December.
And President-elect Donald Trump’s pick to succeed Gary Gensler as chair of the Securities and Exchange Commission (SEC), which oversees the PCAOB, is a longtime critic of the audit regulator. Paul Atkins is expected to ease overall oversight, including of cryptocurrency firms, if approved to lead the SEC, but his past criticism of the PCAOB could signal an even more drastic shake-up to audit regulation. That would likely mean a softer regulatory touch with accounting firms and a new leader to replace Williams as chair, according to the Wall Street Journal.
Atkins is a former Republican member of the SEC during the George W. Bush administration. In speeches he made several years ago, Atkins spoke out against rules that limited audit firms’ ability to make professional judgments. He has also been critical of the PCAOB’s budget, saying salaries paid to board members were disproportionately high.
Williams began her second term as PCAOB chair on Oct. 25. Her term lasts through Oct. 24, 2029.
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Tags: Accounting, Audit Standards, Auditing, PCAOB
