SEC Overturns PCAOB Sanctions on Auditor

Chris Gaetano
Published Date:
Jun 20, 2019

The Securities and Exchange Commission (SEC), in a rare move, overturned sanctions leveled against an auditor by the Public Company Accounting Oversight Board (PCAOB), according to Compliance Week

The case involved a now-retired KPMG auditor whose client was charged by the SEC with accounting fraud in order to hide a $400 million loss in 2007. The PCAOB, in turn, said that the auditor, Cynthia Reinhart, did not follow professional standards, finding that there were repeated cases of neglect over whether the company could continue as a going concern and whether it had the intent and ability to retain investments long enough to permit recovery of market value. Reinhart appealed the ruling to the SEC, which, after looking at the evidence, determined that these two areas don't necessarily count as repeated neglect, and that the PCAOB did not establish a convincing enough case for neglect in other areas as well. 

The SEC, which oversees the PCAOB, does not often overturn board decisions, said an attorney quoted in Compliance Week, but it is not entirely unheard of. While it is expensive and time consuming to appeal a finding, sometimes challengers do win. 

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