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PCAOB fines MaloneBailey $400K for quality control violations

May 21, 2024

The Public Company Accounting Oversight Board has levied a $400,000 fine against MaloneBailey and sanctioned the auditing firm for pervasive quality violations.

According to a settled disciplinary order Tuesday, the PCAOB conducted three inspections of the Houston-based firm from 2018 to 2021 and during each inspection found significant deficiencies that prompted concerns about its performance on audit engagements. But even though the PCAOB brought those deficiencies and concerns to the firm's attention, it failed to make effective changes to improve its system of quality control. The findings involved problems with revenue testing, auditing accounting estimates, including fair value measurements, audit committee communications, fraud risks and state practice qualification requirements.

"Effective quality control systems are critical to high-quality audits, and the PCAOB will not tolerate failures to maintain those systems and properly protect investors," said PCAOB chair Erica Williams in a statement Tuesday.

A spokesperson for the firm declined to comment on the announcement.

Without admitting or denying the findings, MaloneBailey settled with the PCAOB and consented to a disciplinary order that imposes a $400,000 penalty, requires the firm to engage an independent consultant who will review and make recommendations concerning the firm's quality control policies and procedures; and requires the firm to conduct certain training for all audit staff.

"Today's order should serve as a stark reminder that firms must have effective systems of quality control," said Robert E. Rice, director of the PCAOB's Division of Enforcement and Investigations, in a statement. "If they do not, we will hold them accountable for those failures, particularly when the failures have been repeatedly identified during inspections of the firm."

[Accounting Today]

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