PCAOB Punishes NYC-Based CPA Firm and Managing Partner For ‘Substandard Audit Work,’ QC Violations
April 22, 2025
Accounting firm Adeptus Partners was fined $75,000 and managing partner Howard Krant was sanctioned $50,000 on April 22 for breaking the rules during the audits of two technology companies.
The Public Company Accounting Oversight Board dished out fines to a New York City-based accounting firm and its managing partner on April 22 for breaking the rules during the audits of two technology companies.
Adeptus Partners LLC was fined $75,000 and Howard Krant was sanctioned $50,000 for violating various PCAOB rules and standards—including inadequate supervision of engagement teams and review of their work—in connection with the 2020 and 2021 audits of Blockchain of Things Inc. and the 2020 audit of Applied UV Inc. The firm also fell short on following quality control policies and procedures.
“Substandard audit work and inadequate quality control put investors at risk,” PCAOB Chair Erica Williams said in a statement on Tuesday. “When violations like these occur, the PCAOB will take enforcement actions to hold auditors and firms accountable.”
Krant was the engagement partner on both of Adeptus Partners’ audits of Blockchain of Things and the accounting firm’s audit of Applied UV.
According to the PCAOB, the violations committed by Krant include:
Failing to adequately supervise the engagement teams on the 2020 Blockchain of Things and Applied UV audits, including a failure to review the workpapers for these audits or even obtain computer access to review the workpapers for the audits. The PCAOB said Krant signed the firm’s audit reports for the 2020 audits, authorizing their release, based solely on discussions with the engagement team and the engagement quality review partner.
Failing to properly review the engagement team’s work on deferred revenue for the Blockchain of Things 2021 audit to ensure sufficient appropriate audit evidence was obtained.
In addition, the PCAOB found that Adeptus Partners’ system of quality control failed to provide the firm with reasonable assurance that engagement teams performed issuer audits in accordance with applicable professional standards and regulatory requirements.
The PCAOB says in the disciplinary order:
For example, it was the regular practice of one audit partner (not Krant) on the 2020 Audits and the 2021 Blockchain of Things audit to sign off on work papers as a reviewer to remove error messages in order to archive the binder, even though he had not actually reviewed the corresponding work papers. As a result, it was unclear who actually reviewed the work papers, or if significant changes were made to the work papers after they had been reviewed.
For the 2020 Audits, there was also inadequate control over signatures evidencing review within work papers. Krant’s signature appeared as a reviewer within multiple audit work papers, despite Krant never having electronic access to the work papers. In addition, no one on the engagement teams or at the Firm, including Krant himself, was aware of how his electronic signature and date of his signature appeared within these documents.
For the 2020 Audits and the 2021 Blockchain of Things audit, there also was incomplete audit documentation: the EQR sections of the supervision, review, and approval forms were blank, unsigned, and undated. The EQR partners who completed these sections did not know why they were blank in the complete and final set of audit documentation for the audits.
Additionally, for the 2020 Audits and the 2021 Blockchain of Things audit, there was inadequate documentation of journal entry testing, which the engagement team identified as a response to address the significant risk and fraud risk related to management override of controls. The journal entry testing documentation consisted of a short one-page memo, which did not accurately reflect the entirety of the journal entry testing performed.
Without admitting or denying the findings, Krant and Adeptus Partners consented to the PCAOB’s order, which:
Censures both respondents;
Imposes a $75,000 civil money penalty on the firm, and a $50,000 civil money penalty on Krant;
Suspends Krant from associating with a registered public accounting firm for a period of one year; and
Requires the Adeptus Partners to engage an independent consultant to review and make recommendations concerning its system of quality control.
“The firm and one of its partners violated PCAOB standards in the conduct of the audits and failed to implement quality control policies and procedures to safeguard against these violations. The sanctions imposed by the board hold the respondents accountable for those failures,” said Robert Rice, director of the PCAOB’s Division of Enforcement and Investigations.
[CPA Practice Advisor]
