Auditing
PCAOB Punishes New York Audit Firm, Three Partners for Deceiving Inspection Staff
The PCAOB doled out $465,000 in total fines, permanently revoked the registration of Raines & Fischer, and barred three of its partners.
Dec. 06, 2024
Staff report
The Public Company Accounting Oversight Board (PCAOB) on Dec. 3 settled disciplinary orders sanctioning New York-based accounting firm Raines & Fischer and three of its partners—William Fischer, Brian Uhlman, and Steven Sarrel—for violating PCAOB rules and standards.
According to the PCAOB, Raines & Fischer violated PCAOB Rule 4006, Duty to Cooperate With Inspectors, and AS 1215, Audit Documentation, because its personnel improperly created and modified numerous workpapers after the applicable documentation completion dates and in anticipation of PCAOB inspections in 2020 and 2022. Those professionals took various steps, including changing computer clocks and printing documents to PDF, to conceal the alteration of the workpapers before they were provided to PCAOB inspectors.
Sarrel and Uhlman also violated PCAOB Rule 4006. Sarrel was principally responsible for the alteration of workpapers prior to the 2020 inspection of a broker-dealer engagement for which he served as engagement partner. Uhlman was principally responsible for the alteration of workpapers prior to the 2022 inspection of two broker-dealer engagements for which he served as engagement partner. Neither Sarrel nor Uhlman informed the inspectors of the alterations to the workpaper files, despite participating in meetings with PCAOB staff during the inspections.
Fischer was Raines & Fischer’s managing partner and in charge of its audit department and quality control during that period. Despite being aware in both instances of the alterations to the workpapers, he took no action in response and failed to prevent the altered workpapers from being provided to PCAOB staff.
“Attempting to deceive the PCAOB’s inspection staff undermines investor protection,” PCAOB Chair Erica Williams said in a statement. “To protect investors and safeguard the integrity of the inspection process, the PCAOB will continue to pursue disciplinary action against firms and individuals that fail to cooperate with inspections.”
In addition to committing the inspection-related violations, Raines & Fischer’s system of quality control was also deficient, as evidenced by the improper documentation practices described above and other violations of PCAOB rules and standards committed by its personnel. The firm also violated PCAOB documentation standards because it failed to assemble for retention complete and final sets of workpapers for four broker-dealer engagements in addition to the three subject to inspection. Finally, Raines & Fischer repeatedly violated PCAOB Rule 2201 by failing to timely file its Form 2 in four consecutive years.
Additionally, Uhlman failed to comply with auditing and attestation standards in connection with the audit and examination of a carrying broker-dealer. During that engagement, he failed to test key internal controls over compliance and supplemental information included in the schedules supporting the broker-dealer’s financial statements.
Fischer also violated AS 1220, Engagement Quality Review, by failing to perform adequate engagement quality reviews for seven broker-dealer engagements. He also violated PCAOB Rule 3502, Responsibility Not to Knowingly or Recklessly Contribute to Violations, by directly and substantially contributing to the firm’s noncooperation for both inspections and its violations of PCAOB rules and standards.
Without admitting or denying the findings, all four respondents consented to their respective orders. The orders:
- Censure each respondent;
- Permanently revoke Raines & Fischer’s registration;
- Bar Uhlman from associating with a PCAOB-registered firm with a right to petition the board to terminate the bar after five years and requiring additional CPE requirements prior to petitioning;
- Bar Fischer and Sarrel from associating with a registered firm with the right to petition to terminate the bars after three years; and
- Impose civil money penalties of $200,000 on Raines & Fischer, $125,000 on Uhlman, $75,000 on Fischer, and $65,000 on Sarrel.
“These respondents were responsible for a host of audit and attestation deficiencies and compounded those violations with their attempts to conceal the shortcomings in their work from the PCAOB’s inspectors. That misconduct warrants the strong sanctions imposed in the orders issued by the board today,” said Robert Rice, director of the PCAOB’s Division of Enforcement and Investigations.