• As required by the Sarbanes-Oxley Act, the PCAOB keeps its investigations and disciplinary proceedings confidential and nonpublic until the matter is settled or otherwise finalized.^[i]

• PCAOB enforcement actions increased 61% in 2022 compared to 2021. The 29 PCAOB actions in 2022 were the highest number of actions disclosed since 2017.^[ii]

• Over 75% of the 17 actions involving firm respondents in 2022 contained allegations related to the firm’s system of quality control, up from about two-thirds in both 2020 and 2021.

• Nearly 30% of 2022 PCAOB actions involved alleged violations of the Engagement Quality Review (EQR) standard, down from almost 40% of the actions in 2021 and 70% in 2020.

The PCAOB disclosed nearly as many actions in 2022 as it did over the prior two years combined.

• Although issues related to auditor independence are an area of focus at the PCAOB,^[iii] none of the 2022 actions alleged auditor independence violations.

• The PCAOB disclosed one adjudicated action in 2022, the first adjudicated action disclosed since 2017.

[i]     See “Enforcement,” PCAOB, https://pcaobus.org/oversight/enforcement (“As required by the Sarbanes-Oxley Act, PCAOB investigations and disciplinary proceedings are confidential and nonpublic.”).

[ii]     The research sample excludes PCAOB actions that were publicly disclosed but involved allegations unrelated to the performance of an audit or to a firm’s system of quality control. In 2022, there were 13 such actions: (1) seven settled actions alleging that a PCAOB-registered firm failed to timely file Form APs, in violation of PCAOB Rule 3211, Auditor Reporting of Certain Audit Participants; and (2) six settled actions alleging that a PCAOB-registered firm failed to disclose certain reportable events to the PCAOB on Form 3, Special Reports.

[iii]    “Enforcement,” PCAOB, https://pcaobus.org/oversight/enforcement (“As stated in the PCAOB Strategic Plan, the Board prioritizes enforcement efforts that address those issues that pose the greatest risk to investors and are most likely to deter improper conduct. PCAOB staff focuses its work on significant audit violations, failures relating to auditor independence, and matters threatening the Board’s oversight integrity (e.g., noncooperation with PCAOB inspections and investigations).”).

This is an excerpt from Cornerstone Research's report, Public Company Accounting Oversight Board (PCAOB) Enforcement Activity: 2022 Year in Review. Click here to read the full report. Click here to read the press release for more information.