US audit watchdog PCAOB censures Vancouver public accounting firm
Hay & Watson barred by Public Company Accounting Oversight Board over backdating of files related to California oil & gas company
TORONTO, Sept. 16, 2022 – Vancouver accounting firm Hay & Watson has been censured by the the regulator responsible for audit oversight in the United States. According to its public enforcement action, the Public Company Accounting Oversight Board has revoked the registration of the accounting firm and barred its owner and managing partner, Essop Mia, CPA, “from being associated with a registered public accounting firm.” The PCAOB has also imposed a $50,000 civil money penalty.
The PCAOB found that Mia, who was listed as engagement partner, failed to assemble a final set of documentation for the audit, and then he and colleagues at the firm improperly altered, added to and backdated work papers months after the deadline for assembling a complete and final set of audit documentation and shortly before a PCAOB inspection. Mia and the firm violated PCAOB rules, according to the PCAOB, by providing the altered work papers to PCAOB inspectors without disclosing they had been altered.
Firm altered, backdated papers related to California oil & gas company
The PCAOB sanction revolves around an oil and gas company formed in Ontario but headquartered in Sherman Oaks, California. The company, which, according to the PCAOB, was “was, at all relevant times, the Firm’s only issuer audit client,” was listed on the TSX Venture Exchange.
Mia and the firm failed to assemble a final set of audit documentation as of the prescribed completion date. Instead, Mia, and others acting at his direction, continued to improperly alter, add to, and backdate work papers months after the documentation completion date. The Canadian firm was also sanctioned for noncooperation with inspections, by providing the altered work papers to the Board’s inspectors without disclosing that they had been altered.
Members of the firm, at Mia’s direction, improperly backdated at least 30 work papers in a 2019 audit file by adding signoffs to its audit documentation software during September and October 2020 that incorrectly indicated the work papers were prepared or completed before issuance of the 2019 Audit report. According to the PCAOB, Mia signed off on a total of 339 work papers in the 2019 file after the documentation completion date.
"Inspections serve an important role in protecting investors and improving the quality of audit services," said PCAOB Chair Erica Y. Williams in a statement. "Backdating signoffs and modifying documents in advance of an inspection undermines the PCAOB's ability to inspect registered firms and warrants significant board sanctions."
US audit watchdog provides transparency into its inspections process
Unlike in Canada, where the national audit inspector does not publish the names of the firms it is inspecting, the PCAOB provides the public with inspection reports with more detail. As reported by Canadian Accountant, Hay & Watson was the subject of one of three inspection reports published by the PCAOB in July 2022, which details an inspection conducted in cooperation with the Canadian Public Accountability Board.
According to Accounting Today, Mia declined to comment when contacted, but said a settlement was in process. This is the second settled disciplinary order of a Canadian firm published this year.
By Canadian Accountant staff.