The Public Company Accounting Oversight Board (PCAOB) has announced a settled disciplinary order sanctioning Jack Shama, the sole proprietor of the firm of the same name, for numerous and repeated violations of various PCAOB rules and standards in connection with nine audits. During the audits, Shama and his firm performed limited or no audit procedures on many significant accounts and transactions.
The PCAOB found that, among other violations, Shama and his firm failed to exercise due professional care and professional skepticism during the nine audits, failed to obtain sufficient appropriate audit evidence to support the firm’s opinions, and failed to properly assemble and retain audit documentation. Shama’s firm also violated PCAOB standards by failing to have an engagement quality review performed for any of the nine audits.
Commenting on this, PCAOB chair, Erica Williams, said: “When auditors are unwilling or unable to comply with core PCAOB standards across numerous audits, the Board will take action to hold those auditors accountable and protect investors.”
The PCAOB also found that the firm violated PCAOB quality control standards because it failed to design and implement adequate policies and procedures to provide reasonable assurance that (1) the work performed by engagement personnel would meet applicable professional standards and regulatory requirements, (2) the work was assigned to personnel with the required technical training and proficiency, and (3) the firm would only undertake engagements that it could reasonably expect to complete with professional competence.
Shama directly and substantially contributed to the firm’s violations related to engagement quality reviews and quality control.
PCAOB division of enforcement and investigations director, Robert Rice, added: “The pervasive violations of PCAOB standards that occurred in the nine audits at issue are unacceptable and warrant the permanent registration revocation and permanent bar the Board has imposed.”
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Without admitting or denying the findings, Shama and the firm consented to the PCAOB’s order, which censures Shama and his firm, permanently revokes the firm’s registration, and permanently bars Shama from being an associated person of a registered public accounting firm.
PCAOB enforcement staff members Dillon Fitzgerald, Benjamin Reed, Michelle Jaconski, and Thomas Barry conducted the investigation, supervised by Ian Anderson and Stephen D’Angelo.
The PCAOB oversees auditors’ compliance with the Sarbanes-Oxley Act, provisions of the securities laws relating to auditing, professional standards, and PCAOB and SEC rules.