Auditors Warned by PCAOB Against Altering Documents Improperly

An alert that describes concerns of PCAOB staff with regard to changing audit documentation improperly in connection to investigation and inspection has been published by the Public Company Accounting Oversight Board. For the past couple of years, individuals and firms have been sanctioned for inappropriately changing audit documentation with respect to investigation and inspection. In these cases, the sanctions have entailed revoking registration of firms and preventing individuals from auditing registered firms. Recently, staff at PCAOB said that it has obtained evidence that this type of misconduct is recurring.

The PCAOB director, Claudius B. Modesti said that making improper alterations of audit documentation frustrates the mission of the board and also undermines the public trust that auditors indeed serve their gatekeeping function. He continued to add that such matters of misconduct are taken seriously and that auditors need to be aware of the major enforcements and consequences that come from such kind of behavior.

The PCAOB enforcement staff unveiled extra additional instances of the same misconduct including evidence that associated persons and firms that are registered have incorrectly added to, altered or deleted audit documentation with respect to board inspections and then made altered documents available to the inspectors of PCAOB without having to inform the inspector about these alterations.

In some cases, evidence shows that documents were made in advance, during an inspection or back dated before being made available to the inspectors at PCAOB without having any disclosure of the time when they were indeed created. This affects both non-US companies and domestic companies including the global network members.

Standards at PCAOB provide particular audit requirements to follow in case there are valid reasons for making alterations to the audit documentation after the completion of the audit. Staffs at PCAOB are now urging the registered individuals or firms to be aware of improper audit documentation alteration and to have this information reported to the board. They can do this through contacting staff directly in the Registration and Inspection of the Division. Individuals may also report inappropriate alterations of the audit documentation to the Securities and Exchange Commission.