https://www.sec.gov/news/press-release/2022-180
I have chosen to write about an audit failure by RSM US LLP. The SEC
is charging RSM and 3 Senior-Level employees of Revolution Lighting
Technologies Inc. “According to the SEC’s order, RSM’s planning and
supervision of the audit, as well as the evaluation of audit results and
review of Revolution’s disclosures, all failed to adhere to the Public
Company Accounting Oversight Board’s auditing and quality control
standards.” (SEC.gov | SEC Charges Audit Firm RSM and Three Senior-
Level Employees with Failure to Properly Conduct Client Audits,
2022) RSM and Revolution’s senior leader Michael Piqueira, “… failed
to adequately plan, supervise, and execute the audits. Condon was
charged with improperly reviewing and approving RSM’s analysis that
inaccurately concluded Revolution’s errors and inflated revenue were
immaterial to investors.” (SEC.gov | SEC Charges Audit Firm RSM and
Three Senior-Level Employees with Failure to Properly Conduct
Client Audits, 2022) Over a four-year period failed to audit RSM’s
financial statements while revolution was violating accounting
principles by inflating revenue with bill and hold. Ultimately, “RSM
agreed to pay a $3.75 million penalty, to be censured, and to retain an
independent consultant to review and evaluate its audit, review, and
quality control policies and procedures.” (SEC.gov | SEC Charges
Audit Firm RSM and Three Senior-Level Employees with Failure to
Properly Conduct Client Audits, 2022)
RSM should have followed PCAOB standards and created a strong
audit plan and additional supervision. Bill and holding of sales should
have been something that was found and addressed during the first
audit. Do to the false representation of financial statements, board of
directors and investors had no idea this fraud was taking place. This
goes to show how important the auditing planning process is for the
auditing firm, as well as the client.
References
SEC.gov | SEC Charges Audit Firm RSM and Three Senior-Level
Employees with Failure to Properly Conduct Client Audits. (2022,
September 30). https://www.sec.gov/news/press-release/2022-180
