SECPS Unveils Tougher Disciplinary Provisions for Firms


The AICPA SEC practice section (SECPS) strengthened the disciplinary measures its member firms must take to ensure the effectiveness of public company audits.

Beginning January 1, 2001, any firm that audits SEC-registered companies will be required to take certain actions if any of its audit engagement partners is investigated in connection with litigation alleging deficiencies in the auditing of a present or former SEC client’s financial statements.

In such a situation, the new SECPS membership requirement states the firm must take one of the three following actions:

  • Terminate or retire the partner.

  • Remove the partner from performing or supervising public-company audits until the Institute has completed its ethics enforcement process.

  • Subject the partner to additional oversight, for at least one year, on all public company audit engagements in which he or she is involved. Such oversight must be performed by a senior technical partner appointed by the firm’s CEO or managing partner.

Although the firm determines which disciplinary option to employ, that selection is evaluated during its triennial peer review and by the Public Oversight Board (POB).

If another SECPS firm hires the individual under investigation, it is required to assume disciplinary responsibility from the member firm at which the individual was employed when the alleged infraction took place.

David Brumbeloe, SECPS director, said, “We are pleased to see that the enhanced disciplinary requirement, which we submitted to the POB’s Panel on Audit Effectiveness, was included in its final report and recommendations.”

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