The PCAOB rejected an application from Price & Gartrell, P.C. to become a public accounting company. The reason for the rejection is as follows:
"PCAOB NO.1 02-2009-006
December 3, 2009
Basis of Disapproval
12. The Board has considered the following information, which includes information obtained by the Board in connection with Price's application as well as the requirements of the Act and the Board's rules -
a. On or about August 17, 2009, Price certified the financial statements, including the balance sheet and income statement, of Indiana Merchant Banking & Brokerage Company, Inc. ("Merchant"), a registered broker-dealer, for the fiscal year ended June 30, 2009, which Merchant subsequently filed with the Commission.
b. Section 17(e) of the Securities Exchange Act of 1934, required that the balance sheet and income statement filed with the Commission by Merchant for the fiscal year ended June 30, 2009 be certified by a registered public accounting firm.
c. On the date that Price certified the Merchant balance sheet and income statement for the fiscal year ended June 30, 2009, Price was not a registered public accounting firm.
d. Although Price's conduct with respect to Merchant's financial statements did not involve, and the Board is unaware of conduct by Price involving, the audit of any "issuer" (as defined in the Act and the Board's Rules), approval of Price's registration application would make it lawful for Price to provide audit reports for issuers.
13. As provided in PCAOB Rules 2106(b)(2)(ii) and 5201 (c), and on the basis of the information described in paragraph 12, the Board identifies the following proposed grounds for disapproving Price's registration application -
a. Price certified the balance sheet and income statement of a registered broker-dealer, for filing with the Commission, for a period with respect to which Price knew or should have known that those financial statements were required by law to be certified by a registered public accounting firm.
b. Price's certification of these financial statements while not registered with the Board appears to demonstrate an unwillingness or inability to exercise sufficient care with respect to relevant legal requirements."
To read the full statement, click here.
Auditing public companies is a privilege, not a right. Just because you are an accountant does not mean you can audit public company financials and Price found this out the hard way. Because this right can be revoked if the PCAOB finds an audit to be inadequate during their review of the auditors work, auditors are sometimes a little paranoid which can cause them to over scope their audits out of fear - it is a never-ending cycle - management over scopes to try to make the auditors happy, auditors over scope to try to make the PCAOB happy. This is why a risk assessment performed and understood by management is VITAL. Management can control the scope of their audits and they should because their auditors will never know their company as well as they do.