PCAOB Sanctions Auditors for Breaching Standards in Grupo Simec

The Public Company Accounting Oversight Board (PCAOB) has announced a settled disciplinary order, imposing sanctions on Marcelo de los Santos Anaya and Martín Rodríguez Martínez for multiple violations of PCAOB rules and standards in connection with the audits of Grupo Simec, S.A.B. de C.V. ("Simec") for the years 2018 and 2019.

The disciplinary action revolves around de los Santos, the engagement partner for both audits, and Rodríguez, who served as the Engagement Quality Review (EQR) partner. De los Santos repeatedly fell short in exercising due professional care and obtaining sufficient appropriate audit evidence to support the opinions on Simec's financial statements and internal control over financial reporting (ICFR) for the mentioned years.

Among the noted failures, de los Santos neglected to plan and execute the audits according to PCAOB auditing standards, opting instead for International Standards on Auditing in his procedures. Additionally, he failed to adequately evaluate the presentation of Simec's financial statements and the consolidation of its subsidiaries' operations into those statements. Concerning ICFR, fundamental audit procedures, including testing controls over significant accounts and evaluating the severity of identified control deficiencies, were neglected.

PCAOB Chair Erica Y. Williams emphasized the significance of the disciplinary order, stating, "This order demonstrates that the PCAOB will impose significant sanctions against auditors who fail to perform basic elements of audits. We will continue to work diligently to identify and address such violations so that we can ensure investors are protected."

Rodríguez, in his role as EQR partner, failed to identify or address numerous significant deficiencies in the engagement team's testing. This included providing approval for an unqualified ICFR opinion for 2019, despite evidence that the engagement team did not assess whether Simec had rectified material weaknesses disclosed in the company's 2018 Form 20-F and the severity of identified control deficiencies in the current year.

Robert E. Rice, PCAOB Director of Enforcement and Investigations, highlighted the crucial role of engagement quality reviews, stating, "When those reviews ignore obvious deficiencies in audit work and rubberstamp the issuance of clean audit opinions, they put investors at risk."

Without admitting or denying the findings, de los Santos and Rodríguez consented to the PCAOB's order. The disciplinary measures include a five-year bar and a $125,000 civil money penalty for de los Santos and a two-year bar with a $40,000 civil money penalty for Rodríguez. Both respondents are also required to complete additional continuing professional education before petitioning the Board to terminate their bars. The sanctions aim to reinforce the importance of adherence to auditing standards and maintaining the integrity of financial reporting.

The GRC Report is the first word in governance, risk, and compliance news. As your trusted source for comprehensive coverage, the GRC Report keeps you informed and equipped to navigate the evolving landscape of governance, risk, and compliance. And remember, the GRC Report isn't just a news source; it's a community of professionals who share your passion for GRC excellence. Don't miss out on our insightful articles and breaking news – join the conversation and empower your GRC journey.