PCAOB Revocation and Fine For Failure To Produce Records Upheld on Appeal

R.E. Bassie & Co., R. Everett Bassie, CPA, AAER 3354, January 10, 2012

PCAOB revoked Bassie & Co's registration and barred Bassie from associating with a registered public accounting firm and fined him $75,000. It found that the firm and Bassie failed to cooperate with a PCAOB investigation.

In late 2006 PCAOB staff required the firm to produce work papers relating to work done for a client in connection with an investigation. The documents were never produced and disciplinary proceedings were finally instituted in early 2009. In the intervening period the firm and counsel repeatedly asked for extensions of time to produce the documents, but never did so.

The PCAOB investigation involved Bassie's independence in connection with the audit of Calypso Wireless. The documents related to work Bassie did for entities that were involved in a law suit with Calypso.

Since PCAOB may demand any documents its staff deems relevant to an investigation its jurisdiction is not limited to work done only in connection with the audit of a public company. Because the issue in the investigation was Bassie's independence, any facts reasonably related to that issue were relevant to the PCAOB investigation.

The Commission also rejected respondents' claim that it was improper for the PCAOB hearing officer to proceed through summary disposition without trial. It found Bassie had not produced sufficient evidence of an actual advice of counsel defense to justify a hearing. Finally, the Commission upheld the sanctions, noting that PCAOB's ability to investigate is critical to its function and the fact that respondents had over an extended period never produced the documents.

Read more commentary on SEC administrative opinions at SEC Tea Party, a blog by Robert Fusfeld.

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