Brattle Report Analyzes 2023 SEC & PCAOB Enforcement Activity Involving Auditors
According to a new report from The Brattle Group, the Public Accounting and Oversight Board (PCAOB) and the US Securities and Exchange Commission (SEC) have, for the second year in a row, placed an increased emphasis on enforcement in their efforts to hold accountable those that put investors at risk. After bringing record enforcement against auditors in 2022, enforcement continued to trend upward in 2023.
The report, 2023 Enforcement Activity Involving Auditors: SEC & PCAOB Enforcement Actions Brought Against Public Accounting Firms & Associated Individuals, was authored by a Brattle team led by Principal Alison Forman. It analyzes overall enforcement activity from the two regulators, comparing 2023 data to 2022 and 2018–2021 averages (a proxy for prior administrations).
Auditor enforcement remained high in 2023 with 60 actions, up nearly 60% from 2018–2021 levels, with the PCAOB in particular breaking records as it imposed monetary sanctions totaling over $20 million, the highest penalties in PCAOB history. Notably, more than half of the PCAOB’s total penalties in its 19-year enforcement history have been imposed in the last two years.
Total Actions Initiated Against Auditors by the SEC and PCAOB: 2018–2023
By type of respondent, the report examines the levels of enforcement activity, the nature of violations alleged, and sanctions – both monetary and nonmonetary – imposed by the PCAOB and SEC.
“2023 was the second full calendar year of enforcement under new administrations for both regulators, and the increased enforcement activity is consistent with an uptick in pledges from PCAOB and SEC leadership to punish alleged wrongdoers,” said Ms. Forman. “The PCAOB has largely driven the heightened enforcement in the past two years, which has brought roughly three-quarters of the total actions initiated against auditors in 2022 and 2023.”
Other notable findings in the report include:
- Together, the PCAOB and SEC imposed $31.5 million in monetary sanctions against auditors in 2023, a steep decline from $138.5 million in 2022 but 53% higher than the 2018–2021 average
- The PCAOB imposed record penalties in 2023, totaling over $20 million – up 82% from its 2022 record of $11 million
- Violations of auditing standards remained the most common allegation in 2023, seen in 67% of initiated PCAOB actions and 86% of SEC actions
- For the second straight year, the PCAOB brought half of its actions against non-US respondents, including the first settlements with firms based in China and Hong Kong after the PCAOB secured historic access to these firms in 2022
The report also includes predictions – based on the analysis of PCAOB and SEC enforcement actions and other publicly available information – about enforcement activity against auditors in 2024 and beyond.
The full report, 2023 Enforcement Activity Involving Auditors: SEC & PCAOB Enforcement Actions Brought Against Public Accounting Firms & Associated Individuals, is available below.
