Firm Told It May Not Audit Public Companies
Denial Is Oversight Board's First
washingtonpost.com
By Carrie Johnson
Washington Post Staff Writer
Friday, May 7, 2004; Page E02
The accounting industry's oversight panel has for the first time rejected an audit firm's application to review the books of publicly traded companies.
The Public Company Accounting Oversight Board, created under the landmark 2002 Sarbanes-Oxley Act to monitor the troubled accounting profession, yesterday said it had "disapproved" the application of James C. Marshall PC, a Scottsdale, Ariz., firm that audited several public clients.
As part of its mandate, the oversight board is reviewing and registering all accounting firms with clients who sell stock to the public. Since those reviews began last September, the board has approved 840 audit firms as of this week, while the applications of 143 more firms are pending.
The board said Marshall "failed to disclose" in its application that the firm was the subject of a disciplinary proceeding. The panel also cited Marshall's alleged failure to enlist another accountant to provide a second opinion on the firm's work and to keep documents backing up the firm's conclusions. Marshall had promised to take those steps after peer reviewers criticized the firm's record-keeping and other practices in 2000 and 2001.
Board member Kayla J. Gillan said in an interview yesterday that the panel bases its decisions on "whether registering [accounting firms] and allowing them access to the public markets is in the best interest of investors." The board looks for negative peer reviews and firms that have been sued over their work, among other factors, Gillan said.
James C. Marshall, the president of the company, did not return calls for comment yesterday. He did not appeal the board's decision, a factor that sped up the rejection process. In a November 2001 letter to peer reviewers, Marshall said he and his staff were taking courses to beef up their skills and that a failed merger with another accounting firm had contributed to his documentation problems.
In the past three months, at least three of Marshall's former clients, Dstage.com Inc., American Soil Technologies Inc. and Silverado Financial Inc., filed papers with the SEC saying they had hired new auditors.
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