PCAOB Strengthens Accountability Standards for Those Who Contribute to Firm Violations

The PCAOB has released an amendment to Rule 3502, which “governs the liability of an associated person of a registered public accounting firm who contributes to that firm’s violations of the laws, rules, and standards that the PCAOB enforces.” The amendment changes the threshold under which an “associated person of a registered public accounting firm” can be held accountable for contributing to the firm’s violation of the PCAOB’s standards and regulations — from “recklessness” to “negligence.” Accordingly, an associated person can now be held liable for contributing to a violation “directly, substantially, and negligently” even if the person has not acted “recklessly.” The PCAOB notes that the new threshold is aligned with SEC regulations as well as with “the same standard of reasonable care auditors are already required to exercise anytime they are executing their professional duties.”

The amendment is subject to SEC approval and will become effective 60 days after such approval is obtained. For more information, see the press release — as well as the statements by PCAOB Chair Erica Williams and board members Christina Ho, George Botic, and Anthony Thompson — on the PCAOB’s Web site.