The Public Company Accounting Oversight Board
(PCAOB) has disciplined two former senior Ernst & Young US
(E&Y) employees for providing misleading information and
altering working papers.
E&Y former partner, Peter O’Toole, and
former senior manager, Darrin Estella, were disciplined in December
2010 and the hearings have now been made public.
The PCAOB discovered that, shortly before a
PCAOB inspection of an E&Y audit, the pair created, backdated,
and altered working papers.
The pair also provided a document to
inspectors falsely claiming no changes had been made to audit
working papers.
The oversight body held that O’Toole and
Estella’s actions violated PCAOB Rule 4006, which requires
cooperation with its inspections, as well as PCAOB Auditing
Standard No.3, which governs audit documentation.
As such the board barred O’Toole from
associating with any PCAOB-registered accounting firms, with the
right to petition after three years. This is the longest bar the
PCAOB has imposed on a partner of a “Big Four” accounting firm to
date. O’Toole has also been fined a $50,000 civil money
penalty.
Estella was also barred from associating with
any PCAOB-registered accounting firm, with the right to petition
after two years.
“The Board’s orders today bring into sharp
focus for all auditors of public companies, at all levels of audit
engagement teams, that providing misleading documents to PCAOB
inspectors will be met with decisive action and strong sanctions”,
PCAOB division of enforcement and investigations director Claudis
Modesti said.
