Firm Accused of Auditor Independence Violations

A partner at L.L. Bradford failed to monitor partner assignments, leading to auditor rotation violations in six public company audits, says the PCAOB.
Matthew HellerApril 2, 2015

The Public Company Accounting Oversight Board has disciplined a majority shareholder of L.L. Bradford & Co. and two former partners in the Las Vegas accounting firm for violating auditor independence requirements.

Shareholder Hazel-Leilani De Los Reyes Bradford was responsible for quality control at L.L. Bradford but “failed to design and implement a process to track and monitor audit partner assignments and rotation,” the PCAOB said in an order instituting a disciplinary proceeding.

Indeed, the order states, De Los Reyes Bradford “failed to take any affirmative steps to track and monitor audit partner rotation requirements” and those failures contributed to violations of partner rotation requirements with respect to six public company audit clients.

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Specifically, the PCAOB said, firm partners served as the lead partner and/or concurring partner/engagement quality reviewer for more than the permitted five-year period. The rotation requirement is intended to discourage management influence over auditors.

The PCAOB noted that De Los Reyes Bradford assumed the role of quality control partner even though her prior audit experience was “largely limited to a small number of non-public companies, and she lacked the relevant experience, knowledge, and proficiency necessary to carry out the monitoring function.”

Two former L.L. Bradford partners — Dustin M. Lewis and Eric S. Bullinger — were both sanctioned for failing to rotate out of audit assignments for public companies within the statutory period. Bullinger’s violations continued even after he received notice of noncompliance from PCAOB inspectors, the board said.

“These orders reinforce the principle that independence is the bedrock of auditor objectivity,” Claudius B. Modesti, director of PCAOB Enforcement and Investigations, said in a news release.

De Los Reyes Bradford and Lewis were fined $25,000 and $10,000, respectively, and were barred from associating with a PCAOB-registered accounting firm for at least two years; Bullinger was barred from any such association for one year.

In related matters, the board also disciplined audit team member Suzanne M. Herring for violating independence requirements while working at L.L. Bradford and Samyn & Martin, and Gordon Brad Beckstead, a former L.L. Bradford audit principal, for failing to appropriately plan and perform the audit of a public company.

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