Document Management

The Public Company Accounting Oversight Board has barred a McGladrey partner from being associated with a registered accounting firm for two years. PCAOB barred Dale Hotz, a partner in the firm's Frederick, Md., office, and also disciplined two former McGladrey directors for their alleged roles in altering and backdating documents prior to an inspection by the agency.

The board also disciplined Jyothi Nuthulaganti Manohar, who had been a director in the firm's Blue Bell, Pa., office, and Michael Jared Fadner, formerly an assurance manager in that office. Manohar was censured and barred from associating with any PCAOB-registered firm for one year. Fadner was also censured, but was not subject to any additional disciplinary action. The CPAs accepted the board's action without admitting or denying the findings. The three had already been disciplined by the then McGladrey & Pullen, whose actions included restricting them from serving on engagements of audits and interim review periods ending on or before March 12, 2012.

The action stemmed for a 2010 inspection of the audit of the 2009 financial reports of a client company whose name was not given in PCAOB documents. The findings show that Hotz, the engagement partner, supervised Manohar, the engagement manager, and both supervised Fadner during the preparation for the PCAB inspection.

On Dec. 3, 2010, accountants discovered that an engagement letter with an original client signature and a cashflow worksheet were missing from audit documentation and decided to create them and add these to the hard copy workpapers. Fadner created the worksheet and dated in March 6, 2010. After the engagement letter was received from the client on December 10, it was also placed in the files. The three were also involved in creating a Fair Value Memorandum that was added to the workpapers.

Hotz signed three Quarterly  Release Records and added them to the workpaper file without dating them and initialed 11 other documents on December 5 without dating them or explaining why they were initialed after the document completion date, among other changes that were made. On Nov. 29, 2010, Hotz submitted an Engagement Profile to the PCAOB inspectors that swore that no changes had been made to documents after completion of the audit. After he was asked to revise the Engagement Profile, Hotz submitted one to the board's inspection division that again stated that no changes had been made.

• Prev
• Next