The SEC censured Marcum and it with a $10 million fine while PCAOB nailed the firm for $3 million. The agency painted a picture of a firm with a lack of controls that was overwhelmed by the growth but took no action despite the firms of findings.Marcum grew its SPAC base from 113 clients in September 2020 to 882 in June 2021. The growth strained the firm’s ability to control the quality of its audits and Marcum was subject to consecutive PCAOB enforcement orders in 2019 and 202.
The range of problems in documentation and communication were wide range.
Among these, the SEC noted in early 2021., Marcum found about one-third of engagement quality reviews were missing required signoffs or had post-issuance ones, while up to 50 percent of routing signups were not fully signed prior to issuance during the same period. Some times no routing slip was generated until weeks or months after the release of the audit report
The firm failed to follow its own policy of receiving and reviewing background reports before accepting clients. Instead, the firm required clients’ employees to submit a forms authorizing a background check, and then relied on those individuals to disclose relevant facts,
The SEC Review revealed that at least 10 percent of EQR sign offs were conducted prior to the engagement partner signing off on the same work paper.
As the SPAC business expanded, so did the staff. In September 2020, two engagement partners conducted almost all SPAC audit work along with nine managers. By the end of the year, dozens of partners managers and staff who lacked SPAC experience were brought into these engagement sand by mid-21 there were and least 43 engagement partners and 75 managers on SPAC engagement with staff growing from 30 in mid-2020 to 80 by 2022.
But the firm lacked adequate training and policies and the firm’s review in 2021 found that 32 SPAC audits and 37-non-SPAC audits had problems with documentation that required reopening workpaper binders.
