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SEC, PCAOB Bar Utah CPAs

A former partner at a Utah CPA firm has been permanently banned and another partner barred for at least five years from associating any public accounting firm registered with the Public Company Accounting Oversight Board. The action was taken against two partners of Chisholm, Bierwolf, Nilson & Morrill of Bountiful, Utah, for failing to cooperate with a proposed PCAOB inspection and subsequent investigation. It also permanently revoked the firm's registration with the most serious charges surrounding the audit of an oil-and-gas-drilling business that was claiming properties it didn't own as assets.

Todd D. Chisholm was permanently barred from associating with any firm registered with the PCAOB while Troy F. Nilson can reapply after five years. The problems arose regarding the audits of financial statements of four clients: the Hendrx Corp. and Powder River Petroleum International, both for calendar years 2006 and 2007; AlphaTrade for 2007 and Jade Art Group for 2008. The SEC barred both men and the original firm from practicing before it, but said both could reapply in five years. The firm is now known as Bierwolf, Morrill & Nilson.

The PCAOB said since the two worked on about 25 engagements and audits, functioning as each other's concurring reviewers on most, there was little time for supervising assistants and many audits involved little more than referring assistants to standardized audit programs and checklists. Assistants received little training.

Trouble arose after the PCAOB on Aug. 1, 2008 and May 6, 2009, requested a variety of audit documents. However, many that were submitted were created or changed months after the documentation completion dates. Changes were not annotated with actual changes or the identity of who made the changes. The PCAOB said Chisholm and Nilson knew this effort was designed to mislead its Division of Enforcement and Investigations.

In the case of Hendrix, the 2006 financial statements showed that goodwill of almost $32 million was 74 percent of total assets. Despite declining revenue of 50 percent and legal disputes over the ownership of some of the company's Chinese patents, the CPAs did not gain an understanding of how management developed its estimate of the value of goodwill. They eventually comprised with management in impairing goodwill by only 25 percent.

In the case of Powder River, a defunct company which had oil-and-gas drilling operations, the CPAs failed to detect that the company inflated revenue and omitted major liabilities from its balance sheet. The SEC noted that Nilson had limited experience in audits of such companies. Instead of gaining a greater understanding of that business, he relied on general descriptions by Chisholm.

Bob Scott
Bob Scott has provided information to the tax and accounting community since 1991, first as technology editor of Accounting Today, and from 1997 through 2009 as editor of its sister publication, Accounting Technology. He is known throughout the industry for his depth of knowledge and for his high journalistic standards.  Scott has made frequent appearances as a speaker, moderator and panelist and events serving tax and accounting professionals. He  has a strong background in computer journalism as an editor with two former trade publications, Computer+Software News and MIS Week and spent several years with weekly and daily newspapers in Morris County New Jersey prior to that.  A graduate of Indiana University with a degree in journalism, Bob is a native of Madison, Ind
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