Poti is a partner at Richmond, Va.-based PBMares, which was formed late in 2012 through the merger of PBGH and Witt Mares. Poti drew a minimum ban of two years for his work on the 2008 financial statements of Commonwealth Bancshares of Norfolk, Va., which he conducted as engagement partner for Witt Mares. He was on the account from 2006 until federal and state banking regulators close Commonwealth's banking subsidiary on Sept. 23 2011.
Commonwealth, which set an ambitious growth goal in 2006, saw its loan portfolio in condominiums and office properties hammered by the economic downtown. Meanwhile, the volume of troubled loans that were classified as adversely classified assets, which need to be measured for impairment, grew to $80 million in 2008, up from $8 million in one year.
In prior audits, Poti had expressed concern about the loan portfolio and lack of current information about loans and identified its allowance for loan and lease loss as a high risk audit area. He expressed concern in 2008 that the senior loan officer who was evaluating the allowance had originated many of the loans. After reading a state report about the bank's practices, Poti wrote that the bank had mislead the audit team about the severity of issues and ordered additional testing of internal controls
Nevertheless, Poti signed the audit letter which gave the unqualified opinion of Commonwealth's financial statements and said it had effective internal controls. And the team did not test the valuations made by the senior loan officer even though it had been warned the control was not effective. Poti, the SEC reported, did not know what any of the members of senior management did to test the allowance.
Moreover, the internal auditor warned him that the VP of credit administration had not received information from loan officers to independently assess if loans had become impaired. Instead of following PCAOB standards in reviewing management's estimates of impairment, the audit team relied on information from loan files, much of it old.Last modified on Thursday, 19 December 2013