The Securities and Exchange Commission today charged audit firm Marcum LLP with systemic quality control failures and violations of audit standards in connection with audit work for hundreds of special purpose acquisition company (SPAC) clients beginning at the latest in 2020. The SEC’s order also found that Marcum’s deficiencies were not limited to SPAC clients, but they reflected systemic quality control failures throughout the firm. Marcum agreed to pay a $10 million penalty to settle the charges.
According to the SEC’s order, over a three-year period, Marcum more than tripled its number of public company clients, the majority of which were SPACs, including auditing more than 400 SPAC initial public offerings in 2020 and 2021. The strain of this growth, however, exposed substantial, widespread, and pre-existing deficiencies in the firm’s underlying quality control policies, procedures, and monitoring. These deficiencies permeated nearly all stages of the audit process and were exacerbated as Marcum took on more SPAC clients. Moreover, in hundreds of SPAC audits, Marcum failed to comply with audit standards related to audit documentation, engagement quality reviews, risk assessments, audit committee communications, engagement partner supervision and review, and due professional care. Depending on the audit standard at issue, violations were found in 25-50 percent of audits reviewed, with even more frequent, nearly wholesale violations found as to certain audit standards across Marcum’s SPAC practice.
‘Enforcement 40’ for 2020
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