PCAOB Sanctions EY Canada Engagement Partner for Flawed Auditing of Management Estimate

The Public Company Accounting Oversight Board (PCAOB) today announced a settled disciplinary order sanctioning Ernst & Young LLP (Canada) partner Martin Lundie for violations of PCAOB rules and standards in connection with a 2019 audit. 

The PCAOB found that Lundie, who served as the engagement partner, failed to adequately evaluate a significant estimate reported by a Canadian energy company: the allowance the company recorded against its customer receivables. Among other violations, Lundie failed to obtain adequate support for key assumptions used in his evaluation of the reasonableness of the allowance. He also failed to sufficiently test the completeness and accuracy of data the company used to develop the allowance.

Lundie consequently violated auditing standards including requirements to exercise due care and to obtain sufficient and appropriate audit evidence.

“When auditors identify estimates and other aspects of financial statements as significant or as presenting higher risk, they cannot stop there,” said Mark A. Adler, Acting Director of the PCAOB’s Division of Enforcement and Investigations. “Under PCAOB auditing standards, those assessments mean a heightened need to exercise due care, obtain appropriate audit evidence, and evaluate the sufficiency of that evidence.”

Without admitting or denying the Board’s findings, Lundie consented to the PCAOB’s order, which censured him, barred him from association with a registered firm with the right to reapply after one year, and imposed a $65,000 civil money penalty.

PCAOB enforcement staff members Stephen D’Angelo, George Choundas, Laura Voisin, and Tima Hawes conducted the investigation. William Ryan, John Abell, and C. Ian Anderson supervised the investigation.

The PCAOB oversees auditors’ compliance with the Sarbanes-Oxley Act, provisions of the securities laws relating to auditing, professional standards, and PCAOB and SEC rules. Further information about the PCAOB Division of Enforcement and Investigations is available on the PCAOB website. 

Firms or individuals wishing to report suspected misconduct by auditors, or to self-report possible misconduct, may visit the PCAOB Tips and Referrals page.

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About the PCAOB 

The PCAOB is a nonprofit corporation established by Congress to oversee the audits of public companies in order to protect investors and further the public interest in the preparation of informative, accurate, and independent audit reports. The PCAOB also oversees the audits of brokers and dealers, including compliance reports filed pursuant to federal securities laws. 

Contact 

PCAOB Office of Communications and Engagement 
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