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A federal oversight board has permanently barred a Bountiful accounting firm from auditing publicly traded companies after finding numerous violations of professional standards, including failure to detect fraud.
The Public Company Accounting Oversight Board issued the order against Chisholm, Bierwolf, Nilson & Morrill, also accusing it of placing numerous questionable documents in the files of its audits after it learned the board was conducting an investigation.
The board, established by Congress to oversee the audits of public companies, also permanently barred former managing partner Todd D. Chisholm, 48, from associating with any accounting firm that audits public companies. In addition, partner Troy F. Nilson, 45, was suspended for five years, after which time he can apply for reinstatement as an approved auditor.
Chisholm's and Nilson's attorney did not return a phone call seeking comment. Nilson also did not return a voice mail message or respond to an email.
Chisholm is no longer with the firm, which issued 52 audit reports for fiscal years ending in 2006 and 49 audit reports for fiscal years ending in 2007, the board said.
In a ruling dated April 8, the Public Company Accounting Oversight Board said it found violations of accounting standards in its inspection of audits on four publicly traded companies. The Securities and Exchange Commission also issued a cease-and-desist order and barred the firm and the two partners from practicing before it.
The Accounting Oversight Board said its rules about accounting procedures were violated, quality control standards were lacking, the firm took on too many audits and failed to adequately supervise assistants who did most of audit procedures.
One of the companies that the firm audited was Powder River Petroleum International Inc., an Oklahoma corporation with offices in Alberta, Canada.
Until it was placed into receivership in 2008, Powder River's public filings reported that it acquired, developed and resold interests in oil and gas properties. The company resold interest in oil and gas leases to investors in Asia, but reported those investments as income despite also promising investors a return of 9 percent until their principal was recouped, the board said.
That resulted in the company, traded over-the-counter, overstating its revenue by up to 2,417 percent, its pretax income up to 441 percent and assets up to 48 percent.
Chisholm and the Utah accounting firm "failed to consider, or exercise professional skepticism in evaluating, whether information obtained during the audit represented risk factors for fraud," the accounting board said.
In permanently barring the firm, the board also said that after learning of the board's investigation, the partners directed assistants to create and add documentation to audit files.
"In a number of instances, Chisholm's and Nilson's efforts included directing firm assistants to add information to the audit files to create the appearance that firm auditors had performed certain audit procedures that had not, in fact, been performed during the audits," the citation said.
The Public Company Accounting Oversight Board has issued only 36 disciplinary actions against firms or accountants since May 2005.