Audit Firm Runs Afoul of PCAOB Rules By Taking Same As Last Year Way Too Literally
•January 13, 2026
0
Why It Matters
The enforcement highlights how lax audit practices can undermine financial statement reliability and trigger costly regulatory penalties, prompting tighter oversight across the accounting industry.
Key Takeaways
- •Zwick CPA failed to assess audit risks properly
- •Hoskow copied predecessor workpapers, altered dates
- •Firm omitted testing of IT general controls
- •PCAOB barred firm three years, manager two years
- •Genie replaced Zwick with CBIZ as auditor
Pulse Analysis
The Public Company Accounting Oversight Board (PCAOB) continues to tighten its grip on audit quality, and the recent sanction of Zwick CPA underscores the board’s zero‑tolerance stance. By failing to conduct a robust risk‑assessment and neglecting critical evidence‑gathering for revenue and internal‑control reporting, the firm breached core auditing standards that protect investors. Such deficiencies are not merely procedural lapses; they erode confidence in the financial disclosures of public companies, especially in sectors like energy where revenue streams are complex and heavily regulated.
A particularly egregious aspect of the case involved audit manager Jeffrey Hoskow’s wholesale replication of the prior auditor’s workpapers. Rather than performing independent procedures, Hoskow replaced the predecessor’s name, updated the audit year, and affixed sign‑offs, even when the documented events belonged to the previous fiscal period. This practice violates PCAOB rules on documentation integrity and misleads stakeholders about the audit’s substantive testing. Coupled with the firm’s failure to evaluate IT general controls, the audit lacked the depth needed to verify the accuracy of Genie’s financial systems, exposing the company to material misstatement risk.
The repercussions extend beyond Zwick CPA’s three‑year registration suspension and Hoskow’s two‑year ban. The case serves as a cautionary tale for audit firms nationwide, emphasizing the necessity of rigorous training, independent evidence collection, and transparent documentation. Regulators are signaling that shortcuts will attract severe penalties, prompting firms to invest in continuous professional education and stronger internal quality controls. For investors and board members, heightened vigilance over auditor performance becomes essential to safeguard the integrity of financial reporting.
Audit Firm Runs Afoul of PCAOB Rules By Taking Same As Last Year Way Too Literally
Today in PCAOB enforcements we have a fresh case involving Southfield, Michigan firm Zwick CPA, PLLC, firm owner Jack Zwick, and audit manager Jeffrey Hoskow’s work on the 2022 audit of New Jersey-based energy company Genie. Generally speaking these cases against firms you’ve never heard of are fairly boring but this one consists of subzero levels of fucks given we don’t see too often, thus it’s earned its own article.
From the PCAOB’s press release:
As described in further detail in the Firm and Zwick order, the Firm and Zwick, who served as the engagement partner, failed to comply with multiple PCAOB rules and standards in performing the Genie audit. Specifically:
- The Firm and Zwick failed to properly plan, identify, and assess the risks of material misstatement.
- The Firm and Zwick failed to obtain sufficient appropriate audit evidence to support the Firm’s opinion on internal control over financial reporting.
- The Firm and Zwick failed to obtain sufficient appropriate audit evidence as to Genie’s reported revenue and unbilled revenue.
- Zwick failed to properly supervise the work of the Firm’s engagement team members.
- The Firm and Zwick failed to prepare audit documentation pursuant to PCAOB standards.
And now, for the fun part:
As described in further detail in the Hoskow order, Hoskow, who was an audit manager at the Firm, violated PCAOB rules and standards by improperly adopting workpapers from Genie’s predecessor auditor as the Firm’s own. Specifically:
- Hoskow took the predecessor auditor’s workpapers, replaced the name of the predecessor auditor with “Zwick CPA,” updated the year under audit, and added workpaper sign-offs. Emphasis ours
Some more about that per Hoskow’s order [PDF]:
Shortly before the documentation completion date, Hoskow, who had access to the predecessor auditor’s work papers for the prior year audit, took those work papers, replaced the name of the predecessor auditor with “Zwick CPA,” updated the year under audit, and added work paper sign-offs.
Hoskow did so even when the documentation reflected events that had occurred in the prior year (2021), not the year under audit (2022). For example, in one ICFR work paper, Hoskow replaced the year “2021” with “2022,” so that the work paper reads: “In 2022, Genie changed their Tax Specialist to Entity A instead of Entity B. Further this year due to the UK being reported as discontinued operations, Genie noted that the complex provision calculation need expertise on UK tax laws and Genie outsourced UK provision and calculation to the 3rd party . . . .” However, both of the documented events—the change in Tax Specialists and the discontinuance of Genie’s UK operations—actually occurred in 2021, the year before the one the Firm was engaged to audit.
According to Genie’s 2021 annual report, the prior auditor was BDO USA.
Hoskow also “prepared various other significant workpapers that inappropriately included documentation related to other issuers – documentation that was inaccurate and irrelevant to Genie’s operations,” but that part isn’t nearly as funny as taking the prior auditors’ workpapers, crossing out their name, and putting their firm’s name instead.
Zwick’s PCAOB order [PDF] gets into the weeds on the controls testing (or lack thereof):
As noted above, the predecessor auditor identified a material weakness related to Genie’s income tax provision controls in the prior year. To attempt to remediate the material weakness, Genie created a new control, “Tax-15.” During the Genie Audit, however, the Firm failed to perform any design or operating-effectiveness testing over the Tax-15 control and other deficient tax controls in order to conclude whether the material weakness had been remediated as of December 31, 2022.
In addition, and as discussed further below, the Firm’s ICFR work papers assert that the Firm performed certain procedures that had not actually been performed.
In addition, with the exception of testing certain information technology (“IT”)-dependent manual controls related to revenue and purchases, Respondents failed to perform any procedures over the design or operating effectiveness of (a) Genie’s other IT-dependent manual controls; (b) its IT general controls (“ITGCs”); or (c) its entity-level controls.
Moreover, because Respondents failed to test Genie’s ITGCs, they could not rely on data and reports generated by Genie’s IT systems when evaluating the effectiveness of the revenue and purchase-related IT-dependent manual controls they did test. Nor did Respondents perform testing over the completeness and accuracy of data and reports used in the operation of Genie’s IT-dependent manual controls related to revenue and purchases. Therefore, the Firm’s testing of those IT-dependent manual controls also was not sufficient.
This audit sounds like a pain in the ass. No wonder they phoned it in.
For their crimes, Zwick the firm and Zwick the person are in time-out for three years, after which time the firm can reapply for PCAOB registration and Zwick can petition the Board to let him practice again. Hoskow is barred from being an associated person of a registered public accounting firm for two years. As part of their punishment, Zwick and Hoskow are also required to complete 40 hours of continuing professional education relating to PCAOB auditing standards.
Genie dismissed Zwick as auditor last year and went to CBIZ.
The post Audit Firm Runs Afoul of PCAOB Rules By Taking Same As Last Year Way Too Literally appeared first on Going Concern.
0
Comments
Want to join the conversation?
Loading comments...