U.S. Accounting Oversight Board Takes First Disciplinary Action

The U.S. accounting oversight board on Tuesday barred New York’s Goldstein & Morris from auditing publicly traded companies -- the agency’s first disciplinary action since it was formed in 2003 after the bankruptcy of Enron Corp.

The Public Company Accounting Oversight Board said the firm hid information from investigators and gave them false information. The agency also barred the firm’s managing partner, Edward B. Morris, from the industry.

The audit board, a centerpiece of the 2002 Sarbanes-Oxley corporate governance law, has so far mostly set rules for auditors.

“It’s surprised me that it’s taken the PCAOB this long to bring a case,” said Paul R. Brown, an accounting professor at New York University’s Stern School of Business. “What’s held the board back is that it knows it’s being watched extremely closely, and so it’s decided to act very methodically, perhaps too methodically.”

The board said Morris and two former partners, Alan J. Goldberger and William A. Postelnik, knew the firm had audited two public companies without being properly independent of them. The three men hid that from the board by omitting information in a written response to a request for information by board inspectors, the agency said.

After they learned an inspection was imminent, the men back-dated documents and filed them to hide the firm’s failure to comply with auditing standards, the board said. But Goldberger and Postelnik later notified the agency of the alleged deception and quit the firm.

All three men agreed to the disciplinary action without admitting or denying wrongdoing.

The firm’s lawyer declined to comment. Postelnik’s lawyer said he was gratified that the agency recognized his client’s cooperation. Goldberger’s lawyer didn’t return a phone call seeking comment.