Carol Calloway Dee, Ayalew Lulseged, and Tianming Zhang
Contemporary Accounting, Volume 28, Issue 1, Pp 263–291
We examine the stock market effects of news of the Public Company Accounting Oversight Board’s (PCAOB) sanctions imposed upon Deloitte and Touche, LLP (Deloitte) on December 10, 2007 for actions related to its 2003 audit of Ligand Pharmaceuticals Incorporated (Ligand). Deloitte was censured and fined one million dollars. In addition, the firm agreed to create an internal “Leadership Oversight Committee” responsible for increased supervision of its partners and directors. The engagement partner responsible for the Ligand audit was banned from association with a registered accounting firm, although after two years he may file a petition for relief. These sanctions mark the first time the PCAOB has used its enforcement powers against a Big 4 auditor (or any national or international firm), as well as the first time the PCAOB has issued a monetary penalty against any individual or registered accounting firm.