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"You can observe a lot just by watching." Yogi Berra

"We do not distain to borrow wit or wisdom from any man who is capable of lending us either." Henry Fielding, Tom Jones

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PCAOB's First Litigated Disciplinary Sanction of Bar and Revocation Upheld

Gately & Associates, LLC, James P. Gately, CPA; Exchange Act Rel. 62656, August 5, 2010

Time since appeal filed – 1 year 1 month 10 days
Time since last brief – 9 months 22 days

The Public Company Accounting Oversight Board barred Gately from associating with any registered public accounting firm and revoked his firm's registration. The Commission upheld the sanctions. The sanctions were based on a failure to cooperate with PCAOB's attempts to inspect the firm.

This is the first litigated PCAOB disciplinary decision.

PCAOB attempted repeatedly from May 2007 through February 2008 to inspect Gately's firm and on at least five occasions requested that it produce documents. The hearing officer found that Gately was at least reckless in failing to produce records or otherwise respond to PCAOB requests. The sanctions were entered in a summary disposition rather than after a full trial.

The Commission ruled that there is no specific state of mind required in order to find a violation of the inspection requirement. Reckless or even negligent conduct is sufficient to establish a violation. Even impossibility is no defense. Here, Gately argued that due to medical issues and the theft of his computer he was unable to comply. The Commission rejected this claim, noting that Gately had completed fourteen audits during the time he claimed it was impossible for him to comply with PCAOB document requests.

The PCAOB sanctions were upheld as the Commission found Gately's conduct to be an "extreme departure" from the requirement of full and prompt compliance with PCAOB information requests.

But really, is it reasonable for the Commission to labor over a routine matter such as this for more than 13 months? The agency isn't exactly overloaded with its appellate docket.