The Public Company Accounting Oversight Board (PCAOB) has levied a $400,000 fine against Haynie & Company, the former auditor for Investview, for deficient audits conducted in 2019. An individual accountant associated with the firm also faces a $65,000 penalty and a ban from working with registered public accounting firms.
The PCAOB’s January 23rd order details significant failures in Haynie & Company's examination of Investview’s financial statements. Specifically, the firm neglected to gather adequate audit evidence concerning Investview’s accounting for its acquisition of United Games, LLC, its cryptocurrency mining revenue, and a crucial license agreement.
Investview acquired United Games, a collapsed multi-level marketing entity, in 2018. Haynie & Company’s audit fell short in evaluating Investview’s valuation of this acquisition. Investview reported a $1.8 million valuation for intangible assets from United Games and used $800,000 in company shares as consideration, resulting in a reported $971,000 gain in 2019. While Investview utilized a third-party specialist for this valuation, the specialist’s reports were based on information supplied by Investview. Crucially, Haynie & Company did not verify the projections Investview provided to this specialist. The firm also failed to assess whether the United Games acquisition was presented accurately according to applicable financial reporting standards.
Regarding Investview’s cryptocurrency mining revenue, which was managed through Kuvera Global, the PCAOB noted deficiencies. Investview reported approximately $1.94 million in net cryptocurrency mining revenue for the fiscal year ending March 31, 2019. Haynie & Company had identified improper revenue recognition as a significant risk, even a fraud risk, yet failed to obtain sufficient audit evidence. This included not evaluating whether Investview’s revenue recognition method complied with ASC 606, a standard Investview adopted that year. Furthermore, the firm skipped detailed testing of a $3.83 million portion of the net revenue, representing payments Investview made to its cryptocurrency mining supplier.
This oversight meant that Investview was able to overstate its payments to a mining supplier by $370,000 without adequate scrutiny from its auditors. The firm also had issues with a license agreement, failing to obtain sufficient evidence to support Investview's accounting for it.
The PCAOB’s disciplinary action aims to uphold audit quality and investor protection. Auditors are expected to perform rigorous examinations, particularly when identifying potential fraud risks. The failure to do so can result in significant financial penalties and reputational damage for accounting firms, as seen in this case with Haynie & Company. Investors can report potential accounting fraud to the Securities and Exchange Commission (SEC) through their online tip form.