On September 10, 2019, the Public Company Accounting Oversight Board (PCAOB) censured Marcum LLP and Alfonse Gregory on the basis of its findings that Marcum repeatedly violated PCAOB rules and standards over the course of four years by failing to satisfy applicable independence criteria, including as set out in SEC regulations. Marcum's independence violations resulted from its conduct in connection with the firm's annual Marcum MicroCap Conference ("MicroCap Conference") from 2012 through 2015. Specifically, Marcum was not independent with respect to audits and reviews of 62 issuers that participated in the MicroCap Conference. In addition, from 2012 through 2017-including after PCAOB staff brought independence concerns to the firm's attention in 2015-Marcum failed to take sufficient steps to ensure that its system of quality control would provide reasonable assurance that the firm would identify and appropriately address potential independence issues. 30 The MicroCap Conference was an investor conference at which smaller or emerging public companies made business presentations to audiences that included potential investors. Marcum created, organized, and hosted the conference to increase its visibility and brand in the microcap space. The success of the conference depended on companies perceiving it as a good forum to connect with potential investors, and on potential investors perceiving it as a good opportunity to find high-quality investment opportunities. From 2012 through 2015, Marcum endeavored to establish the MicroCap Conference as an event at which the presenting companies, including dozens of Marcum's issuer audit clients, were perceived as being high-quality investment opportunities. For example, Marcum expressly touted the quality of the conference's presenting companies and told potential conference attendees, including potential investors, that the presenting companies had been selected through a vetting process. From 2012 through 2015, Marcum issued audit reports on the financial statements of its issuer audit clients that were among the presenting companies at the MicroCap Conference. The MicroCap Conference was an important marketing event for Marcum. The firm used the event to increase its visibility in the microcap marketplace and to develop relationships with potential clients. The conference also provided a marketing opportunity for the microcap companies that presented at the conference and the firms that sponsored the conference. The success of the MicroCap Conference depended on providing value for the participants in the conference that is, Marcum, presenting companies, sponsors, and potential investors. Marcum understood that it could attract more conference participants, including investors, and thereby make its MicroCap Conference more attractive to presenting companies and sponsors, by building a public perception that the conference had high-quality presenting companies. From 2012 through 2015, Marcum promoted the MicroCap Conference as an exclusive, annual showcase for microcap presenting companies that Marcum publicly described as being "highly vetted," "high- quality" investment opportunities. Many such statements were directly attributed to the Managing Partner and SEC Services Leader. Each year, Marcum arranged for an investor relations firm to create profiles of the presenting companies. These profiles were included in the 2012 through 2015 conference books that were distributed to potential investors. The profiles included often laudatory descriptions of the presenting companies; for example, multiple Marcum audit clients were described as "leading" and "innovative" companies in the Firm's 2015 conference book. Marcum and its personnel promoted the MicroCap Conference by distributing brochures, sending out marketing emails, issuing press releases, giving interviews, and posting news articles and announcements on a Marcum website dedicated to promoting the conference. In addition, Marcum sent out thousands of conference invitations to potential attendees, including fund managers and private equity investors, banks, law firms, and other service providers for microcap companies. The MicroCap Conference was well attended and grew in size between 2012 and 2017. For example, the conference had approximately 800 attendees in 2012 and more than 2,000 attendees by 2016. Marcum's touting and marketing of the presenting companies extended beyond its own public statements. In 2013, for example, the firm's SEC Services Leader directed Marcum personnel to remind presenting companies of the importance of issuing press releases concerning their participation in the conference. In 2014, Marcum provided the presenting companies with a template press release that promoted the companies, promoted the conference as "a signature showcase for superior quality, under-followed public companies," and promoted Marcum as "Ranked #15 nationally." Marcum issuer audit clients constituted a significant percentage of the presenting companies at each MicroCap Conference between 2012 and 2015. They represented 18 of 64 presenting companies (28%) at the 2012 Conference, 21 of 122 (17%) at the 2013 Conference, 30 of 128 (23%) at the 2014 Conference, and 36 of 152 (24%) at the 2015 Conference. Across the four conferences, 62 separate Marcum issuer audit clients were presenting companies. The PCAOB found that from 2012 through 2017, Marcum failed to establish policies and procedures sufficient to provide the firm with reasonable assurance that: (1) it would maintain independence in all required circumstances; and (2) the policies and procedures the firm had established with respect to independence were suitably designed and were being effectively applied and monitored. Even after the firm received notice from PCAOB staff in 2015 that its conduct appeared to be inconsistent with independence requirements, the firm responded by taking certain actions, but failed to implement, apply, and monitor policies and procedures sufficient to provide reasonable assurance that it would identify and appropriately address potential independence issues in 2016 and 2017. In early 2015, PCAOB staff notified Marcum that the Board would inspect the firm that year. In April 2015, the Board's Inspections staff issued a comment advising Marcum that it appeared the firm had failed to maintain its independence with respect to its issuer audit clients that participated in the MicroCap Conference. After receiving the inspection comment in 2015, Marcum took certain steps to address the comment, including removing certain language touting the presenting companies from future promotional materials for the conference, adding a disclaimer to portions of the MicroCap Conference website, and, in 2017, adding the following provisions to its quality control policies: "Any public statement about a client, or any group of companies which includes a client, is prohibited without the firm's approval. Public statements would include those statements included in marketing materials, e-mail blasts or statements on websites about any Issuer audit clients or prospects, with respect to any firm-hosted or firm-sponsored conference, including the Marcum MicroCap Conference. No public statement should be made without careful consideration of the general standard of independence set out in Rule 2-01(b) of Regulation S-X, including consideration of the four principles in the preliminary note to Rule 2-01.31 After taking these steps with respect to its public touting of the presenting companies, including those that were Marcum issuer audit clients, the firm held its 2016 and 2017 Conferences without adequately considering other potential independence issues in relation to Marcum issuer audit clients that presented at the conference. Indeed, Marcum failed even to verify the effectiveness of the steps it took to limit its touting of presenting companies. As a result, Marcum failed to identify, evaluate, or appropriately address a number of issues concerning the 2016 and 2017 Conferences that, at the very least, raised questions about the firm's independence. Questions 1. Describe the nature of the violations of AICPA and PCAOB rules in this case? 2. Did Marcum violate the Advertising and Solicitation Rule in the AICPA Code or the Acts Discreditable rule? Explain. 3. What should be done when a registered public accounting firm fails to follow the requirements of a PCAOB audit inspection as in the Marcum case?