On May 3, 2024, the SEC announced charges against a Colorado audit firm, BF Borgers CPA PC and its owner, Benjamin F. Borgers.  The SEC’s Accounting and Auditing Enforcement Release’s extensive charges include:

“…the deliberate and systematic failure to audit and review public company and SEC-registered broker-dealer clients’ financial statements in accordance with Public Company Accounting Oversight Board (“PCAOB”) standards … and their fraudulent issuance of audit reports falsely representing that they had done so from at least January 2021 through at least June 2023.”

These failures affected over 350 clients and more than 1,500 SEC filings.

The firm and its owner will pay civil money penalties of $12 million and $2 million respectively.  They are also denied the privilege of appearing or practicing before the Commission and censured.

This case is eerily similar to a 2009 case against Moore & Associates Chartered and Michael J. Moore.  That case involved over 300 clients and also resulted in fines and bars.  (Mr. Moore’s violations actually continued, as you can read in this 2015 Litigation Release.)

Both these cases were brought by the SEC rather than the PCAOB, perhaps because of the structure of the PCAOB’s enforcement activities imposed by the Sarbanes Oxley Act.  Another interesting aspect of these two cases is the difference in the magnitude of the penalties.  In the Moore case the firm paid disgorgement of $179,500 and Moore paid a penalty of $130,000, amounts significantly less than the BF Borgers penalties.

You can find the PCAOB’s 2022 inspection report for BF Borgers CPA PC here.

Companies and their audit committees should be conscious of the issues created when an audit firm does not perform appropriately.  Because of the magnitude and complexity of the issues former BF Borgers clients face, CorpFin and the Office of the Chief Accountant issued this Statement addressing issues including the requirement to file a change in auditor Form 8-K and the impact on annual and quarterly reporting.

As always, your thoughts and comments are welcome.