As they occasionally, (and at times frequently), do, the SEC has sent us a reminder to do the right thing.<\/p>\n
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This most recent reminder actually started with an action announced last September against a company that involved one of the classic financial fraud reporting areas, inappropriate revenue recognition<\/strong>. The complaint alleges significant self-dealing by officers and a variety of other inappropriate actions to fabricate financial results<\/strong>. The case was serious enough that the company\u2019s registration was revoked<\/strong>. You can read the press release and find related documents here<\/u><\/a>.<\/p>\n <\/p>\n Whenever an action like this is announced, one of the questions we all ask is \u201cwhere were the auditors?\u201d<\/strong><\/p>\n <\/p>\n Usually an action against auditors happens separately from the related action against a company. Many times the two are hard to correlate. In this case the action against the auditor took almost nine months longer. It was formally announced on July 22, 2016. The SEC\u2019s order against the auditor found that the auditor<\/p>\n <\/p>\n \u201cfailed to perform sufficient procedures to detect the fraudulent sales in the company\u2019s financial statements. (The Audit Firm) also failed to obtain sufficient audit evidence over revenue recognition and accounts receivable, identify related party transactions, investigate management representations that contradicted other audit evidence, perform procedures to resolve and properly document inconsistencies, and exercise due professional care.\u201d<\/p>\n <\/p>\n In the action the partner for this engagement paid a fine of $25,000 and was permanently suspended from practice before the SEC<\/strong>. This includes both auditing and working as a company accountant. The firm paid a $100,000 penalty and it can only begin accepting new public company clients again next year after an independent consultant certifies that the firm has corrected the causes of its audit failures. You can read the release and find related documents here<\/u><\/a>.<\/p>\n <\/p>\n As a final reminder about accountant\u2019s and auditor\u2019s role as gatekeepers the enforcement staff said:<\/p>\n <\/p>\n \u201cAuditors are supposed to act as gatekeepers to protect the integrity of our markets, but (The Audit Firm) failed to live up to their professional obligations\u201d.<\/p>\n <\/p>\n As always, your thoughts and comments are welcome!<\/p>\n","protected":false},"excerpt":{"rendered":" As they occasionally, (and at times frequently), do, the SEC has sent us a reminder to do the right thing. This most recent reminder actually started with an action announced last September against a company that involved one of the classic financial fraud reporting areas, inappropriate revenue recognition. The complaint alleges significant self-dealing by … Continue reading Do the Right Thing! – SEC Reminders for Auditors and Companies<\/span>