SEC Charges 69 Firms For Audit Violations

by Glenn Shapiro, LawAndTax-News.com, New York

14 September 2007

The US Securities and Exchange Commission has charged 69 auditors with issuing audit reports on the financial statements of public companies while they were not registered with the Public Company Accounting Oversight Board (PCAOB).

The SEC administrative orders named 37 unregistered audit firms and 32 audit partners who participated in the preparation and issuance of their unregistered firms’ audit reports. The SEC argued that these firms and partners did not comply with a fundamental requirement of the Sarbanes-Oxley Act of 2002 — that accounting firms that prepare and issue audit reports on the financial statements of public companies must be registered with the PCAOB.

The SEC issued 29 settled and ten contested orders. The 69 firms and partners named in Thursday's actions were collectively responsible for issuing 60 audit reports for 53 companies between November 2003 and October 2005.

Linda Chatman Thomsen, Director of the SEC’s Enforcement Division, commented: “The Commission is committed to ensuring compliance with the regulatory framework Congress established for auditors of public companies. When these auditors failed to register with the PCAOB, they violated one of the key requirements of Sarbanes-Oxley and evaded the PCAOB’s oversight authority. The actions we take today protect investors and will deter future violations of Sarbanes-Oxley’s registration provision.”

Twenty-eight firms and 22 partners agreed to settlements in which the Commission found that each audit firm had issued between one and eight audit reports while unregistered, and ordered the firms and partners to cease and desist from committing or causing violations of the registration provision of Sarbanes-Oxley, Section 102(a). The Commission also censured the firms. Additionally, two firms agreed to disgorge audit fees they had received for their audits, while the other settling firms that received audit fees returned the fees to their issuers during the course of the Commission’s investigation.

Without admitting or denying the findings of the Orders, each of the settling firms and partners consented to the entry of an order finding that they had violated Section 102(a) of the Sarbanes-Oxley Act, the SEC stated.

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