CFTC Files Complaint against the Audit Firm of an FCM
The CFTC filed a complaint against a Certified Public Accounting Firm, and its sole owner and auditor, which served as an independent auditor and conducted required year-end audits for a brokerage house registered with the CFTC as a Futures Commission Merchant ("FCM") under Section 6c of the Commodity Exchange Act ("CEA") to enjoin their unlawful acts and practices and to compel their compliance with CEA and CFTC Regulations. Moreover, the CFTC sought civil monetary penalties, pre- and post-judgment interest and other equitable relief. In its complaint, the CFTC alleged that:
- Defendants were not qualified to conduct an FCM audit and had no understanding of the applicable CFTC Regulations;
- Defendants improperly relied on a non-employee, non-CPA to perform all of the work on the FCM's audits;
- Defendants' audits of the FCM did not comply with Generally Accepted Auditing Standards or other requirements set forth in Rule 1.16;
- Defendants' audits also violated Rule 1.16 because they did not appropriately address the risks particular to an FCM client, and failed to include appropriate tests of the FCM's accounting system, internal accounting controls, and procedures for safeguarding customer and firm assets. Furthermore, defendants' audits were insufficient to provide reasonable assurance that any material inadequacies existing at the date of the examination would be discovered; and
- Defendants failed to notify CFTC of material inadequacies they identified in their audits, which the FCM failed to timely report to CFTC, as required by Rule 1.16(e)(2).
View Complaint in full here (links externally to CFTC website).See also: Press Release.