SEC Charges Audit Firm for Failing to Maintain Independence

The SEC charged that an audit firm failed to maintain independence from clients while engaging in audits, exams and reviews.

In a Complaint filed in the U.S District Court for the Southern District of Florida, the SEC alleged that the firm entered into engagement agreements with clients that included indemnification provisions which compromised compliance with the "Commission’s auditor independence rule in connection with 62 audits, 11 examinations ("exams"), and 144 reviews." The SEC asserted that the firm was on notice about the "impairment" of their independence for several months. The SEC stated that the firm falsely purported to provide reports to issuer clients as an "independent registered accounting firm," which were, in turn, used by clients in filing with the SEC. As a result, the SEC asserted that the firm aided and abetted its issuer clients’ violations in doing so.

The SEC charged the firm for violations of Regulation S-X Rule 2-02(b) ("Accountants' reports and attestation reports") and Exchange Act Rule 17a-5(i) ("Reports to be made by certain brokers and dealers").

The SEC requested that the Court impose an injunction against the firm, disgorgement with prejudgment interest and civil money penalties.