SEC Sanctions Eight Audit Firms for Violating Auditor Independence Rules

The SEC sanctioned eight firms for violating auditor independence rules when they prepared the financial statements of brokerage firms that were their audit clients.

An SEC investigation found that the firms took data generally from financial documents provided by clients during audits and used it to prepare their financial statements and notes to the financial statements.

According to the SEC, under auditor independence rules, audit firms cannot jeopardize their objectivity and impartiality in the auditing process by providing such non-audit services to audit clients. By preparing the financial statements, the SEC stated, "these particular firms essentially put themselves in the position of auditing their own work, and they inappropriately aligned themselves more closely with the interests of clients' management teams in helping prepare the books rather than strictly auditing them."

See: SEC Press Release.