Aerospace Manufacturer Charged for Financial Reporting, Accounting and Controls Violations

An aerospace products manufacture settled SEC charges for violations of rules on financial reporting, accounting, internal controls and disclosure procedures.

According to the Order, the manufacturer filed restatements to correct prior submitted financial reports riddled with errors, including revenue recognition errors, inventory costing mistakes and inadequate internal control over financial reporting ("ICFR") and disclosure controls and procedures ("DCP"). The SEC found that the errors impacted the company's "reported revenue, inventory, loss reserves, and deferred tax asset and liability balances." The SEC said that the manufacturer's internal control issues continued through several reporting periods, resulting in corrections and disclosures of ineffective ICFR and DCP.

As a result, the SEC found that the manufacturer violated Securities Act Sections 13(a), 13(b)(2)(A), and 13(b)(2)(B) ("Periodical and other reports") and Rules 12b-20 ("Additional information"), 13a-1 ("Requirements of annual reports"), 13a-11 ("Current reports on Form 8-K"), 13a-13 ("Quarterly reports on Form 10-Q"), and 13a-15(a) ("Controls and procedures").

The SEC noted that the manufacturer implemented remedial measures, including: (i) taking corrective action for material weaknesses, (ii) retaining "new personnel with expanded expertise in financial reporting;" and (iii) hiring a consultant to assist the manufacturer with internal controls.

To settle the charges, the manufacturer agreed to (i) cease and desist from committing future violations, (ii) undertakings, including remediating the company's material weaknesses, and (iii) if the company fails to comply, to pay a civil penalty of $400,000.