Accounting Firm To Pay Over $11.8 Million To Settle SEC Audit Failure Charges

An accounting firm agreed to pay more than $11.8 million to settle SEC charges relating to the failed audits of an oil services company that allegedly used deceptive income tax accounting to inflate earnings.

The SEC Order determined that:

the firm's audit team failed repeatedly to detect the company's ongoing fraud for over four years despite placing the energy company audits in a high-risk category; the firm's audit team relied on the energy company's unsubstantiated explanations instead of performing required audit procedures in order to scrutinize the company's accounting, even though it was aware that the company made post-closing adjustments in order to lower the year-end provision significantly for income taxes each year; and the firm failed to minimize recurrent known problems experienced by its audit team when auditing tax accounting. Enforcement Director Andrew J. Ceresney remarked that the responsibility for addressing such failures lies with auditing and...