SEC Accuses BD Auditor of Improper Professional Conduct
The SEC has commenced enforcement proceedings against an audit firm that it accuses of engaging in improper professional conduct by failing to adhere to generally accepted accounting principles during the audit of a broker-dealer. The SEC alleges that the firm’s failures resulted in financial statements that over-valued the firm’s securities inventory and overstated certain liabilities, thereby resulting in insufficient net capital. The SEC faults the firm for failing to supervise an inexperienced auditor and relying on statements from the client rather than verifying balances with a third party.
OUR TAKE: The SEC has warned that it will bring cases against the industry’s gatekeepers including auditors. This type of case also should prompt registrants to do a better job vetting the service providers they engage.