Audit Partner and Manager Barred from SEC Work for Inflated Valuations
An audit partner and manager were barred from appearing before the SEC for failing to follow professional standards in connection with the audit of a private fund. According to the SEC, the respondents failed to verify the existence of certain investments by confirming them with third parties and issued an audit report with inflated asset valuations. The SEC said that the auditors should have been on high alert because the previous auditor resigned over the same security. The adviser and its principal agreed to pay over $1.3 Million to settle the charges.
OUR TAKE: The SEC requires auditors to serve as securities markets gatekeepers. In this role, the SEC will hold the auditors accountable for ensuring that a fund has actually made purported investments. Also, the SEC suggests that the auditor also has a role in ensuring the proper valuation of illiquid investments.