01 Oct SEC Settles With Three Accountants for Alleged Audit Failures

The SEC announced yesterday that it settled with three auditors who were alleged to conduct improper audits on a number of publicly traded companies that were shells or development stage companies. The Commission has been stepping up enforcement against “gatekeepers” such as accountants and attorneys for, as the SEC put it in their press release, “the importan roles they play in the securities industry.” Internally the operation was called “Operation Broken Gate.”

These accountants apparently did not conduct proper “engagement quality reviews,” or EQRs, on the public companies in question. There were also other “significant deficiencies” in these audits. As a result, two of the three have  basically agreed to stop doing audits for public companies. A third is still litigating. The two that settled neither admitted nor denied the allegations.

Where will the next shoes drop? This is not clear.