The SEC settled charges concerning two partners of a public
accounting firm who "got too close to their clients on a
personal level and violated rules that ensure firms maintain their
objectivity and impartiality during audits."
The SEC stated that the first partner was
"specifically tasked by the firm to improve its relationship
with the New York-based audit client because it was a 'troubled
account.'" After an investigation, the SEC determined that
"the audit partner and the company's CFO stayed overnight
at each other's homes on multiple occasions and traveled
together with family members on overnight trips with no valid
business purpose, and they exchanged hundreds of personal text
messages, emails, and voicemails during the auditing periods."
The partner agreed to pay a $45,000 penalty and is suspended from
appearing and practicing before the SEC as an accountant.
The SEC found that the second audit partner engaged in a
romantic relationship with a financial executive of the company
being audited while she was coordinating the engagement team that
performed the audit and review services. Further, the supervisor of
the audit became aware of the improper relationship "yet
failed to perform a reasonable inquiry or raise concerns
internally." The client coordinating partner and the
financial executive agreed to pay penalties of $25,000 each.
The public accounting firm consented to the SEC Order and agreed
to pay $4.975 million in monetary sanctions.
SEC Enforcement Director Andrew J. Ceresney remarked that:
These are the first SEC enforcement actions for auditor
independence failures due to close personal relationships between
auditors and client personnel. [The firm] did not do enough to
detect or prevent these partners from getting too close to their
clients and compromising their roles as independent auditors.
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