The SEC announced settlements with an auditing firm (the “Firm”) and one of its partners relating to violations of certain auditor independence rules involving nineteen audit engagements with fifteen SEC-registrant issuers.
More specifically, the SEC found the Firm and its partner violated the Commission’s and Public Company Accounting Oversight Board’s (“PCAOB”) auditor independence rules. The alleged conduct involved performing prohibited non-audit services, including exercising decision-making authority in the design and implementation of software relating to one of its issuer client’s financial reporting as well as engaging in management functions for the company. The partner was responsible for supervising the performance of the prohibited non-audit services. Additionally, the SEC charged additional PCAOB-rule violations for failing to notify the clients’ audit committees about the non-audit services. The SEC described these failures as “mischaracterized non-audit services” despite the services involving financial software “that were planned to be implemented in a subsequent audit period and providing feedback to management on those systems—areas outside the realm of audit work.” The partner was also charged with providing material, non-public information concerning an issuer to a software company without the issuer’s consent.