Ernst & Young to Pay $11.8 Million to Settle SEC Claims
October 18 2016 - 1:20PM
Dow Jones News
Ernst & Young LLP agreed to pay $11.8 million to settle
claims that the accounting firm's auditors should have detected
deceptive accounting practices that inflated a client's earnings,
the Securities and Exchange Commission said Tuesday.
An Ernst & Young partner and a former partner agreed to
temporary suspensions as public-company auditors to resolve the
case, the SEC said.
The audit firm and the two accountants, Craig Fronckiewicz and
Sarah Adams, consented to the SEC's order without admitting or
denying the findings.
The audits were performed for Weatherford International PLC,
which agreed last month to pay $140 million to settle SEC claims
that it inflated its earnings by more than $900 million and
misstated other metrics, including its effective tax rate. The
oil-field-services company didn't admit or deny the findings.
The SEC said Tuesday that the firm and the two accountants
ignored red flags, such as adjustments that Weatherford made to
lower its tax expense over several years.
An Ernst & Young representative didn't immediately respond
to a request for comment.
"Audit and national office professionals must appropriately
address known deficiencies in their auditing of high-risk areas,
and auditors must have the fortitude to refuse to sign off on an
audit if important issues remain unresolved," said Andrew J.
Ceresney, Director of the SEC's Division of Enforcement. "Ernst
& Young failed to ensure that material post-closing accounting
adjustments were justified by appropriate audit evidence, leading
to a significant audit failure."
The fine that Ernst & Young agreed to pay includes
disgorgement of $9 million and a penalty of $1 million, the SEC
said. The payment will be combined with the money that Weatherford
and two of its employees agreed to pay for a total of $152 million,
which will be returned to investors who were harmed by the fraud,
the SEC said.
Write to Dave Michaels at dave.michaels@wsj.com
(END) Dow Jones Newswires
October 18, 2016 13:05 ET (17:05 GMT)
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