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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