Ernst & Young Gets Its Audit Clients in Shape, Ends Up Getting Its Own Ass Kicked
Bwhahahahahahahahaha LOL and bwhahahaha some more. Skeptical CPA, what say ye? Surely you have an opinion to express on this farce
In 2002, worried about growing financial scandals, the audit firm of Ernst & Young set out to identify its riskiest clients and force them to comply with accounting rules. The effort backfired.
On Thursday, the firm agreed to pay an $8.5 million fine to the Securities and Exchange Commission for its work auditing the books of Bally Total Fitness. The firm agreed to an order that it cease and desist from violating securities laws.
Six current and former Ernst partners, including Randy G. Fletchall, the partner in charge of the firm’s national office, were also sanctioned by the commission in one of its most sweeping actions against auditors involved in a failed audit.
“It is deeply disconcerting that partners, even at the highest levels of E. & Y., failed to fulfill their basic obligations to the investing public by not conducting proper audits,” said Robert Khuzami, director of the S.E.C.’s enforcement division.
“This case is a sharp reminder to outside auditors that they must carry out their duties with due diligence,” he added. The $8.5 million settlement, one of the highest ever paid by an accounting firm, “reflects the seriousness of their misconduct.”
Mr. Fletchall, who remains with Ernst, was in charge of resolving technical accounting issues in the United States. He was censured by the commission.
Let's replay the scenario. Enron. Arthur Andersen. E&Y's "oh fuck" moment. Shouldn't they have already identified their riskiest clients? And shouldn't they have resolved any issues surrounding those clients without needing an $8.5 million settlement with the SEC?
$8.5 million? Pennies.