The Canadian Press - ONLINE EDITION

Ernst & Young paying $4M to settle SEC charges over lobbying Congress for 2 audit clients

  • Print

WASHINGTON - Ernst & Young has agreed to pay $4 million to settle civil charges of compromising its independence by lobbying Congress on behalf of two companies whose books it audited.

The Securities and Exchange Commission announced the settlement Monday with New York-based company, one of the so-called Big Four accounting firms with Deloitte, KPMG and PricewaterhouseCoopers.

The SEC said employees of Washington Council EY, a lobbying subsidiary of Ernst & Young, met with congressional staff and tried to influence pending legislation on the two companies' behalf. That improperly made Ernst & Young an advocate for the two audit clients, the SEC said, at the same time that the accounting firm called itself "independent" in its audit reports included in the two companies' financial statements.

Acting as an advocate for a company could damage an accounting firm's objectivity in conducting audits for the company, potentially giving investors an inaccurate picture of its finances, regulators say.

The violations occurred prior to 2009. The SEC didn't name the companies or the legislation.

Ernst & Young said in a statement, "We regret these instances that arose many years ago and are pleased to put this matter behind us." The firm noted that in 2012, it voluntarily decided to stop doing lobbying for public company audit clients.

The SEC has brought a number of cases involving auditor independence against big accounting firms in recent years. The issue came to the fore in the Enron scandal that broke in late 2002 and in several accounting scandals involving big corporations that followed it.

In the new case, the SEC said Ernst & Young had a written independence policy but failed to provide Washington Council EY with formal training on the policy.

Ernst & Young neither admitted nor denied the SEC's allegations but did agree to refrain from future violations of auditor independence rules and the securities laws. The SEC also censured Ernst & Young, bringing the possibility that the firm could face a stiffer sanction if the alleged infraction is repeated.

Ernst & Young is paying a $2.48 million penalty, plus $1.24 million in restitution and $351,925 in interest.

The SEC said that in deciding on the sanctions, it took into account corrective steps taken by Ernst & Young, such as the new restrictions it adopted in 2012.

The SEC previously has taken similar action against Ernst & Young. In 2007, the SEC censured the firm and ordered it to pay $1.6 million to settle charges of compromising its independence and contributing to faulty accounting by an audit client, PNC Financial Services Group.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Weather for final Fringing weekend

View more like this

Photo Store Gallery

  • Geese fly in the morning light over Selkirk Ave Wednesday morning- Day 22– June 13, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)
  • A Canada goose protects her nest full of eggs Monday on campus at the University of Manitoba- Standup photo- Apr 30, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)

View More Gallery Photos

Poll

What should the city do with the 102-year-old Arlington Street bridge?

View Results

View Related Story

Ads by Google