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SEC Enforcement Chief Shares Lessons Learned from Recent Cases Against Auditors

In a recent speech, the director of the SEC’s Division of Enforcement, Andrew Ceresney, provided a history of SEC enforcement actions against auditors and current areas of focus in enforcement cases.  He noted that while the Commission holds auditors in “high regard,” it has “not hesitated to pursue auditors where such charges are warranted or their conduct may indicate that they are a threat to the Commission’s processes.”

Ceresney’s lessoned learned from recent enforcement actions against auditors include:

  • Auditors should determine that they have sufficient capacity to serve a client before entering a client engagement.
  • Audits should be properly planned and executed.
  • Auditors should exercise “proper professional skepticism” by gathering audit evidence, documenting their work, and requiring sufficient evidence, particularly in cases where there are red flags.
  • Auditors should consult internally on “troublesome” issues.
  • Audit firms should establish “robust” monitoring and training regarding independence issues.
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