Auditor Charged with Violating Independence Rules

The SEC charged public accounting firm RSM US LLP with violations of the auditor independence rules in connection with more than 100 audit reports involving at least 15 audit clients. According to the SEC’s order, RSM US repeatedly represented that it was “independent” in audit reports issued on the clients’ financial statements, which were included or incorporated by reference in public filings or provided to investors.  Instead, the SEC found that RSM US or its associated entities, including other member firms of the RSM International network, provided non-audit services to, and had an employment relationship with, affiliates of RSM US audit clients, which violated the SEC’s auditor independence rules. The prohibited non-audit services included corporate secretarial services, payment facilitation, payroll outsourcing, loaned staff, financial information system design or implementation, bookkeeping, internal audit outsourcing, and investment adviser services.  The prohibited employment relationship concerned a partner at an RSMI member firm in Australia serving on a voluntary basis as a non-discretionary member of the board of an affiliate of a RSM US issuer audit client. The SEC also found that certain of RSM US’s independence controls were inadequate, resulting in the firm’s failure to identify and avoid these prohibited non-audit services and the prohibited employment relationship.  These violations occurred between 2014 and 2015, with certain violations remaining undetected until at least 2016. RSM US consented to the SEC’s order without admitting or denying the findings and was ordered to cease and desist from future violations.  RSM US agreed to pay a $950,000 penalty and be censured.