The SEC settled charges concerning two partners of a public accounting firm who "got too close to their clients on a personal level and violated rules that ensure firms maintain their objectivity and impartiality during audits."
The SEC stated that the first partner was "specifically tasked by the firm to improve its relationship with the New York-based audit client because it was a 'troubled account.'" After an investigation, the SEC determined that "the audit partner and the company's CFO stayed overnight at each other's homes on multiple occasions and traveled together with family members on overnight trips with no valid business purpose, and they exchanged hundreds of personal text messages, emails, and voicemails during the auditing periods." The partner agreed to pay a $45,000 penalty and is suspended from appearing and practicing before the SEC as an accountant.
The SEC found that the second audit partner engaged in a romantic relationship with a financial executive of the company being audited while she was coordinating the engagement team that performed the audit and review services. Further, the supervisor of the audit became aware of the improper relationship "yet failed to perform a reasonable inquiry or raise concerns internally." The client coordinating partner and the financial executive agreed to pay penalties of $25,000 each.
The public accounting firm consented to the SEC Order and agreed to pay $4.975 million in monetary sanctions.
SEC Enforcement Director Andrew J. Ceresney remarked that:
These are the first SEC enforcement actions for auditor independence failures due to close personal relationships between auditors and client personnel. [The firm] did not do enough to detect or prevent these partners from getting too close to their clients and compromising their roles as independent auditors.
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