AN audit firm has fallen fowl of a Securities and Exchange Commission rule requiring auditors to maintain a professional distance from clients and remain impartial and objective.
In SEC administrative proceedings, the auditors agreed to pay a $4 million fine to settle the Securities Exchange Act 1934 rule breach.
Ernst & Young’s Capitol Hill unit - Washington Council EY (WCEY) - engaged in representations to congressional staff to amend legislation of interest to its audit clients.
Scott W. Friestad, associate director of the SEC's Division of Enforcement, Scott W. Friestad said, "Ernst & Young engaged in lobbying activities that constituted improper advocacy and clearly violated the rules."
The SEC claimed: WCEY sent letters, signed by a senior executive of an Ernst & Young audit client to congressional staff, urged passage of certain legislation; tried to get a bill more favorable to its client's interests; attempted to defeat legislation detrimental to those interests; asked third parties to approach a U.S. senator to garner support for a legislative amendment; and marked up a draft of a bill by inserting a client’s language before sending it to congressional staff.
A full account of the administrative proceedings and fine can be read at the SEC website.
Source: SEC Newsroom