SEC Imposes Penalties and Sweeping Independent Consultant on CohnReznick for Alleged Audit Failures in Case Underscoring SEC’s Focus on “Gatekeepers”
June 16, 2022
On June 8, 2022, the SEC announced a notable settlement with national audit firm CohnReznick LLP, charging it with failure to uphold several professional standards during its 2017 audits of two public companies that had previously been sued by the SEC for accounting fraud.
In its order, the SEC specifically alleged that CohnReznick violated professional standards and contributed to materially misleading financial statements by, among other things, failing to exercise sufficient professional skepticism and accepting assertions from company management without sufficient supporting evidence.
The SEC fined CohnReznick $1.9 million, levied fines and suspensions against several of its audit partners, and imposed an independent consultant with a sweeping mandate to demand various audit-related and internal process reforms and veto new audit clients. This action is consistent with the SEC’s repeated warnings that “gatekeepers” such as auditors are in the agency’s crosshairs.
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