The Securities and Exchange Commission has fimed Ernst & Young, one of the Big 4 global audit firms , to pay $11.8 million—$1 million fines and $10.8 million in audit fee give-backs plus interest. The fine was for failing to recognize allegedly false financials issued by Weatherford International from between 2007 and 2012 that inflated its earnings by more than $900 million in total, according to the SEC. The company allegedly misled investors about its earnings per share, effective tax rate and other key financial information. Two of its executives were also charged. The SEC collected a $140 million fine in September from Weatherford and its executives. EY paid total fines of $9.3 million to the SEC in September for audit partners that got too close to key clients at two public companies, the SEC alleged.
Last year, Grant Thornton was fined $3 million for ignoring red flags and fraud risks while conducting deficient audits of two publicly traded companies.
The SEC said Fronckiewicz and Adams repeatedly engaging in improper professional conduct during the audits and quarterly reviews, relying on Weatherford’s unsubstantiated explanations for post-year end accounting adjustments each year instead of verifying the information. Fronckiewicz and his team failed to find out why the company was experiencing a huge unexplained income tax receivable that grew to over $400 million by year-end 2010, the SEC said.
Jeffrey Newman represents whistleblowers