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SEC Probing `Number of' Audit-Independence Cases, Official Says
Thursday, June 27, 2002
(16:03)
By Neil Roland
Bloomberg

“We take audit-independence cases very seriously because they undermine the confidence of the investing public in the gatekeepers,” Paul Berger said.

WASHINGTON -- Bloomberg
The Securities and Exchange Commission is investigating “a number of” possible audit-independence abuses by U.S. accounting firms, an SEC official said as the agency announced a $400,000 fine of Ernst & Young's Dutch affiliate.

“There may well be audit-independence cases coming down soon, including some involving the Big-Four accounting firms,” SEC Associate Enforcement Director Paul R. Berger said in an interview.

SEC rules forbid auditors from doing other business with clients because it may lead auditors to go easy on checking the books.

The SEC, led by Chairman Harvey Pitt, is being pushed by Congress to crack down on executives and auditors with possible conflicts of interest after accounting scandals surfaced at such companies as Enron Corp. and WorldCom Inc., which said yesterday it hid $3.9 billion in expenses.

Ernst & Young's Dutch affiliate was censured for “improper professional conduct” in connection with its audits of Baan NV from 1995 to 1997, while the firm was helping Baan sell its software, the SEC said today. The Ernst & Young affiliate agreed to pay a $400,000 penalty, the first fine against an accounting firm for audit-independence violations, the SEC said.

Commissioner Isaac Hunt was the only SEC commissioner to vote on the settlement, as Pitt and Commissioner Cynthia Glassman recused themselves, people familiar with the case said. Both have past ties to Ernst & Young.

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Dan