Audit Conduct

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SEC Cases Against Auditors More than Doubled since "Operation Broken Gate" Began in 2013

In a keynote address at the American Law Institute Conference on Accountants' Liability last week, Andrew Ceresney, Director of the SEC's Division of Enforcement, noted the SEC has more than doubled the number of actions against audit firms and associated persons since it began "Operation Broken Gate" in 2013 to identify negligent auditors

Mr. Ceresney took a stroll down Memory Lane in his speech, summarizing enforcement actions against audit firms going back to the 1980s.   Emphasizing independence, professional skepticism, due care, and competence, he acknowledged the improvements some firms have made to audit quality but lamented egregious cases in which no audits were performed or firms took engagements they were not competent and/or lacked sufficient resources to perform.  He also cited auditors' over-reliance on management representations, especially valuation estimates and insufficient audit documentation and planning as areas needing significant improvement.