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Cady Bar the Door Insight & Commentary on SEC Enforcement Actions and White Collar Crime

Category Archives: Auditors

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SEC Sanctions Auditor, Should Make Small Issuers Think Twice

Posted in Accounting Fraud, Auditors

The SEC brought a settled administrative action against an auditor on October 24th.  Often I’ll take a case like this and write something about it to warn other auditors (or investment advisers or broker-dealers, or whomever) from similar behavior.  But you know what?  No.  It’s too dumb. Law Here’s the relevant law:  Section 10A(j) of… Continue Reading

Keeping Internal Investigations Independent and Conflict-Free

Posted in Accounting Fraud, Auditors, Financial Fraud, Investigations

Internal investigations can arise in a number of different ways and can concern a number of different subjects.  Allegations of financial misconduct, employment-related missteps, and breaches of fiduciary duty, among others, can all lead a company in that direction.  Grand jury subpoenas, search warrants, target letters, media reports, whistleblower claims, audit reports, and routine risk… Continue Reading

SEC Issues Risk Alert on Investment Adviser Custody Rule

Posted in Auditors, Compliance, Investment Advisers, Non-scienter-based Violations

The SEC can express its displeasure with a particular securities practice in a number of different ways, with increasing levels of fun for the alleged malefactor.  Here’s a non-exhaustive list: One thing it can do is file an enforcement action in federal or administrative court.  This option is not fun at all.  It’s not as… Continue Reading

PCAOB Brings Case on Audit Documentation

Posted in Auditors

The Public Company Accounting Oversight Board brought a settled action on November 13th  against three outside auditors whose errors were measured not in substance, but in process.  Dale Arnold Hotz, Jyothi Nuthulaganti Manohar, and Michael Jared Fadner – all CPAs and respectively a partner, director, and assurance manager at then-McGladrey & Pullen – issued a… Continue Reading

SEC Sues Auditor for Failing to Audit

Posted in Accounting Fraud, Auditors, Financial Fraud, Microcap Fraud, Non-scienter-based Violations

This world has a lot of problems that require fixing, but I dare say that scratch-off lottery tickets is not one of them.  Still, that is the problem that Lee Cole and Linden Boyne ventured to solve through Electronic Game Card, Inc. (EGMI), a company that tried to develop credit card-sized electronic games that could… Continue Reading

SEC Charges Thornburg Mortgage Executives with Financial Fraud

Posted in Accounting Fraud, Auditors, Financial Fraud, SEC Litigation

Perhaps the SEC, at least for the time being, is finding its groove with respect to financial fraud matters.  For the second time in a two-month span, the Commission has brought a case for fraudulent disclosures regarding the health of a residential loan portfolio.  In January, the SEC filed suit against Florida-based BankAtlantic and its… Continue Reading

SEC Charges First Auditor of 2012

Posted in Auditors

The SEC brought its first enforcement action of 2012 against an auditor last Monday.  It is not a terribly subtle case.  All of the so-far unproven facts that follow come from the SEC’s complaint, filed in the Southern District of Florida.  Briefly, Daniel Imperato is alleged to have orchestrated a scheme to use Imperiali, a business development… Continue Reading