Investing

SEC Suspends Public Accountants Over Bad Audits

Chris Lange

Published: December 11, 2015 10:50 am

Last Updated: January 13, 2020 4:11 pm

The U.S. Securities and Exchange Commission (SEC) suspended five accountants and two audit firms from practicing or appearing before the SEC. This was handed down following violations of key rules that are designed to preserve the integrity of the financial reporting system.

According to the SEC, the accountants and firms at various times performed deficient audits of public companies, jeopardized the independence of other audits and falsified and backdated audit documents among other misconduct.

The SEC detailed in its report:

• Messineo and his firm, which had more than 70 corporate clients, skipped mandatory quality reviews for their own audits and performed deficient quality reviews for audits by another audit firm.
• To cover up these violations, Bigalke falsified and backdated audit documents in her role as Messineo & Co.’s senior accountant. She also arranged with Mohr, the firm’s quality reviewer, the backdating of quality review documents.
• Mohr falsely identified himself as a certified public accountant during a time when was not licensed as a CPA.
• Messineo served as the CFO of two public companies being audited by Klein and DKM.  Messineo falsely certified the companies’ public filings despite knowing that auditor independence rules were being violated as Confessore was improperly serving conflicting roles as a member of the DKM audit team and an employee of Messineo & Co.
• After Messineo resigned from his CFO positions at both public companies, he merged his audit firm into DKM and exacerbated DKM’s independence issues because he retained ownership interests in the two companies while DKM continued to audit them.

As a result, Messineo and his firm Messineo & Co. are permanently barred from practicing as accountants on behalf of any publicly traded company or other entity regulated by the SEC. Klein, Confessore and DKM are suspended from appearing or practicing before the SEC as accountants for at least two years. Mohr is suspended for at least four years, and Bigalke is suspended for at least three years.  They are collectively paying penalties and disgorgement totaling more than $100,000 to settle the SEC’s charges.

Paul G. Levenson, director of the SEC’s Boston Regional Office, said:

Auditors must follow the professional standards and avoid conflicts of interest when they opine on the financial information reported by public companies. These accountants and their firms showed complete disregard for the basic rules of their profession. As a result, they are now barred from working on any SEC-related matters.