WASHINGTON (Legal Newsline) — Ernst & Young LLP has agreed to pay more than $11.8 million after allegations related to audits of an oil services company that allegedly used deceptive income tax accounting to inflate earnings, the Securities and Exchange Commission (SEC) has announced.
Last month, the audit client – Weatherford International – agreed to a $140 million penalty. Combined with Ernst & Young’s payment, along with money collected from two charged Weatherford employees, $152 million will be returned to investors harmed by the alleged accounting fraud.
According to the SEC, Ernst & Young repeatedly failed to detect fraud on the part of Weatherford until the scheme was four years running.
“Audit and national office professionals must appropriately address known deficiencies in their auditing of high-risk areas, and auditors must have the fortitude to refuse to sign off on an audit if important issues remain unresolved,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “Ernst & Young failed to ensure that material post-closing accounting adjustments were justified by appropriate audit evidence, leading to a significant audit failure.”
Handling the case for the SEC were attorneys Jim Valentino, Ilana Sultan and Natalie Lentz with assistance from Kevin Lombardi and Kara Brockmeyer. Tracy L. Price supervised the case.