News & Insights

Auditor Liability Bulletin

March 1, 2024

SEC Charges Accounting Firm for False Certification and Causing Audit Client to Commit a Violation

On February 29, 2024, without admitting or denying the findings, Clark Schaefer Hackett and Co. (“CSH”), settled with the SEC for allegedly violating SEC independence standards and falsely certifying, in violation of Rule 2-02(b) of Regulation S-X, it had conducted its audit in accordance with PCAOB standards.  The SEC further alleged that the false certification caused CSH’s audit client to violate Section 13(a) and 14(b) of the Exchange Act by submitting false or inaccurate registration statements and periodic reports filed with the Commission. 

The SEC alleged that in 2019, CSH audited the financial statements of a private company under Generally Accepted Audit Standards (“GAAS”), and during the same engagement, provided the company with non-audit services by assisting management in preparing the financial statements and performing bookkeeping services.  The SEC further alleged, that later in 2020, in connection with its audit client’s anticipated merger with a special purpose acquisition company, CSH conducted an audit of the same 2019 financial statements under PCAOB standards and represented that it was “independent” in the auditor’s report it issued under PCAOB standards, which was included in public filings with the Commission.  

CSH agreed to a censure, to cease-and-desist from committing or causing any violations and any future violations, to pay $50,000 in civil penalties, to pay $27,822 in disgorgement, and to pay $3,509 in prejudgment interest.  CSH also agreed to certain undertakings, which require the firm to, among other things, (1) retain, at its own expense, an independent consultant within 120 days to review, evaluate, and make recommendations concerning the firm’s policies and procedures relating to compliance with the independence requirements, more specifically, standards and rules that prohibit the performance of certain non-audit services by CSH or its associated entities to CSH audit clients or their affiliates; (2) adopt all recommendations from the independent consultant within 120 days from the date the independent consultant issues a report; and (3) certify, in writing, compliance with the undertakings as set forth in the order.  

The SEC press release is available here, and the settled order is available here.