SEC Issues Settled Order Against Auditor for Failures Related to Audit of a Mutual Fund

On March 6, 2026, the SEC issued a settled order against EisnerAmper for improper professional conduct in connection with its audit of the 2020 financial statements of the Infinity Q Diversified Alpha Fund (“Mutual Fund”) under Sections 4C and 21C of the Exchange Act, and Rule 102(e) of the Commission’s Rules of Practice.

The order against EisnerAmper explains that the engagement team identified the valuation of hard to value securities, i.e., “Level 3 assets,” as a significant risk of material misstatement, but failed to sufficiently respond to the identified risks. Specifically, the SEC found the engagement team failed to understand the Mutual Fund’s process and internal controls around its valuation model for the Level 3 assets and failed to perform sufficient testing over the valuation of the Level 3 assets.

The SEC found that EisnerAmper did not conduct the 2020 audit in accordance with PCAOB auditing standards in violation of Rule 2-02(b)(1) of Regulation S-X because the firm failed to (1) obtain an adequate understanding of internal controls related to the valuation process; (2) obtain sufficient appropriate audit evidence when performing valuation testing that did not meet applicable auditing standards and did not align with EisnerAmper’s audit plan; and (3) exercise sufficient due professional care or professional skepticism when performing the audit work. Additionally, the SEC found that EisnerAmper violated PCAOB quality control standards.

The order (1) requires EisnerAmper to cease and desist from violating or causing violations of Rule 2-02(b)(1) of Regulation S-X; (2) censures the firm; and (3) requires the firm to comply with and make written certifications to the Commission regarding the remedial undertakings described in the order. The order does not impose a civil penalty based on EisnerAmper’s prompt remedial efforts.

The SEC previously issued a settled order against the Mutual Fund’s investment adviser and charged its Chief Investment Officer for each of their roles in the fraudulent mismarking scheme involving the manipulation of valuation models to inflate the performance of Infinity Q funds. The Chief Investment Officer also pleaded guilty to one count of securities fraud, was sentenced to 15 years in prison, and was ordered to pay restitution of approximately $126 million.

A copy of the settled order against EisnerAmper can be found here and a copy of the Administrative Proceeding Summary can be found here.