CORPORATE CRIME REPORTER
Ernst
& Young to Pay $1.6 Million to Settle SEC Charges
21 Corporate Crime Reporter 14, March 27, 2007
Ernst & Young will pay $1.6 million to settle charges that it violated auditor
independence standards.
The big four accounting firm, through its partner Michael S. Joseph, helped develop and market an accounting product for a client – American International Group, Inc. – and advised an audit client, The PNC Financial Services Group, Inc., on the accounting treatment for a version of that product that PNC purchased.
The Securities and Exchange Commission (SEC) found that as a result of Joseph's actions, Ernst & Young compromised its auditor independence required by generally accepted auditing standards and Regulation S-X.
Because Ernset & Young was not independent, the firm did not conduct independent reviews of PNC's financial statements for the second and third quarters of 2001.
The SEC censured Ernst & Young and order it to pay disgorgement and interest totaling $1,587,170.42.
The money will be paid to a victim restitution fund established in 2003 pursuant to a deferred prosecution agreement between PNC and the Department of Justice.
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