We’ve had some fun over the years picking on BDO USA for its auditing imperfections, from blowing the 2009 audit of General Employment Enterprises Inc. to three former BDO accountants getting into trouble for misdeeds made in the 2013 audit of AmTrust Financial Services Inc. to god-awful PCAOB audit inspection reports.
Now we’ve come to find out that BDO USA’s penchant for bad auditing has rubbed off on its colleagues to the north. This press release was sent out by the Ontario Securities Commission on Jan. 24:
A Panel of the Ontario Securities Commission (OSC) has approved a settlement agreement in which BDO Canada LLP (BDO) admitted that it failed to comply with generally accepted auditing standards in the audits of the 2014 and 2015 financial statements of two privately-offered investment funds.
As part of the settlement, BDO has paid the Commission a $3.5 million administrative penalty and $500,000 towards the cost of OSC Staff’s investigation. The settlement reflects that, since the audits at issue, BDO has enhanced its policies and procedures to prevent the re-occurrence of similar failures in the future.
“Investors rely on auditors to carry out their work with professional skepticism and proper oversight. When auditors fall short, investors lose confidence in the integrity of financial reporting, a cornerstone of our capital markets.” said Jeff Kehoe, Director of Enforcement at the OSC. “This settlement holds BDO accountable for failing to adequately carry out its role as a gatekeeper.”
“In the midst of audit season, this settlement is a timely reminder for auditing firms to review their audit policies and procedures to ensure they comply with professional auditing standards and achieve the highest level of audit quality,” added Cameron McInnis, Chief Accountant at the OSC.
BDO has entered into a separate settlement agreement with Grant Thornton Limited, the court-appointed receiver for Crystal Wealth and its funds. Upon court approval of that settlement, OSC Staff will recommend to the Commission that $2.5 million of the $3.5 million administrative penalty be allocated to Crystal Wealth investors.
BDO was the auditor of Crystal Wealth and its investment funds. In April 2017, the Ontario Superior Court of Justice put Crystal Wealth, its investment funds, and their directing mind, Clayton Smith, into receivership following an application by the Commission.
In June 2018, a Panel of the Commission approved a settlement agreement between Smith and Staff in which he admitted to defrauding investors in the funds whose financial statements BDO audited.
It remains to be seen whether this was a one-time screw-up by BDO Canada’s auditors and that they’ve learned from this experience or if BDO USA’s bad auditing bug has spread faster than the coronavirus.