As everyone who is anyone knows, it's important to maintain independence in both fact and appearance.
James T. Adams — once Chief Risk Officer at Deloitte's San Francisco office — was reminded of that part of CPA Ethics 101 today when the Securities and Exchange Commission charged him for causing violations of the auditor independence rules that ensure audit firms maintain their objectivity and impartiality with respect to their clients
According to the SEC press release:
An SEC order finds that certified public accountant James T. Adams repeatedly accepted tens of thousands of dollars in casino markers while he was the advisory partner on subsidiary Deloitte & Touche’s audit of a casino gaming corporation. A marker is an instrument utilized by a casino customer to receive gaming chips drawn against the customer’s line of credit at the casino. Adams opened a line of credit with a casino run by the gaming corporation client and used the casino markers to draw on that line of credit. Adams concealed his casino markers from Deloitte & Touche and lied to another partner when asked if he had casino markers from audit clients of the firm.
Adams agreed to settle with the SEC and will not be able to practice as an accountant on behalf of any publicly traded company or other entity regulated by the SEC for two years.
The SEC says Adams drew $85,000 worth of markers in July 2009 that remained outstanding for 43 days. In September, he drew $3,000 in markers that were outstanding for 13 days and $70,000 in markers that were outstanding for 27 days. In October, he drew $110,000 in markers that were outstanding for 38 days. In December, he drew $100,000 in markers that were outstanding for seven days, and later drew $110,000 in markers that remained outstanding when he retired from the firm in May 2010.
So, not only was he really bad at being independent in both fact and appearance, he probably wasn't very good at gambling either.
“The transactions by which Adams accepted the casino markers were loans from an audit client that are prohibited by the auditor independence rules,” said Scott W. Friestad, associate director in the SEC’s Division of Enforcement. “Auditor independence is critical to the integrity of the financial reporting process. Through his extensive use of casino markers, Adams clearly violated the rules and put his own desires ahead of his client’s interests.”
Adams spent his entire career with Deloitte — starting with Deloitte & Touche in 1974 and sticking it out until he retired in May of 2010. It goes without saying his CPA licenses in Georgia and California are inactive. Very, very inactive.