The SEC Division of Enforcement cracked a lot of skulls in fiscal 2022, as it brought in a record $6.439 billion in penalties and disgorgement, up from $3.852 billion in fiscal year 2021. Of that total, the $4.194 billion in civil penalties the SEC doled out was also a record, but the $2.245 billion in disgorgement fell by 6% from 2021.
Total enforcement actions for 2022 came in at 760, a 9% increase over the previous year, and included 462 new, or “stand alone,” enforcement actions, up 6.5% over 2021.
Of that $6.4 billion in penalties, $125.73 million, or nearly 2%, were given to some of our most favoritest audit firms, with EY’s cheating fiasco leading the way at $100 million.
Other audit firms busted by the SEC this year included:
- Deloitte’s China-based affiliate ($20 million) for failing to comply with fundamental U.S. auditing requirements when auditing U.S. issuers and foreign companies listed on U.S. exchanges, allowing clients to select their own samples for testing, and having clients prepare their own audit documentation.
- RSM US ($3.75 million) and three senior-level employees for failing to properly audit a client company’s financial statements over a four-year period, when that client was improperly inflating revenues.
- CohnReznick ($1.9 million; $80,000 total to three partners) for improper professional conduct on engagements for two clients in 2017. The SEC also charged three CohnReznick partners with improper professional conduct for violating numerous professional standards in their third quarter 2017 interim review and 2017 annual audit of one of the client’s financial statements.
Gurbir Grewal, director of the SEC Division of Enforcement, has high hopes that audit firms, public companies, and the like will all of a sudden keep their noses clean in 2023. “While we set a commission record this past fiscal year for total money ordered at $6.4 billion, including a record $4.2 billion in penalties, we don’t expect to break these records and set new ones each year because we expect behaviors to change. We expect compliance.”
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