Coming off the heels of a horrible Public Company Accounting Oversight Board inspection report, in which 16 of 24 audits inspected in 2016 were found to have deficiencies, BDO USA is again in the news for all the wrong reasons.
Three former BDO accountants were suspended by the Securities and Exchange Commission on Oct. 12 for misdeeds made in the 2013 audit of insurance company AmTrust Financial Services Inc., including manipulating files to conceal audit deficiencies.
Lev Nagdimov, CPA, senior manager on the audit engagement, Richard Bertuglia, CPA, lead engagement partner, and John Green, CPA, engagement quality review partner, settled with the SEC on Friday, without admitting or denying the SEC’s allegations.
They each agreed to be suspended from appearing and practicing before the SEC as accountants, which includes not participating in the financial reporting or audits of public companies.
Nagdimov can apply for reinstatement after five years, Bertuglia after three years, and Green after one year.
According to the SEC, here’s what got them into trouble:
BDO fell behind schedule while conducting its 2013 integrated audit of AmTrust Financial Services Inc. and ultimately failed to complete necessary audit procedures before AmTrust’s deadline to file its annual report with the SEC. To create the appearance that BDO’s audit was in fact complete, the senior manager on the audit engagement, Lev Nagdimov, instructed BDO’s audit team to sign off on all work papers and audit programs regardless of whether its work was finished. Nagdimov further instructed BDO’s audit team to load and sign blank or placeholder work papers in BDO’s electronic files.
Consistent with Nagdimov’s instructions, the audit team improperly “predated” audit documentation by signing blank or incomplete work papers and audit programs. After AmTrust filed its 2013 annual report, the audit team finished its necessary audit procedures and preserved the predated sign-offs in BDO’s electronic files by overwriting existing documentation in the placeholder work papers. BDO was required to produce an earlier snapshot of its work papers from the period when the “predated” documents were in place, pursuant to an SEC request.
The SEC identified the audit deficiencies and predated work papers by comparing BDO’s final, archived work papers to the snapshot of the work papers as they existed at the time that BDO released its audit report.
[I]f BDO’s engagement partner Richard J. Bertuglia and engagement quality review partner John W. Green had properly exercised due professional care, they would have identified these audit deficiencies before they released BDO’s audit report, which provided unqualified opinions on AmTrust’s 2013 financial statements and internal control over financial reporting.
According to the SEC order, Nagdimov joined BDO in November 2003 and was staffed on BDO’s audit engagement team for AmTrust from 2006 until he was fired in November 2014. Bertuglia was an audit partner in BDO’s New York City office from July 2000 until he retired from the firm in June 2017. Green joined BDO in August 2012 as an audit partner in the firm’s New York City office until he left the firm in August 2016.
A spokesperson for BDO could not be reached for comment on Friday evening; however, the firm did provide this statement to Accounting Today this afternoon:
“BDO is not a party to this settlement, which concerns three former professionals’ actions in connection with a 2013 audit. BDO takes these matters very seriously and has cooperated fully with the SEC on this matter.”
Going Concern reached out to Nagdimov and Green on Friday evening for comment. Bertuglia could not be reached for comment.