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Sarbanes-Oxley News & Developments
SEC Comes Down on Former Tyco AuditorIt has not been a good week for PricewaterhouseCoopers, as two of its former auditing partners were barred by the SEC from practicing as accountants.
> > The SEC settled charges against Richard P.Scalzo, the former PwC engagement partner responsible for the firms audits of Tyco International Ltd.
The SEC also settled charges and barred Warren Martin, a former PwC partner, from auditing the books of publicly traded companies. That ban stems from audit work for MicroStrategy Inc. done by Martin.
According to the commission Scalzo should have reevaluated the risk assessment of the Tyco audits and performed additional audit procedures. Among those procedures: additonal audit testing of certain executive benefits, executive compensation, and related party transactions. As a result, the SEC barred the one-time auditor of Tyco from practicing as an accountant.
The SEC said Martin failed to develop adequate audit evidence for revenue recognition for MicroStrategy; failed to consider properly language and dates in contracts that conflicted with the company revenue recognition; failed to consider properly concerns raised by PwC personnel that should have alerted Martin to the audit failures; and relied on unprobed and untested management representations. Martin has agreed not to practice as an accountant, with the right to apply for reinstatement after two years.
In May 2001, PwC paid $55 million to settle a class-action shareholder lawsuit related to its MicroStrategy audits.
Source: CFO article
Published:2003-08-14
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