Without admitting or denying the SEC’s findings, RSM agreed to pay a $3.75 million penalty, to be censured, and to retain an independent consultant to review and evaluate its audit, review, and quality control policies and procedures. The firm did not perform substantive procedures that provided sufficient appropriate audit evidence to verify the source of these responses. (AS 2310.28) In addition, for the majority of the items in its sample, the responses were returned by email. The firm did not maintain control over the confirmation requests because the issuer sent the requests. To test cash at one of the issuer’s business units, the firm performed confirmation procedures for a sample of cash accounts. And by giving Revolution a pass, investors learned only too late that Revolution was committing a multi-year fraud.”Īccording to RSM’s latest PCAOB inspection report the firm is struggling. “RSM failed to do this at all levels, from the engagement team up through the firm’s national office. “Auditors are important checks against fraud, and they should be scrutinizing arrangements like bill and hold sales,” he said. SEC Director of the Division of Enforcement Gurbir Grewal gave his usual quote about auditors having a job to do and how important they are, blah blah. Condon was charged with improperly reviewing and approving RSM’s analysis that inaccurately concluded Revolution’s errors and inflated revenue were immaterial to investors. The SEC’s order against the three employees finds that Kirn, RSM’s lead partner on its Revolution audits, and Piqueira, the senior manager on those audits, failed to adequately plan, supervise, and execute the audits. The SEC also charged RSM partners Steven Kirn and Richard Condon and senior audit manager Michael Piqueira for their roles in the improper audits. Today in Auditors Not Doing Their Jobs, the SEC has charged RSM, three senior-level employees who work there, and a couple partners with improper professional conduct for failing to properly audit Revolution Lighting Technologies Inc.’s financial statements over a four-year period when Revolution was violating accounting principles by inflating revenue with bill and hold sales.Īccording to the SEC’s order, RSM’s planning and supervision of the audit, as well as the evaluation of audit results and review of Revolution’s disclosures, all failed to adhere to the Public Company Accounting Oversight Board’s auditing and quality control standards.
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