The Number of Accounting & Auditing Cases Increased in FY2023
The Number of Accounting & Auditing Cases Increased in FY2023
There was a 22% increase in the number of accounting and auditing cases filed by the SEC in FY 2023, according to a new report published by Cornerstone Research, SEC Accounting and Auditing Enforcement Activity (here). The Report goes on to discuss key points regarding the actions initiated during the last Government fiscal year and compare them with those from earlier periods.
The Report begins by noting that 83 accounting and auditing enforcement actions were filed during FY2023. That represents a 22% increase over the prior year. It is also the highest number of accounting and auditing cases filed by the agency since 2019. The 44 actions initiated by the Commission during the fourth quarter of the fiscal year represented over half of the cases initiated during the period. This is also the largest number of cases filed in a single quarter in recent years, according to Cornerstone.
Cornerstone also found that 41 of the 83 actions filed referred to either a restatement and/or a material weakness in internal controls. Accordingly, over half of the cases were not identified as involving a restatement or being based on a material weakness in internal controls.
Most of the cases identified as involving an accounting or auditing issue were filed as administrative proceeding. All but 5 of those cases were settled at the time of filing. The Commission also filed 12 civil injunctive actions that are included in this group of cases. That represents a small decrease in number compared to the prior fiscal year. At the end of the fiscal year over half of those cases had not been resolved.
In fiscal 2023 the Commission initiated 11 of the actions in this group against non-U.S. parties. That represents an increase over the average of 9 filed from FY 2018 to FY 2022. The actions were brought against parties in Canada, the Netherlands, Ireland, the United Kingdom, Singapore and China.
The most common allegations in the 83 actions filed tied to revenue recognition and/or internal controls. One or both of those allegations were made n 63% of the cases filed during the period. Only 4 actions involved claims based on auditor independence, a small decline from the prior year. The number of cases involving a Section 304 claim also declined compared to the prior year.
Less than half of the cases brought by the Commission involved individuals. Cases that did involve individuals constituted 41% of those filed during the period. Nearly half of the individuals involved were either a CEO or CFO – 12 individuals who were either a CEO or CFO were involved in the cases. In contrast, 17 of the individuals involved were members of the board of directors.
Finally, the amount of civil penalties imposed in 2023 represented less than half of the total monetary settlements. Specifically, only 33% of the total monetary settlements were penalties – 67% represented disgorgement and prejudgment interest.
The Number of Accounting & Auditing Cases Increased in FY2023
The Number of Accounting & Auditing Cases Increased in FY2023
There was a 22% increase in the number of accounting and auditing cases filed by the SEC in FY 2023, according to a new report published by Cornerstone Research, SEC Accounting and Auditing Enforcement Activity (here). The Report goes on to discuss key points regarding the actions initiated during the last Government fiscal year and compare them with those from earlier periods.
The Report begins by noting that 83 accounting and auditing enforcement actions were filed during FY2023. That represents a 22% increase over the prior year. It is also the highest number of accounting and auditing cases filed by the agency since 2019. The 44 actions initiated by the Commission during the fourth quarter of the fiscal year represented over half of the cases initiated during the period. This is also the largest number of cases filed in a single quarter in recent years, according to Cornerstone.
Cornerstone also found that 41 of the 83 actions filed referred to either a restatement and/or a material weakness in internal controls. Accordingly, over half of the cases were not identified as involving a restatement or being based on a material weakness in internal controls.
Most of the cases identified as involving an accounting or auditing issue were filed as administrative proceeding. All but 5 of those cases were settled at the time of filing. The Commission also filed 12 civil injunctive actions that are included in this group of cases. That represents a small decrease in number compared to the prior fiscal year. At the end of the fiscal year over half of those cases had not been resolved.
In fiscal 2023 the Commission initiated 11 of the actions in this group against non-U.S. parties. That represents an increase over the average of 9 filed from FY 2018 to FY 2022. The actions were brought against parties in Canada, the Netherlands, Ireland, the United Kingdom, Singapore and China.
The most common allegations in the 83 actions filed tied to revenue recognition and/or internal controls. One or both of those allegations were made n 63% of the cases filed during the period. Only 4 actions involved claims based on auditor independence, a small decline from the prior year. The number of cases involving a Section 304 claim also declined compared to the prior year.
Less than half of the cases brought by the Commission involved individuals. Cases that did involve individuals constituted 41% of those filed during the period. Nearly half of the individuals involved were either a CEO or CFO – 12 individuals who were either a CEO or CFO were involved in the cases. In contrast, 17 of the individuals involved were members of the board of directors.
Finally, the amount of civil penalties imposed in 2023 represented less than half of the total monetary settlements. Specifically, only 33% of the total monetary settlements were penalties – 67% represented disgorgement and prejudgment interest.