In a rare case, the SEC has charged the CEO and CFO of Quality Services Group, a computer equipment company, with falsely certifying its financial statements.
The charge stems from an SEC review of the company procedures which revealed that company management misrepresented the state of its internal controls over financial reporting to its auditors, and not from a misstatement of financial results.
Excerpt from SEC Press Release
The Sarbanes-Oxley Act of 2002 requires a management’s report on internal controls over financial reporting to be included in a company’s annual report. The CEO and CFO must sign certifications confirming they’ve disclosed all significant deficiencies to the outside auditors, reviewed the annual report, and attest to its accuracy.
“Corporate executives have an obligation to take the Sarbanes-Oxley disclosure and certification requirements very seriously. Sherman and Cummings flouted these regulatory requirements and misled investors and external auditors in the process,” said Scott W. Friestad, associate director in the SEC’s Enforcement Division.
FierceCFO, the online newsletter noted
Indeed, many companies and executives are likely taking a careful look at internal controls, given the charges the Securities and Exchange Commission levied recently against Quality Services Group, a computer equipment company in Florida.